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Estate Planning May Avoid Probate

The phrases “estate planning” and “wills and trusts” have become synonymous with each other in recent times, and in our fast-paced world many people will go an entire lifetime without giving either one a second thought. However, should one delve past the surface he/she will soon discovery what estate planning really consists of at its core: planning. Estate planning is planning to help ensure that your current, future and post-mortem financial situation is handled with minimal problems and it therefore requires an understanding of certain legal concepts which form the framework for any present and future acts one may take.

In the legal sense, estate planning, or an “estate plan” is the manner in which an individual or married couple organize and title their assets. Some important goals with an estate plan include limiting liability and avoiding a costly and time-consuming probate upon the death of the testator. There are numerous misconceptions that people make when discussing the implementation of an estate plan, with some – but not all – of the most important ones being discussed here.

Common Misconceptions about Estate Planning

1) “I don’t need an estate plan since I don’t have any money or property.”

First and foremost, the most critical mistake seen in estate planning is assuming that estate planning is only necessary for wealthy individuals or families. This is absolutely false since every person – whether homeless or worth billions - has an ‘estate’ that comes into existence the moment that a person passes away. The purpose of probate is to assess the extent of estate and distribute the estate’s assets (to both beneficiaries and creditors) so that the estate can be effectively closed.

2) “I think I just need a will and/or a trust.”

Most people dive into the subject without first assessing their own situation with regards to both finances and family relationships. Instead, some people simply assume that they need a will and trust simply because of the common use of these tools without any understanding of how they work or what the consequence of using (or misusing) wills and trusts are.

3) “I already have a will and/or trust so I don’t need anything else.”

People are usually unaware of the other tools available to them to achieve their goals in an estate plan. Two examples of such tools include the use of limited liability companies (“LLCs”) and life estate deeds. These valuable tools are commonly underutilized to way to hold ownership interests and property during their lives while establishing a future successor or beneficiary of these interest and property in the event of their death or incapacitation.

The use of LLC’s to hold investment property not only limits personal liability but affords the opportunity to implement a plan of succession. Specifically, a 2015 decision from Florida’s Fourth District Court of Appeals (Blechman v. Estate of Blechman, 160 So.3d 152 (Fla. 4th DCA 2015)) established the precedent that where an LLC operating agreement provides how a deceased’s member’s interest is transferred after death, such a provision supersedes any devise of the ownership interest through a deceased member’s will or trust and is binding on the other members or beneficiaries.

With life estate deeds, a property owner does not need to change the current ownership interest but can merely create a future interest in a beneficiary that only goes into effect upon the death of the current owner. Historically, the key downfall with a standard life estate deed was that the future beneficiary (or beneficiaries) was afforded the right to limit key decisions regarding the property during the current owner’s life (i.e., selling, mortgaging or fundamentally altering the property’s use or structures). However, this potentially burdensome aspect can now be avoided by using an enhanced life estate deed (commonly referred to as a “Lady Bird deed”). Both deeds have their benefits depending on the current owner’s personal situation (i.e., age, health, etc.) so careful consideration before doing so is required.

4) “I’m just going to do my own estate plan to avoid legal fees.”

Another fatal mistake individuals may make is creating an estate plan themselves through either the use of legal forms available for purchase to the public or by creating the documents themselves based on their own internet research. While these forms can be useful to some in accomplishing the goals (or at least some) of an estate plan, they are typically flawed in many ways, including but not limited to being partially or completely unenforceable under Florida law, omitting key provisions to serve a person’s interest or being out-of-date since laws are repealed or revised every year through both the legislature and the courts. Thus, drafting and executing your own legal documents – regardless of the situation – is never a wise idea. Lawyers dedicate years of their lives to not only attending law school but also honing their craft in the never-ending pursuit of knowing the law (it’s called the “practice of law” for a reason!).

Conclusion

The ‘moving parts’ of an estate plan are numerous and can be complicated. Therefore, an estate plan must be considered and arranged in a way that is tailored to meet your own needs and goals. Do not undertake the estate planning endeavor without the use of a competent and experienced estate planning attorney to ensure that your hard-earned assets and loved ones are taken care of during your life and beyond.

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