WILL A LIFE INSURANCE POLICY BE SUBJECT TO PROBATE? (HERE’S WHAT YOU NEED TO KNOW)

Seventy-five million families in the United States rely on life insurance policies to protect their financial security and future. The residents of Florida own eight million individual life insurance policies, and their coverage averages approximately $130,000 per policyholder.

While estate planning, lawyers routinely handle matters pertaining to wills and trusts, after a person dies, most families are depending on life insurance. Moreover, the party who receives the payout from a life insurance policy is not determined by anything written in a will or in a trust.

IS A LIFE INSURANCE BENEFIT SUBJECT TO PROBATE?

As you know, when you buy life insurance, you name one or more beneficiaries who will receive the death benefit. Is that benefit subject to probate – and thus to taxes and debt collection? And what happens to a life insurance policy if the beneficiary has passed away or cannot be located?

Exactly what happens in the probate process? Should probate be avoided if possible? If you keep reading, you will learn some answers in this brief discussion of life insurance and probate.

WHAT HAPPENS TO LIFE INSURANCE IF THERE’S NO BENEFICIARY?

In most cases in Florida, life insurance will be paid directly from a life insurance company to the policy’s beneficiaries, and probate usually is not required or necessary. Because it is not subject to taxes or debt collection, life insurance is not deemed to be a part of a policyholder’s estate.

But what happens if a policy’s beneficiary cannot be located – or is now deceased? If no beneficiary claims the benefit, it may be added to the deceased policyholder’s estate, and that makes the life insurance benefit subject to the probate process.

WHAT, PRECISELY, IS PROBATE?

Probate” is the legal process that distributes a deceased person’s estate. The probate process typically uses the deceased person’s will as a starting point, because the will names the beneficiaries who will be entitled to a part of the estate when it is distributed by an executor.

Particularly with high asset estates, probate is often a lengthy and contentious process as multiple parties claim parts of the deceased person’s assets. If it is at all possible, probate is something to avoid – even if, in the end, the process has been fair and the estate is distributed properly.

WHAT ARE PROBATE ASSETS?

Probate assets are those assets that a deceased person owned singularly and exclusively in his or her name at the time of death and any assets owned by both the deceased person and one or more co-owners that lack a legal provision for automatic succession.

If someone dies in the state of Florida with outstanding debt, that person’s estate will pay off (or will go toward paying off) the debt, and federal estate taxes may also have to be paid. (There is no state-level estate tax in Florida.)

However, when a death benefit is paid directly by an insurance company to a policy’s beneficiary, the beneficiary is paid the benefit in full, and there is no tax or debt obligation.

According to the Florida Bar Association, in this state, “A life insurance policy … that is payable to a specific beneficiary is not a probate asset, but a life insurance policy … payable to the decedent’s estate is a probate asset.”

IF THERE’S NO BENEFICIARY, WHO GETS THE LIFE INSURANCE?

Here in Florida, scores of people do not name a life insurance beneficiary. If no beneficiary has been named, if no beneficiary can be located, or if the designated beneficiary has passed away, the insurance company pays the estate, and the death benefit is subject to probate.

Probate is a complex and difficult process. Surviving family members who need help regarding any life insurance or probate matter should contact an experienced West Palm Beach estate planning attorney at once. Any failure to act promptly could be costly.

WHAT’S IMPORTANT TO REMEMBER?

What is important to remember is that your life insurance policy’s beneficiaries need to be alive and locatable at the time of your death. This means that you may occasionally need to update the names of the policy’s beneficiaries.

Keeping your policy up-to-date ensures that the death benefit will not be subject to probate. Naming a second (or a “contingent”) beneficiary is a smart idea – in case your primary beneficiary dies or disappears before you can make an update.

What is also important to remember is that you are reading only a general discussion of life insurance and probate in Florida. Everyone’s situation is unique, so you must have the insights and personalized legal advice that an experienced south Florida estate planning lawyer can offer.

WHAT CAN HAPPEN IF THERE’S A DISPUTE AMONG BENEFICIARIES?

Beneficiary disputes over life insurance benefits can emerge when a deceased person changed a beneficiary before his or her death and there is a dispute regarding the validity of that change.

The courts in Florida will invalidate a life insurance beneficiary change if the change involved any type of fraud or undue influence or if the policyholder lacked the mental capacity to make such a change competently.

Most insurance companies have strict procedures in place for changing a beneficiary. A Florida court will consider the deceased person’s medical records, the statements of witnesses, and other evidence to help determine the person’s mental state when the change was made.

WHEN SHOULD YOU SPEAK WITH AN ESTATE PLANNING LAWYER?

If you believe that you are rightfully entitled to a loved one’s life insurance benefits, and if your claim to those benefits is denied for any reason, discuss your situation with a good Florida estate planning and insurance attorney. You may be able to take legal action and obtain justice.

And if your family depends on you, it is not too early to begin planning your estate. Proper estate planning requires an experienced West Palm Beach estate planning attorney who will help you create legal documents which ensure that your wishes are carried out with minimal interference.

No one can know what tomorrow may bring, but a good south Florida estate planning lawyer will work with you diligently until your estate planning process is complete and meets entirely with your satisfaction.

And if the responsibility for a loved one’s financial affairs falls on you after that person’s death, reach out to an experienced Florida estate planning and probate attorney for the timely advice and legal help that you will very much need.

What Families Need To Know About Trust Disputes

Here in Florida, smart estate planning requires help from an experienced estate planning attorney to create the legal documents that you’ll need. Irrevocable trusts and revocable trusts are among the most popular estate planning tools.

What are the advantages of irrevocable and revocable trusts in this state? How are trust disputes handled in Florida? When is an estate planning attorney in West Palm Beach needed?

An estate planning attorney can create a trust to avoid probate and to expedite the distribution of assets after your death. Trusts in Florida are also a good way to protect certain assets and to avoid particular taxes.

WHAT BENEFITS DOES A TRUST OFFER?

Smart owners of extensive assets have used trusts successfully to avoid the probate court in Florida and to save beneficiaries money, time, and aggravation.

probate court in palm beach county

However, trusts are not a guaranteed way to avoid courtroom acrimony. Trusts are subject to litigation – meaning that they can be legally contested – in Florida. Trustees, beneficiaries, or others may challenge a trustee’s actions or the trust itself – and lawsuits will emerge.

WHEN SHOULD YOU SPEAK TO A LAWYER REGARDING A TRUST?

In South Florida, an accomplished estate planning law firm should be contacted when:

  • You begin the estate planning process.
  • A trustee needs help administering a trust.
  • A trust is challenged or contested legally.
  • A trustee breaches his or her fiduciary duties.

HOW ARE THE TERMS “SETTLOR” AND “TRUSTEE” DEFINED?

A trustee and a settlor are two different roles, but one person can perform both functions. A settlor is the person who creates the trust and reserves powers with respect to the trust. A trustee manages the trust until it is terminated.

trustee

In Florida, the document that creates a trust that a settlor uses for asset distribution after he or she has died must be signed and must meet the same legal requirements as a will. The settlor must be of sound mind and free of undue influence when the trust is created.

WHAT CAN TRIGGER LEGAL ACTION REGARDING A TRUST?

There are a number of possible disputes and causes of action arising from revocable and irrevocable trusts. A cause of action may be brought for the following reasons:

  • The trust doesn’t meet Florida’s legal requirements for a trust.
  • The settlor was not of sound mind or mentally capable of making the trust.
  • Undue influence affected the settlor.
  • The trustee violated Florida law when trust assets were distributed.
  • The language of the trust document is confusing, unclear, and vague.
  • The trust should be changed or revoked.

WHEN DOES A TRUSTEE COMMIT A BREACH OF DUTY?

A beneficiary in Florida may take legal action if a trustee breaches his or her fiduciary duty. Trustees have the duty to administer a trust properly and in the best interests of its beneficiaries.

lawsuit over trust

A breach of duty happens when a trustee:

  • does not make proper asset distributions
  • does not make a timely accounting
  • does not administer the trust in the manner specified by the trust
  • does not invest the assets of the trust properly
  • uses trust assets for his or her own advantage
  • pays him or herself excessively for service as a trustee

The Florida Trust Code allows a person who prevails in a trust litigation matter to recover lawyer’s fees and the costs of litigation from the trust estate.

HOW CAN TRUSTEES MAKE THEIR OBLIGATIONS EASIER?

When you are the trustee of a revocable or an irrevocable trust, your task will be easier from the start if you have cordial relationships with the trust beneficiaries – the people who benefit from the trust money. The wisest way to handle the concerns of beneficiaries is to:

  • Contact them early.
  • Explain to them your role.
  • Help them understand how long it takes to administer a trust.
  • Treat beneficiaries’ questions as opportunities to create good will.
  • Do not hide the trust document or the assets.

HOW CAN AN ESTATE PLANNING LAWYER HELP WITH A TRUST DISPUTE?

Here in South Florida, an experienced West Palm Beach estate planning attorney can help you in the prosecution or defense of any claim involving Florida trust law, such as:

  • A claim against a trustee: Your attorney can work to hold a trustee accountable for a breach of trust or for an abuse of power.
  • A claim against a trust itself: If you have been deprived of assets because of undue influence over a decedent, an estate planning attorney with trust litigation experience may be able to help you.
  • Third party lawsuits: A Florida estate planning attorney can defend the estate against claims filed for unsettled debts or for personal injuries.

emotional trust dispute

The disputes that can arise over a trust may be emotionally difficult for a family. If your loved one’s instructions have not been followed, or if a breach of fiduciary duty has occurred in some other way, an estate planning lawyer will help you act and help you resolve the problem.

CAN DISPUTES OVER TRUSTS BE RESOLVED OUT-OF-COURT?

Florida’s Trust Code, which took effect in 2007, provides several options – beyond having a trust declared invalid – for beneficiaries or others considering legal action:

  • Out-of-court settlements: Under the Florida Trust Code, parties may agree to a binding nonjudicial settlement regarding virtually any trust matter. Many lawsuits can be avoided when the parties can reach a private, out-of-court agreement.
  • Trust modification or termination: Trust disputes are often settled by a simple reformation, termination, or modification of the trust. The Florida Trust Code allows for trust modifications that are consistent with the settlor’s intentions.
  • Termination of uneconomic trusts: A court may terminate or modify a trust or may remove or appoint another trustee if the court finds that the value of the trust property is inadequate to justify the continuing expense of administration.
  • Trustee removal: The Florida Trust Code additionally allows the removal of a trustee at the request of all of the beneficiaries. Removal by request does not require evidence of malfeasance but only a showing that removal serves the best interests of the beneficiaries.

WHO SHOULD SPEAK TO AN ESTATE PLANNING ATTORNEY IN FL (AND WHEN)?

Anyone with questions or concerns regarding estate planning and trust litigation should speak as soon as possible with a skilled West Palm Beach estate planning attorney. Whether you are a settlor, a trustee, or a beneficiary, an estate planning lawyer’s help is your right.

Probate in Florida – What Are The Rules?

Losing a loved one is one of the most difficult situations anyone faces in life. If your loved one did not leave a will or a living trust, you may have to deal with seeing that your loved one’s debts are paid and that any remaining assets are properly distributed.

Those responsibilities add even more anxiety at a time when you are already suffering and grieving. In South Florida, when the responsibility for a deceased loved one’s financial affairs falls on you, don’t hesitate to reach out to an experienced West Palm Beach probate attorney.

When someone passes away, the legal procedure known as probate may be required. Probate completes and settles the deceased person’s financial affairs.

In Florida, when someone dies without a will or a living trust, probate is the legal process that identifies and gathers the deceased person’s assets, pays that person’s taxes and debts, and distributes that person’s remaining assets to the beneficiaries.

Depending upon the size and nature of the estate and the nature of the estate planning documents, an estate in Florida may be settled in one of several ways:

  • no probate (or “disposition of personal property without administration”)
  • summary administration
  • formal administration

The administration of probate in Florida applies only to probate assets, that is, to those assets that the deceased person owned exclusively and singularly in his or her own name at the time of death or any assets that lack a legal provision for automatic succession that were owned by both the deceased person and by one or more co-owners.

Under Florida law, probate assets will include but are not necessarily limited to:

  • Investment accounts or bank accounts in (only) the name of the deceased person.
  • Life insurance, annuity contracts, or individual retirement accounts payable to the deceased person’s estate.
  • Except for homestead property, real estate titled exclusively in the name of the deceased person or in the name of that person and another person as tenants in common.

However, many of a deceased person’s assets may go directly to their new owner without any legal requirement for probate.

In the state of Florida, non-probate property includes homestead property, homes and bank accounts where ownership is shared by more than one person, assets with designated beneficiaries (such as savings and retirement accounts and life insurance policies), and any assets held in a living trust. If probate issues arise in Texas, a  probate attorney in Austin, TX can help.

WHAT IS DISPOSITION OF PERSONAL PROPERTY WITHOUT ADMINISTRATION?

When a deceased person leaves little in assets, the “disposition of personal property without administration” allows any person who paid the deceased person’s final expenses – such as funeral costs and final medical costs – to receive reimbursement from the deceased person’s estate.

Disposition without administration may only be used if the decedent did not leave real estate and if the assets are either exempt from the claims of creditors or do not exceed the amount of the final expenses.

In Florida, if you need to request reimbursement for a deceased person’s final expenses, complete the form titled “Disposition of Personal Property Without Administration.”

It’s available in each county from the clerk of the court and it’s also online. A small fee is required along with documentation of your expenses and a copy of the death certificate.

If the deceased person left a will, it must be filed as well with the local circuit court. A skilled West Palm Beach probate attorney can help you with the paperwork and filings and review them for accuracy and completion to ensure that there are no unnecessary delays in the process. The laws are different in states like Georgia, so an Atlanta real estate lawyer  may be able to help.

WHAT IS SUMMARY ADMINISTRATION?

Summary administration is a probate “shortcut” that’s available if the deceased person died more than two years ago or if the value of the estate – excluding non-probate assets – does not surpass $75,000.

The person who is named in the will as the executor – or anyone inheriting property – can initiate summary administration by filing a Petition for Summary Administration.

If there’s a surviving spouse, that person must sign the petition. Any beneficiary who does not sign the petition must be formally notified that the petition is being filed.

A Petition for Summary Administration spells out the deceased person’s assets and the value of those assets, specifies who inherits what, and – on that basis – requests summary administration.

In these cases, rather than naming an executor or an administrator of the estate, if the court decides the estate meets the requirements for summary administration, the court simply issues a court order that releases the assets and property to those inheriting it.

An heir can then use the court order at a bank, for instance, to verify that he or she is the rightful inheritor of the deceased person’s accounts.

WHAT IS FORMAL ADMINISTRATION?

Formal administration (that is, “regular” probate) may be required if an estate cannot be settled in a simpler way. Formal administration begins when an executor is named in the will or when someone petitions the circuit court to be named as the estate’s personal representative.

Beneficiaries and heirs (that is, the people who would legally inherit the estate if no will existed) are notified that formal administration will begin.

The court then issues “Letters of Administration” giving the estate’s personal representative the legal authority to settle the estate. If the deceased person left a will, that will must be filed with the court and its validity must be determined.

The validity of a will may be determined by asking the witnesses to provide statements under oath. In Florida, a will is “self-proving” (that is, legally valid) if the witnesses, when they watched the will being signed, themselves signed a notarized statement to that effect.

In regular probate, the court supervises as the personal representative identifies and gathers the deceased person’s assets, pays the deceased person’s taxes and debts, and finally distributes what remains to those inheriting it.

The personal representative must file a final plan showing the court what the estate held, how assets have been handled, and who will receive what.

Anyone with an objection may then raise it with the court. When assets have been distributed, the personal representative submits the final paperwork and receipts to the court and asks the court to close the estate. Formal administration usually requires six to twelve months.

To say that probate is complicated is an understatement. Executors, personal representatives, and surviving family members who need legal advice and/or representation regarding any probate matter in south Florida should contact an experienced West Palm Beach probate attorney as early as possible.

The probate process can involve a number of time limits and deadlines, so the failure to act promptly can be a costly mistake.

Twelve Uncomfortable Yet Necessary Questions Regarding Estate Planning

Estate planning is probably not your idea of fun. Among other things, it forces us to admit that we may become incapacitated, to decide who gets what after we pass away, and to make provisions for end-of-life care. In South Florida, to establish your wishes legally and in writing, a West Palm Beach estate planning attorney will need to ask some very tough and personal questions. Some of them might make you quite uncomfortable. Thinking about these questions ahead of time, however, can help you prepare for a consultation regarding your estate plan.

1. “If both parents die unexpectedly, who raises the children?”

Don’t wait until your children are adults to start planning your estate. If you fail to name a guardian, and if both parents pass away unexpectedly, then a judge will name a guardian for you based on what that judge determines is the best interests of your child. Unless you believe that a complete stranger knows better than you do what is best for your children, it’s a good idea to see an estate planning attorney now. No one knows what tomorrow has in store.

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2. “What if your family perishes together in an accident or a natural disaster?”

Even if you are committed to the idea that your parents, spouse, siblings, or children will inherit your assets and property, you have to face the remote possibility that an accident or a natural disaster could take all of you together at once. If you don’t have a close friend or a charity that you can name as a secondary beneficiary, it can be a barrier to completing an estate plan, and you’ll need to arrive at some kind of determination.

3. “Are there any other relatives that you haven’t mentioned?”

Plenty of people are able to keep lifelong secrets even from those who are close to them. If it turns out after your father dies that he had another family you never knew about, or if you never dreamed your grandmother was married three times until you met her first two husbands at the funeral, you are not alone. If your estate planning attorney asks you about “other relatives you haven’t yet mentioned,” it’s because many people keep such secrets, and your attorney needs to know. If you don’t disclose these kinds of facts to your estate planning attorney, someone could conceivably show up with a legal claim after your death and put your estate plan in jeopardy.

4. “Are there any other people who might have a legal claim on your estate?”

Intimate companions outside of marriage have sued for more than “palimony.” In fact, they’ve sued plenty of estates in Florida. Without regard to your marital status, your estate planning lawyer will probably ask if you are or have been in a relationship such as a civil union, a domestic partnership, or any personal relationship that may encumber you legally. You may not even be aware of potential legal obligations that you need to know about. An estate planning attorney can’t provide the legal help you may need unless he or she has the full picture, and a legal dispute after your death could consume your estate with legal fees.

5. “What are your wishes regarding nutrition, hydration, and life support?”

In Florida, your estate planner will ask you to sign a health care directive about withholding nutrition and hydration. We all have our own convictions regarding exactly when life ends or should end. Share your wishes regarding nutrition, hydration, and life support with your estate planning attorney to make sure those wishes are carried out.

6. “Do you have any ‘frozen’ genetic material?”

Even if your estate planning attorney doesn’t ask, disclose any frozen eggs, sperm, or fertilized embryos that you may have preserved. Do you want to provide for beneficiaries born after you die? Science is pushing the boundaries, even for estate planning, so if you have any genetic material stored, expect to be asked some tough questions by your estate planner.

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7. “Are you transgender?”

If you are asked this question, it’s not because your attorney is being nosy, inappropriate, or rude. It’s because gender transition has legal implications that need to be considered for estate planning, and even if your attorney does not ask, he or she nevertheless needs to know. It is imperative that your gender identification in all of your legal documents expresses the way you now identify yourself. If there are any mismatches, it may be necessary to apply for new documents like your birth certificate, driver’s license, or passport.

8. “Who will care for your pets?”

You may or may not need to set up a pet trust, but you will probably want to set aside some funds and have someone you trust to care for your pets. Whether it’s a goldfish or a stable of racehorses, your estate planner will have questions and will be able to help you find the right answers to caring for your pets. A number of organizations care for the pets of deceased pet owners in South Florida, so if it’s necessary, a West Palm Beach estate planning attorney can put you in touch with the right people.

9. “Have you made large donations or gifts?”

Most gifts above $13,000 must be reported to the Internal Revenue Service. The gift may not be taxable, but it must be reported. A good estate planning attorney can help you get gifts made in the past reported properly and may also be able to help you mitigate any tax consequences.

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10. “Did you sign a prenuptial, postnuptial, or community property agreement?”

If you signed any kind of legal document that may have seemed unimportant years or even decades ago, it’s possible that someone could dig it up after your death and put your estate plans in jeopardy. During the estate planning process, it is imperative to disclose, as far as possible, any legal document that you have ever signed. If a document needs to be modified or terminated, your estate planner can help.

11. “What are your online user names and passwords?”

Many of us have something online that may need to be accessed or preserved in the event of incapacitation or death. Your estate planner can help you decide what is important, what isn’t, and who should have access. Digital property law is a new and rapidly developing field, and technology keeps advancing, so you and your estate planning attorney will need to explore your options together carefully.

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12. “Do you suffer from any severe or chronic health condition?”

Again, this isn’t a nosy question. The best estate planning takes into account actuarial life expectancies, but if you have health issues that could impact those life expectancies, your estate plan will need to be modified accordingly. Don’t hesitate to speak up, ask questions, express your concerns, and disclose anything that you think may be important to the estate planning process. You might even want to make a list of disclosures and questions for your first estate planning consultation or as you go along. In effective estate planning, the details can make all the difference.