Occasionally I will get an estate planning client who wants to leave all of his or her property to one child in the belief that it will somehow make their estate easier to probate and that the chosen child will “know what to do.” This is a recipe for disaster. I have never prepared an estate plan that does this because I always talk the client out of it. I have two main objections: (1) the child is not obligated to follow the decedent’s instructions, and (2) if the child does follow the decedent’s instructions then they may be liable for gift taxes.
Both objections come down to one basic problem. Once you have left all of your estate to a person, that person owns it and is not obligated to give it away. If they do give it away, then they may be liable for gift taxes for any amount in excess of $14,000 for the year (as of 2014). The First DCA confirmed that this was the case late last year. If you leave all of your estate to one person, that person has the discretion to honor your wishes or not.
As you can imagine, this is a recipe for litigation. It is much better to take the time and effort to decide exactly how you want your estate divided than to kick off a fruitless and expensive battle between your heirs. Even if your heirs choose not to fight, you will have done extensive, probably irrevocable damage, to their relationships.
The time limits in probate cases can be unforgivingly short. For example, you must object to the personal representative’s accounting within thirty (30) days and set a hearing on your objection within ninety (90) days. A recent post in the Florida Probate & Trust Litigation Blog illustrates how true that is.
The issue in the case reported on, which was an opinion from the Third District Court of Appeal, was whether the three (3) month statute of limitations in Florida Statute section 733.212(3) applied to a motion to disqualify a personal representative. The Third District Court of Appeal held that it did apply. Consequently, a motion to disqualify filed more than three (3) months after the service of a notice of administration on the party seeking disqualification is barred. What makes this case interesting is that it directly conflicts with a decision of the First District Court of Appeal, as certified by the Third District Court of Appeal. The First DCA had held that the statute of limitations under Florida Statute section 733.212(3) did not apply to a motion to disqualify a non-resident personal representative.
The lesson of Hill v. Davis is that you cannot take your time when it comes to any potential claims or rights involving a deceased person or estate. Most of the time limits are much shorter than in other litigation. All claims against a decedent are barred two (2) years after the date of death. Absent the granting of an extension of time, a claim may also be barred three (3) months from the first date of the publication of the notice to creditors.
While Hill v. Davis is a good example of the short time limits involved in probate litigation for lawyers and clients alike, the two cases together are good examples of why lawyers cannot always tell their clients what “the law” is. Trial courts are bound to follow the decisions of appellate courts in Florida. Before the Third DCAs opinion was issued, a trial court in any of the DCAs was bound to follow the reasoning and opinion of the First DCA. But now a trial court located in the First DCA must follow the opinion in Angelus v. Pass while a trial court in the Third DCA must follow Hill v. Davis. This is true even if the judge thinks that the opinion of the other DCA is the more well reasoned and convincing opinion. But what about a trial court in one of the other three (3) DCAs? Trial courts in those three (3) DCAs are free to follow whichever opinion they think is the better one. Yet another DCA may have a similar case before it and may try to reconcile the two cases, follow one of the two cases, or come up with yet another approach. Eventually the Florida Supreme Court will resolve the conflict between the DCAs and its decision will become the law. At least until a lower court distinguishes the Supreme Court’s opinion in a similar case or the waters are otherwise muddied.
Is it any wonder then that when a client consults a lawyer and asks “What is the law on this?” that the lawyer scratches her head and says, “Well, I’ll have to do some research.”? And later reports that “the law is unclear” or “conflicting.” Add to that the fact that every litigated case has its own unique facts and it can be very difficult to predict the outcome of any case.
Michael Jackson was as much a corporation as a person. Like any major celebrity or company, he had ongoing litigation and business operations. “The National Law Journal” has an article detailing the myriad suits Jackson and his company, MJJ Productions, had at the time of his death. These suits will continue being litigated by his corporation or his estate. The corporate suits will proceed with nary a hiccup. The corporation’s existence is unaffected by Jackson’s death. Unlike a very small corporation that may be little more than a one man band, MJJ Productions probably has full time professional management. That management will continue to run the company. However, there may be issues as to who runs MJJ. Assuming Jackson owned most, if not all, of the shares of MJJ, the person who controls the estate and eventually his heirs will have control of MJJ as well as his other personal assets and business.
It is unknown whether Jackson had a will or a trust (or trusts). According to one attorney,most celebrities have living trusts. If he has a will or if he died intestate, there is likely to be a delay while a personal representative (a/k/a an executor) is appointed. If he had a living trust, then the successor trustee can more or less immediately take control of all the assets in the trust. However, if he had some assets in the trust and some not in the trust, then he may still need a personal representative to manage assets outside the trust.
However, Jackson’s estate may earn even more than Jackson. Even as I write this, radio stations and TV stations are playing Jackson songs and videos and the royalties are pouring in. Itunes is probably sellng Jackson’s music at a record rate and CDs and posters are flying off the shelves at WalMart. This income is likely to go further without Jackson to spend it faster than it comes in. It is likely to support an army of lawyers and accountants and still be able to pay debt and a legacy for his three (3) children. Elvis Presley’s estate earned $52,000,000.00 last year, which may be more than Jackson earned while living. Jackson’s estate may do better than Presley’s for the next year or two. On the other hand, a rush is on for refunds of the tickets sold for his upcoming concert tour. At least some of that is insured, but one wonders whether there will be suits for the lost profits and money spent in expectation of the tour.
We won’t know for some time just how things will shake out. One thing is for certain, whether Jackson’s estate proves to be flush or broke, his confused finances and personal life are likely to be a bonanza for a cadre of lawyers on both sides of the issues.
I recently had conversations with a couple of lawyers who also practice probate litigation. We agreed that probate litigation is often the result of poor communication. Specifically, parents tell their children what the children want to hear or use ambiguous phrases like “don’t worry you’ll be taken care of.” The same goes for other relatives and friends who might be expected to be remembered by you with money or assets when you pass away.
Here is one example of muddled communications — A decedent’s nieces and nephews sued their aunt’s beneficiaries claiming undue influence. The nieces and nephews said their aunt called the beneficiaries the “cleaning lady” and “the lawnman.” The beneficiaries said the decedent disliked her nieces and nephews, but the nieces and nephews swore the aunt loved them and promised to “take care of them” when she died. I believe both sides were telling the truth. The decedent had a prickly, cranky, insecure personality and had told each side what they wanted to hear and whatever made her feel important. Coupled with the fact that she waited to do her estate planning until she was on the way to the hospital where she died, it was a perfect recipe for a lawsuit.
Children often overestimate the wealth of their parents when they don’t know what their parents actually own. They may not realize that dad obsesses over MSNBC and Bloomberg because he enjoys it and that $100,000.00 in 10 or 20 stocks is all he has. They think he’s obsessively monitoring his millions. A phrase like “don’t worry I’ll take care of you” is ambiguous enough to cause problems. For the parent it may mean, “I’m leaving you $10,000.00,” but for the kids it may mean. “Don’t worry I’ll make sure you’re set for life.”
Here are some tips to make sure your legacy to your heirs and beneficiaries isn’t a lawsuit:
Be clear. Make sure that your children and other beneficiaries know what to expect from you at your death.
Don’t just tell people what they want to hear. You don’t have to tell people you hate them, but you shouldn’t misrepresent your relationships with others either/
Don’t wait until the last possible moment to meet with a lawyer and plan your estate.
Don’t wait until you’re incapable of making your appointments and arrangements to visit a lawyer before planning your estate.
If you remarry and have children from a previous marriage, get a prenuptial. If you later decide to ignore or revoke the prenuptial, do so in writing.
Don’t share your estate plan with someone or promise to “take care of them” and then set up all of your accounts and beneficiary designations so they pass outside of the estate plan that leaves everything to someone else.
Don’t make misleading or false promises to people you don’t intend to “take care of” in your estate plan.
This list is far from comprehensive. The bottom line is to be honest with yourself and others. Do what you can to not make misleading statements or promises or to give false hopes or expectations. You may save your heirs and beneficiaries a lot of headaches.
A will is a set of written instructions for the distribution of your property when you die. It may also include instructions regarding the handling of your remains although this is not required. During your lifetime, a will does nothing.Upon your death, a copy of your will is filed with the local court and probate proceedings are started, if necessary.Your will names your Personal Representative.If you have minor beneficiaries, disabled beneficiaries, a taxable estate, or certain other situations, then your will may also include a trust naming a trustee for the management of the property for the benefit of those named.
an instrument, including a codicil, executed by a person in the manner prescribed by this code, which disposes of the person’s property on or after his or her death and includes an instrument which merely appoints a personal representative or revokes or revises another will.
This is probably the most frequently asked question for any estate-planning attorney.Anyone with any property at all, whether real or personal, or with children ought to have a will.Even a person who has nothing may be instantly worth a large sum of money at death, if they are killed through someone else’s negligence or are well insured.For a divorced person with minor children, a will eliminates arguments over who will manage any assets or money left to the children (e.g., an ex-spouse).If you do not have a will, then the state decides who gets your property.In addition, the court will decide who will be your Personal Representative and it may be necessary for that Personal Representative to obtain a bond at the expense of the estate. If you prepare a will, then you can direct that the bond be waived.
This is the first post in a series that will explain some of the basics of estate planning and basic estate planning documents. Many people put off estate planning because they associate it with their own death or they think it is too expensive, but estate planning isn’t just about the distribution of your assets after you are gone.It also isn’t just for the wealthy.In fact, it may be more important for the middle class because there won’t be enough money to correct a failure to plan after you are gone.It is cheaper to do it right the first time.Proper estate planning also takes into account how you will be taken care of if you become disabled.It also considers how to protect your assets for your own use and your hopes, dreams, and desires for your loved ones whether family, friends, or charities.Your estate plan will be built on a firm foundation by first considering your needs, then the needs of your family, ways to protect your estate, ways to grow your estate, and, finally, ways to minimize estate taxes, if applicable. Less than two percent (2%) of estates are subject to estate taxes.
Once upon a time, I might have said that you didn’t need an estate plan unless you had assets, property, or children. However, I have run into some situations that have convinced me that just about everybody needs an estate plan. It is possible for someone who never had any assets to have a large estate at death. How does this happen? A young father or mother could be killed in an accident with a well insured Coca-cola truck whose driver ran a stop light. Suddenly the not wealthy young father or mother has a substantial claim and a large estate. If the decedent was happily married to the other parent of the children, there may not be any problems. However, I have seen many situations like this where the couple was estranged. In the absence of a will, this often causes problems. On at least one occasion, I encountered a family where four of the five surviving “adult” children were mentally handicapped. The fifth was not much better. Their mother left a mobile home on some land and no will. This caused considerable problems. \
The Terry Schiavo tragedy is another example. If she and her husband had done any estate planning, chances are that they would have received Living Wills. There then would have been no doubt as to Ms. Schiavo’s wishes one way or the other. Many years of expensive litigation might have been avoided or shortened.. So now I think most people could benefit from estate planning.