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Probate and Estate Terms

FLORIDA PROBATE ATTORNEY and  PROBATE ESTATE ADMINISTRATION LAW

THE ESTATE PLANNING LAW FIRM, P.A.

Florida Probate Attorney Broward Direct ext 954 920-2886 or for Palm Beach 561 948-8906

Serving Broward County, Palm Beach County, and sorrounding counties with Florida Probate, Inheritance Law, Wills and Estates.

David S. Luber, LL.M. is an Estate Planning Master of Laws focussing on assisting clients with Florida Probate, Inheritance Law, Probate Administration, Summary Probate Administration, Estate Administration, Ancillary Probate Administration, Estate Planning, Wills, Trusts, and Estates in Broward and Palm Beach County as well as assisting with probate nationwide for those who have family or property in Florida. The firm provides personal attention and can be reached toll free. In Broward 954 920-2886 for Palm Beach Probate law 561 948-8906 or outside the local Broward County and Palm Beach County areas toll free nationwide at 866 561-1499. David can also be reached by at email [email protected] or at his direct extension of 954 920-2886.

Alphabetical Listing of Florida Trust and Estate Law Definitions

Ancillary Administration: Probate proceedings in another state. This is usually necessary when the deceased person owned real estate in their sole name in a state other than his or her home state. It could be avoided by putting the property into a trust or passing the property so the beneficiary (beneficiaries have) has a remainder interest in which the property will pass to them by operation of law upon the death of the decedent. With limited exceptions such as requiring documents from the decedents probate in their home state ancillary probate in Florida is generally treated according to the same rules as if the decedent were domiciled in Florida. For example if a person is domiciled in New York but owns a winter home in Palm Beach in their sole name an ancillary probate would be needed in Palm Beach.

Probate proceedings in another state. This is usually necessary when the deceased person owned real estate in their sole name in a state other than his or her home state. It could be avoided by putting the property into a trust or passing the property so the beneficiary (beneficiaries have) has a remainder interest in which the property will pass to them by operation of law upon the death of the decedent. With limited exceptions such as requiring documents from the decedents probate in their home state ancillary probate in Florida is generally treated according to the same rules as if the decedent were domiciled in Florida. For example if a person is domiciled in New York but owns a winter home in Palm Beach in their sole name an ancillary probate would be needed in Palm Beach.

Applicable Exclusion an amount that can pass free of estate tax. Currently this amount is unlimited. It was $3.5 million in 2009 unlimited in 2010 and currently $5 million in 2011. The President has proposed returning it to $3.5 million in 2013. When there is a husband and wife the estates need to be properly planned though or the exclusion amount of the first spouse to die may be wasted. The Gift Tax Exclusion for 2011 and 2012 is set at $5 million although it had been at $1m prior to the tax agreement President Obama made with the Congress for 2011 and 2012. For these years there is portability meaning the surviving spouse can use the prior exclusion amount if certain steps are taken.

Attorney-in-Fact – Power of Attorney –The person selected to have the authority to act on the behalf of a principal. A Power of Attorney can be any adult that the principal selects. (He or she need not be a Florida attorney.) Typically, people appoint an attorney-in-fact in a power-of attorney, granting them the power to handle any financial affairs or complete nearly any forms that the principal could do. The authority of the power of attorney cannot last beyond the life of the principal. The power of attorney typically becomes effective at the time that it is signed and not at the time of disability. Florida law and section 709.08 of Florida Statutes provide they are durable powers of attorney meaning that it is not impacted by a persons subsequently disability. The agent named in the Power of Attorney must act in the best interests of the principal (person whose property the document is regarding) or they can be sued for abuse of power of attorney. Abuse of Power of Attorney appears to be getting more frequent especially after additional facts come to light following a persons death. People who would be estate beneficiaries but for the abuse of power of attorney can hire estate litigation attorneys to pursue their claims in probate court.

Annual Gift Tax Exclusion Each person has an annual gift tax exclusion currently set at $13,000 per person per year free of gift tax. It is indexed for inflation each year. A husband and wife can elect to split gifts for a year and are then able to give $26,000 to an individual in a year for gifts of a present interest with no tax. Other then spouses who are not US Citizens spouses can give one another an unlimited amount of gifts of any type of interest during their lives and it will not be taxable at that time.

Each person has an annual gift tax exclusion currently set at $13,000 per person per year free of gift tax. A husband and wife can elect to split gifts for a year and are then able to give $26,000 to an individual in a year for gifts of a present interest with no tax. Other then spouses who are not US Citizens spouses can give one another an unlimited amount of gifts of any type of interest during their lives and it will not be taxable at that time.
Assets Subject to Florida Probate Administration: Refers to assets that are in the sole name of the Florida decedent without beneficiary designation and do not pass by contract. They therefore need to go through probate so the title can be changed to those entitled to receive them.

Beneficiary: In the estate planning context this is a person entitled to receive property that was left to them by a will or trust or as a named beneficiary such as a retirement account or life insurance policy or as a transfer on death beneficiary of a bank account or other asset. This is contrasted by a person who receives property merely because of their family or marital relationship to the decedent through intestate succession and is referred to as an heir.

Charitable Trust – One of several different types of charitable trusts, including Charitable Lead trusts and Charitable Remainder Trusts, established to benefit a particular charity or the public. Typically charitable trusts are established as part of an estate plan to lower or avoid imposition of Federal (and some states’) estate and gift taxes and/or to save capital gains tax. It can be a win win situation since the donor is able to achieve a tax reduction while still providing for a worthwhile charity that provides a service to the public. When this is done during life an income tax deduction is available then the property is out of the estate for estate tax purposes or will generate a deduction to remove it. Some of this tax saving is often put into the premiums for a life insurance policy as a wealth replacement technique. The insurance policy can be designed so the payment of the premiums will not result in a gift and the value of policy is not included in the estate. Used in this combination the donor is able to provide for a gift to charity through the charitable trust they can still receive income from the trust and despite their gift to charity their children can end up with as much and in some cases more money then if no charitable trust planning had been taken.

Charitable Lead Unitrust (CLUT)–Income goes to charity and remainder to one’s heirs or beneficiaries. Generally for the very rich and for those whose children won’t need the income until years later when the trust ends. For example Jacklyn Kennedy Onassis used this to save taxes when she was seeking to benefit her children, John Kennedy Jr. and Carolyn Kennedy.

(CLUT)–Income goes to charity and remainder to one’s heirs or beneficiaries. Generally for the very rich and for those whose children won’t need the income until years later when the trust ends. For example Jacklyn Kennedy Onassis used this to save taxes when she was seeking to benefit her children, John Kennedy Jr. and Carolyn Kennedy.
Charitable Remainder Trust (CRT)–A trust funded with assets that go to charity upon death. The donor/trust creator can sell the assets without paying capital gains taxes and receive an annual income. Will also receive a tax deduction for the charitable gift and eliminate appreciated assets from one’s estate.

Charitable Remainder Annuity Trust–A charitable remainder trust in which the trust donor is paid an annual fixed dollar amount.

Charitable Remainder Unitrust–This pays an annual fixed percentage of the fluctuating value of trust assets.

Claim: Claims are debts of the estate. There are two types of creditors in Florida a known or reasonably ascertainable creditor and all others. For claims the Personal Representative is aware of or should be aware of a creditor in Florida has the greater of 30 days from being served or 3 months from publication to file a claim in the probate court or the claim will likely no longer be valid. For all other creditors they are limited to 3 months from publication. If there is not enough money in an estate to pay all the claims then Florida statute 733.707 would determine the order of payment.

Codicil: A written amendment to a will.

Community Property is Property acquired during a marriage and while living in one of the 9 . As a general rule, everything derived from the earnings of either spouse is shared equally by a husband and wife. Each spouse owns only one-half of the community property because the other half belongs to the other spouse. Community property rules can be modified by and made by the spouses. Florida law is a separate property state although equitable distribution of Florida Statute 61.075 controls property distribution between spouses in the event of divorce without valid prenup and Florida surviving spouse has elective share and homestead rights. Property that was Community property may retain its character as Community Property though when someone moves from one state such as Arizona to another such as Florida.

Community Property States–States in which community property laws apply. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington State and Wisconsin are considered community property states.

Cost Basis The amount originally paid for property. The is the value that is used to determine or loss for income tax purposes. Generally, the tax basis will equal the cost basis plus the cost of capital improvements, less depreciation. Once the property is transferred upon the owner’s death, it is revalued as of the date of death; this is called the stepped up basisfor Federal Income Tax purposes. Property that is transferred by gift during life has a cost basis instead of a stepped up basis. The lower the basis is in a property the higher the capital gains tax will be upon sale. To give away real, personal or intangible property under a will or trust.

Devise: To give away, real personal or intangible property under a will or trust.

Devisee: An entity or a person selected in a will or trust to receive a devise.

Domicile: The place that a person presently lives with the intent to remain. This is usually a persons permanent residence but if they are merely away on military service, to receive medical care or go to college for example but intend to return home to another place that they intend to return to will be the domicile. The law governing the state and county of domicile will control the disposition of the person’s property upon their death other than out of state real property in their sole name.

Donor: A person who makes a gift. DA person or entity who receives a gift. This can also be referred to as a beneficiary. A person who makes a gift.

Elective Share Describes a proportion of an estate which the surviving spouse of the deceased may claim in place of what they were left in the decedent’s will. It does not apply if they have signed a valid pre or post nuptial agreement. In Florida the elective share law was modified October 2001. It now applies to not only the probate estate as it used to but includes what is known as the augmented estate which typically includes transfer on death accounts, trusts and property that would otherwise pass with the right of survivorship. The valuation in Florida is 30% of the value of the augmented value of the estate.

Escheat: Property that passes back to the state of Florida because there was no will or trust validly directing the property and no heirs at law who it would pass. This is extremely rare as the intestate laws of Florida have numerous options if property is not validly devised to anyone. Florida Statute 732.107 states Florida estate law for property which may escheat.

Estate: For probate purposes whatever was in the sole name of the decedent upon his death and does not pass to another by operation of law, by contract, or as a named beneficiary and this property is subject to probate administration. For US Estate Tax purposes, it refers to all of a deceased person’s assets that are included in the person’s estate for tax purposes. Items such as an Irrevocable Insurance Trust on the decedents life may be excluded from their estate. The current exemption exempted for estate tax in 2011 or 2012 is $5 million.

Estate Planning: The process of preparing and planning for a persons financial, health care and personal affairs. It includes documents to designate an agent in the event of a future disability such as a living will or health care surrogate to assist with health care matters if one is unable to do so, a durable power of attorney to help with financial matters, and wills and trusts to pass financial property to family, friends and possibly charitable organizations. Estate Planning can ensure that a person is able to pass their property exactly as they desire instead of how Florida intestate succession law or their home state would dictate it pass and then if trusts are prepared they can direct how the property will be handled long after the grantor is dead and when properly funded help avoid the need for both probate or ancillary probate. Estate Planning is critical for all people and not merely those with a large estates. It determines who the guardian of minor children would be, who the personal representative/trustee (if there was also a trust) would be that handles the affairs and a guardianship from having to be imposed where the court would take control. Florida probate could be avoided as well through the use of trusts and or proper beneficiary designations for the way that property is held saving time and money. Additionally if it is a large estate money could be saved that would otherwise have to be paid for estate taxes. Once all the persons assets exceed a certain exemption amount the estate is taxed at over 40%. With proper planning substantial amounts of money can be saved.

Exempt Property: Florida law (Florida Statute 732.402) provides the right of a surviving spouse or children to receive tangible personal property such as furniture and furnishings within the homestead property up to $10,000 as well as the automobiles regularly used by the decedent if they are not devised to someone else. These properties are not subject to any claims except those with perfected security interests on them. Those entitled to such designation may be required to file the probate forms to declare such property as exempt within 4 months of publishing notice of administration of the probate administration. A surviving spouse and/or children are also entitled to a designation of homestead property that the property is exempt from creditors

Fair Market Value This is what a willing buyer will pay a will seller with neither being under a compulsion to buy or to sell and both having knowledge of all relevant facts.

Family Allowance: An allowance that a surviving spouse, minor or dependent children are entitled to from his or her deceased spouse’s Florida estate. If there is a surviving spouse this is typically given to them and may be up to $18,000. It is intended to provide some money for the spouse and family to live on during a probate administration.
Fiduciary: This refers to a person (or entity) that serves in a representative capacity. Personal representatives, trustees, guardians, conservators, and agents under powers of attorney are all fiduciaries. A fiduciary stands in a position of confidence and trust with respect to each heir, devisee, and/or beneficiary. They are subject to a responsibility to act in the best interests of the person that they are serving on behalf of and can be sued if they act improperly. Most litigation of this type would be heard by a judge in a Florida probate court.

Formal Probate
: a proceeding before a probate judge either with a will or intestacy which is not a summary administration or disposition of property without administration and is governed by chapter 733 of Florida statutes. When there are no creditors and non exempt assets of less than $75,000 subject to Florida probate it is quicker and easier to proceed with a Florida Summary Probate.

Gift A voluntary transfer of property for less than full and adequate consideration in return. If Internal Revenue Service is to recognize a transfer as a gift, the donor(s) must unconditionally transfer all title and control of the property to the recipient(s) at the time the gift is given. It is not a completed gift if full control over the property is not given away. With adequate disclosure of the gift the Internal Revenue Service is not allowed to revalue the gift after 3 years. Transactions can be a combination of sale and gift for example a car worth $10,000 given to a child for $2,000 would likely be a sale for $2,000 and a gift of $8,000.

Grantor: The description for a person who is transferring their property through a trust or a deed.

Guardian: An adult appointed by a surviving parent in his or her will or by a court, who is responsible for a minor child or for a legally incapacitated person’s personal care and nurturing.

Grantor Trust For income tax purposes this is a trust, in which the grantor or a third party, because of certain rights to income or principal or certain powers over the disposition of income and principal, is treated as the owner of the trust and taxed on the income thereof. Consequently, a grantor trust is not treated as a separate entity for income tax purposes. A grantor does not need to get a separate id number for a revocable trust until the trust becomes irrevocable.

Heir: person, who inherits property from the estate of a deceased person who died without a will. Holographic Will A will written entirely in the testator’s own handwriting.

Florida Homestead Exemption: In Florida, homestead has many meanings depending on the situation one refers to a surviving spouse’s or lineal heirs right to receive the primary residence of their family member free of claims from creditors other then perfected security interests on it such as the mortgage. It also cannot be transferred if there are any minor children or a surviving spouse (other than to a surviving spouse if there are no minor children) and would pass with a life estate to surviving spouse and a remainder interest in decedents children if there is a spouse and children unless devised to spouse as permitted. If owned as tenants by the entireties by husband and wife it is not considered homestead.

In Florida there is no limit to the value of the property that is covered by a Florida homestead exemption from creditors. Two additional components of homestead are that the values cannot increase by more than 3% each year for purposes of tax assessments each year and each homestead now has the first $50,000 exempt from tax assessment.
In Florida, homestead has many meanings depending on the situation one refers to a surviving spouse’s or lineal heirs right to receive the primary residence of their family member free of claims from creditors other then perfected security interests on it such as the mortgage. It also cannot be transferred if there are any minor children or a surviving spouse (other than to a surviving spouse if there are no minor children) and would pass with a life estate to surviving spouse and a remainder interest in decedents children if there is a spouse and children unless devised to spouse as permitted. If owned as tenants by the entireties by husband and wife it is not considered homestead. In Florida there is no limit to the value of the property that is covered by a Florida homestead exemption from creditors. Two additional components of homestead are that the values cannot increase by more than 3% each year for purposes of tax assessments each year and each homestead now has the first $50,000 exempt from tax assessment.

Intangible Personal Property: The value of such property is not derived from the property itself but what it represents. For example types of this property include cash, stock, bonds, mutual funds, and bank accounts. The paper themself has virtually no value but the promise to pay or designation of a certain value by the company, government or stock market provides the value of the property. As of 2007 Florida has now abolished the intangibles tax.

Inter Vivos Trust: A trust that takes effect while a grantor is still living.

Intestate: Refers to dying without a will or other designation of how one’s property should pass.

Intestate property will pass to the decedents heirs. In Florida if a person has a surviving spouse and children the spouse will receive the first $60,000 then 50% of the remainder if all the children are the spouses children as well otherwise the spouse will receive 50% and the children will receive 50%. If there is only a spouse or a children the spouse or children receive all the property. Intestate succession The distribution of property to heirs according to the statutes of the State of Florida upon the death of a person who owned the property but did not leave a valid will. As provided above and 732.101-109 of Florida statutes.
The distribution of property to heirs according to the statutes of the State of Florida upon the death of a person who owned the property but did not leave a valid will. As provided above and 732.101-109 of Florida statutes.

Incidents of Ownership Includes a variety of rights and powers that an insured decedent may have held over a life insurance policy; the possession of one or more of these incidents of ownership within three years of death will bring the policy proceeds into the insured’s gross estate. This may subject them to estate tax if the estate has more money then the applicable exclusion amount under current law. As of 2011 this amount is $5 million per person. If the decedent is subject to state estate taxes from a state other than Florida this could also cost additional money and states often times have their state estate taxes starting at a level much lower than the federal exemption. This is not an issue in Florida though as there is no state estate tax or inheritance tax in Florida. The federal estate tax under current law is $5 million..

Includes a variety of rights and powers that an insured decedent may have held over a life insurance policy; the possession of one or more of these incidents of ownership within three years of death will bring the policy proceeds into the insured’s gross estate. This may subject them to estate tax if the estate has more money then the applicable exclusion amount under current law. As of 2011 this amount is $5 million. If the decedent is subject to state estate taxes from a state other than Florida this could also cost additional money and states often times have their state estate taxes starting at a level much lower than the federal exemption. This is not an issue in Florida though as there is no state estate tax or inheritance tax in Florida.

Income Beneficiary The beneficiary of a trust who is entitled to receive the income from it.

Income in Respect of a Decedent (IRD) Income earned by a decedent or income to which the decedent had a right prior to death, but which was not properly includible in his or her gross income prior to death (This is Internal Revenue Code section 691).
The beneficiary of a trust who is entitled to receive the income from it.(IRD) Income earned by a decedent or income to which the decedent had a right prior to death, but which was not properly includible in his or her gross income prior to death (This is Internal Revenue Code section 691).
Individual Retirement Account (IRA) A tax-deferred retirement account for an individual that can be established by a person with earned income and the spouse who files a joint return. Earnings accumulate tax-deferred until the funds are withdrawn beginning at age 59.5 or later and are required to be started by the age of 70.5 (or earlier then 59.5, with a 10% penalty). A Roth IRA does not provide an initial tax deduction for the money but both the money and the subsequent appreciation grow tax free and will pass tax free when the property is withdrawn. Distributions are not required to be started upon reaching 70.5 and it can continue to accumulate tax free.

Inventory: A list of the assets of the decedent or disabled person that is prepared by an attorney and signed by the fiduciary (personal representative or conservator/guardian). In Florida this is required to be filed in a Florida Probate court.

Irrevocable Trust – A trust that is not amendable or revocable by the grantor. Can be created during a grantor’s lifetime, often called an “inter vivos” trust, or upon a grantor’s death, often called a testamentary trust. Some common types of irrevocable inter vivos trusts include life
insurance trusts, gift trusts, generation skipping trusts, Qualified Personal Residence Trusts (QPRT) Grantor Retained Annuity Trusts (“GRAT”), Intentionally Defective Grantor Trusts, Charitable Remainder Annuity Trusts (CRAT) and Charitable remainder Unitrusts (CRUT), Charitable LEAD Annuity Trusts (CLAT) and Charitable Lead Unitrusts (CLUT). Some common types of testamentary trusts include, unified credit exemption trusts, marital trusts, generation skipping trusts, testamentary charitable remainder trusts and charitable lead trusts.

Insurance Trust An irrevocable trust established to own an insurance policy or policies and thereby prevent them from being included in the insured’s estate. The insured must not retain any incidents of ownership. These trusts are typically used just by those who anticipate they may have more property then the applicable exclusion amount would allow them to shelter upon their passing or the passing of their spouse so it can save money from potentially having to pay estate taxes on the proceeds. There are additional administrative costs and responsibilities involved with this but with the estate tax starting at around 41% it can be a very useful way to save on estate taxes.

A list of the assets of the decedent or disabled person that is prepared by an attorney and signed by the fiduciary (personal representative or conservator/guardian). In Florida this is required to be filed in a Florida Probate court. – A trust that is not amendable or revocable by the grantor. Can be created during a grantor’s lifetime, often called an “inter vivos” trust, or upon a grantor’s death, often called a testamentary trust. Some common types of irrevocable inter vivos trusts include life insurance trusts, gift trusts, generation skipping trusts, Qualified Personal Residence Trusts (QPRT) Grantor Retained Annuity Trusts (“GRAT”), Intentionally Defective Grantor Trusts, Charitable Remainder Annuity Trusts (CRAT) and Charitable remainder Unitrusts (CRUT), Charitable LEAD Annuity Trusts (CLAT) and Charitable Lead Unitrusts (CLUT). Some common types of testamentary trusts include, unified credit exemption trusts, marital trusts, generation skipping trusts, testamentary charitable remainder trusts and charitable lead trusts. An irrevocable trust established to own an insurance policy or policies and thereby prevent them from being included in the insured’s estate. The insured must not retain any incidents of ownership. These trusts are typically used just by those who anticipate they may have more property then the applicable exclusion amount would allow them to shelter upon their passing or the passing of their spouse so it can save money from potentially having to pay estate taxes on the proceeds. There are additional administrative costs and responsibilities involved with this but with the estate tax starting at around 41% it can be a very useful way to save on estate taxes.

Intentionally defective grantor trust – An irrevocable inter vivos trust created by a grantor for beneficiaries other than the grantor that attributes all income tax to the grantor. Generally used when the grantor wants to irrevocably gift the property to the beneficiaries and exclude the property from the grantor’s taxable estate for estate tax purposes, but intends that the transfer be ignored for income tax purposes. Often used in conjunction with a sale of discounted assets by the grantor to the trust, to avoid capital gain on the sale of the assets.

Joint tenancy A form of joint asset ownership by two or more persons in which each person has an equal undivided ownership interest that passes directly to the surviving joint tenant(s) upon the death of any joint tenant. Any joint tenant can petition the court seeking to compel partition of a joint tenancy asset but they cannot do so with tenancy by the entireties. (A form of joint tenants only available to husband and wife). If the joint tenants are not husband and wife and the intention is that it pass with right of survivorship in Florida it is important that the deed specifically provide that it shall pass with the rights of survivorship.

– An irrevocable inter vivos trust created by a grantor for beneficiaries other than the grantor that attributes all income tax to the grantor. Generally used when the grantor wants to irrevocably gift the property to the beneficiaries and exclude the property from the grantor’s taxable estate for estate tax purposes, but intends that the transfer be ignored for income tax purposes. Often used in conjunction with a sale of discounted assets by the grantor to the trust, to avoid capital gain on the sale of the assets. A form of joint asset ownership by two or more persons in which each person has an equal undivided ownership interest that passes directly to the surviving joint tenant(s) upon the death of any joint tenant. Any joint tenant can petition the court seeking to compel partition of a joint tenancy asset but they cannot do so with tenancy by the entireties. (A form of joint tenants only available to husband and wife). If the joint tenants are not husband and wife and the intention is that it pass with right of survivorship in Florida it is important that the deed specifically provide that it shall pass with the rights of survivorship.

Kiddie Tax Unearned Income (dividends, rents, interest, etc) Unearned income of a child under age 18 beyond an exemption amount such as $850 will be taxed to the child at the parent’s income tax rate. It used to only apply to children under 14 but was raised to 18 in 2006.

Lack of Marketability Discount When the value of an asset is less than its initial or expected fair market value due to unusual circumstances that make it not readily saleable. For example, a limited partnership interest.

(dividends, rents, interest, etc) Unearned income of a child under age 18 beyond an exemption amount such as $850 will be taxed to the child at the parent’s income tax rate. It used to only apply to children under 14 but was raised to 18 in 2006.When the value of an asset is less than its initial or expected fair market value due to unusual circumstances that make it not readily saleable. For example, a limited partnership interest.
Legally Incapacitated Person: A person who has been determined by a court as not capable of handling his or her personal and financial affairs. If someone is mentally incompetent they obviously lack testamentary capacity and any will or documents they sign prior to regaining capacity will be legally invalid.

Letters Of Administration: Letters are issued by the probate judge to a personal representative, showing that the personal representative has the authority to act on behalf of a Florida probate estate. Letters of administration can be issued to any Florida resident who is mentally competent and at least 18 years of age who has not been convicted of a felony and close family members (children, spouse, sibling etc) who live out of state. When there is a preference stated in a will that person will have priority to serve as Florida Personal Representative and receive Letters of Administration as long as they are allowed to serve. In Florida intestate estates the preference for who is named in letters of administration goes to the surviving spouse then the person selected by a majority in interest by the heirs.

Limited Liability Company (LLC) An entity formed under state statute that has the legal characteristic of limited liability similar to that of a corporation, while it may qualify to be treated as a partnership for tax purposes. In Florida there is a 5.5% state tax on Limited Liability Companies. Limited Liability Companies are covered by Florida statutes chapter 609.

Limited Partner A partner in a partnership who can’t participate in the management of the partnership’s business. A limited partner’s liability is limited to the loss of his or her investment in the partnership.

Limited Partnership Form of partnership composed of both a general partner(s) and a limited partner(s); the limited partners have no control in the management of the company and are usually financially liable only to the extent of their investment in the partnership.

A partner in a partnership who can’t participate in the management of the partnership’s business. A limited partner’s liability is limited to the loss of his or her investment in the partnership. Form of partnership composed of both a general partner(s) and a limited partner(s); the limited partners have no control in the management of the company and are usually financially liable only to the extent of their investment in the partnership.

Living Will A legal document in which an individual states, in advance of final illness or injury, his or her wishes regarding which procedures and equipment designed to extend life they choose to avoid. Basically it is a document that says if extraordinary measures are needed and they will merely extend the time but not the quality of life that the person chooses to have the plug pulled and to have a natural death. This is very important that it be done and not leave your fate to the government or the court who may act contrary to your desires.

Marital Deduction A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free of estate and gift tax. This is usually just a deferral of tax and an exemption from it so it is usually not advisable to have everything pass outright in a manner that would qualify for the marital deduction. In the spouses revocable trust should be a credit shelter trust to make sure each spouse is able to use their exclusion amount.

Marital deduction trust – A trust that qualifies for the marital deduction for estate tax and gift tax purposes. Several types of trusts so qualify, including: general power of appointment marital trusts, qualified terminable interest property trusts, and qualified domestic trusts. Unless the property is then deferred from tax but unless it is spent or is the spouse is under the exclusion amount upon the passing of the surviving spouse the marital property is subject to estate tax on the death of the surviving spouse.

Minority Discount A discount applied to the value of an interest in a corporation, limited liability company or limited partnership that is not publicly marketable to reflect the fact that a minority interest in the company has less value than a controlling interest, since the holder of the former cannot control business actions.

Minor: In Florida, a person who is under the age of 18 who is not married or legally emancipated.

Notary is a person with a state commission to attest to the validity of the signatures on documents. A Florida will, trust and power of attorney are all required to be notarized by a Florida notary.

Pay on Death (POD) Designation is naming a beneficiary to receive an account balance on ones death. This is often also be referred to as Transfer on Death or (TOD). (POD)Designation is naming a beneficiary to receive an account balance on ones death. This is often also be referred to as Transfer on Death or (TOD).
Personal Representative – The individual or individuals (or institution) named in a will or appointed by the Florida Probate Court who is responsible for gathering a decedent’s assets, paying debts, taxes, and expenses, selling assets of the estate, if necessary, and distributing the remaining property and money according to the terms of the will (or the intestate laws of the state of residence). The personal representative must preserve and protect the estate assets and unless an accounting is waived account to the estate beneficiaries for estate income and expenses. The personal representative must file a federal and state estate tax return, if required, and must also file final state and federal income tax returns for the decedent, and, if necessary, federal and state income tax returns for the estate.

Per Stirpes A way of distributing an estate so that the surviving descendants will receive only what their immediate ancestor would have received if he or she had been alive at the time of death. State law definitions can vary. This means that if a decedent dies with two children one of who had predeceased him and the predeceased child left two children each of them will receive 1/4 of the property or collectively 1/2 of the property that was to go to the children and the other child would receive the other half.

Pour Over Will This is a Will used to transfer (pour over) into a trust any property that is left in a person’s estate after death. A pour over will can be admitted to a Florida probate court.

Florida Personal Representative The individual or individuals (or institution) named in a will or appointed by the Florida Probate Court who is responsible for gathering a decedent’s assets, paying debts, taxes, and expenses, selling assets of the estate, if necessary, and distributing the remaining property and money according to the terms of the will (or the intestate laws of the state of residence). The personal representative must preserve and protect the estate assets and unless an accounting is waived account to the estate beneficiaries for estate income and expenses. The personal representative must file a federal and state estate tax return, if required, and must also file final state and federal income tax returns for the decedent, and, if necessary, federal and state income tax returns for the estateA way of distributing an estate so that the surviving descendants will receive only what their immediate ancestor would have received if he or she had been alive at the time of death. State law definitions can vary. This means that if a decedent dies with two children one of who had predeceased him and the predeceased child left two children each of them will receive 1/4 of the property or collectively 1/2 of the property that was to go to the children and the other child would receive the other half.This is a Will used to transfer (pour over) into a trust any property that is left in a person’s estate after death. A pour over will can be admitted to a Florida probate court along with a

Postnuptial Agreements – Contracts entered into by a husband and wife after marriage, defining the rights of each spouse in their marital, non-marital and jointly-owned property in the event of divorce, legal separation or the death of one of the parties. Florida law requires each spouse provide full and adequate disclosure of assets for postnuptial agreements.

Power of Appointment A right given to another in a written instrument, such as a will or trust that allows the other to decide how to distribute your property. The power of appointment is “general” if it places no restrictions on who the distributees may be. A power is “limited” or “special” if it limits the eventual distributee.

Prenuptial Agreement – Contract couples can enter into prior to marriage in order to govern their respective rights in marital, non-marital, and jointly-owned property in the event of divorce, legal separation, or the death of one of the parties. It is advisable to execute these documents well in advance of the marriage to avoid the potential claim of duress as a means to attack the document. Each side should have independent attorneys of their own choosing.

Pretermitted Child A child by birth or adoption who became a child after the execution of the current estate planning and was not mentioned in the will or trust. If a person has a child or children after executing their will and do not prepare a codicil after or name the child in the document the child will be entitled to receive the share they would be allowed if the estate were to pass by Florida intestacy laws.

Probate is a legal process through which (a) a judge determines whether or not the decedent’s will if any is valid; (b) a personal representative is appointed to (1) collect the decedent’s assets in his or her probate estate, (2) pay the decedent’s legal debts, and (3) distribute the remaining assets in the decedent’s Florida probate estate to the individuals or entities entitled to the assets in accordance with the will or laws of Florida intestacy; and (c) the court approves the transfer of the decedent’s assets to the individuals and entities designated in the will or the laws of intestacy. The probate court will also determine the rights, if any, of a spouse and children to the decedent’s property in addition to what they have been left in the will and supervises any claims filed against the estate, objections to claims and probate claims which are barred by time.

Revocable Trust: A trust that one establishes during one’s lifetime which is not part of one’s will, but is established by a separate written trust agreement. A properly funded revocable trust avoids probate. It can be amended or revoked at any time as long as the grantor is not subject to undue influence and still has mental capacity. It can provide for professional management of the trust assets, help to ensure that the grantor or their trustee can maintain control over their affairs and specify specific ages or amounts at which beneficiaries receive property. Can also be phrased to take advantage of the applicable exclusion amount and/or marital deduction in order to save money on taxes. By providing for discretionary distributions and spendthrift language for beneficiaries other than the grantor better asset protection can be created. This trust will become irrevocable and no longer amendable when the grantor of the trust dies or becomes permanently incompetent.

Testamentary Trust: A trust that is part of a person’s will. It does not become effective until the person passes away and the will is admitted to probate court. A Florida probate court can admit the testamentary trust to probate for a Florida decedent or an out of state decedent who required no probate in their home jurisdiction and owned real estate in Florida.

Testate: This occurs when a person dies with a valid will in existence.

Testator: The person who makes a will.

Trust: A written document which provides for the management and disposition of assets. It normally involves three parties: the person who establishes the trust (In Florida usually called a grantor sometimes could also be called a donor, settlor, or trustor), a trustee, and one or more beneficiaries.

Trustee: A financial institution or adult who has mental capacity and has not been convicted of a felony that is designated to be responsible for the administration of a trust. There may be more than one trustee (co-trustees), and an individual and a financial institution may serve as co-trustees.

Qualified Personal Residence Trust (“QPRT”) – An irrevocable inter vivos trust under which a grantor transfers his/her interest in a personal residence to the trustee to hold for the grantor’s use and occupation during a specified term of years, and, upon expiration of the term, the residence passes to the remainder beneficiary or beneficiaries. Primarily used to gift the residence to the remainder beneficiary that is susceptible to application of valuation discounts and actuarial discounts based on the grantor’s age and the term of the trust, and is most beneficial if the residence is expected to significantly appreciate in value. It is allowed for a primary residence or one vacation home. Although it could be helpful to put a home in this trust from a tax perspective it is possible it could destroy the homestead exemption for creditor purposes since the home is no longer owned by a natural person as required in Article X section 4 of the Florida Constitution.

Qualified Terminable Interest Property (QTIP) Property qualifying for the marital deduction at the election of the donor or the decedent’s personal representative. The spouse retains a qualified income interest in the property for life, with the income payable at least annually. The corpus ultimately passes to a specified remainderman, under a special power of appointment given to the spouse. This can be especially helpful in second marriage situations where the donor wants the spouse to receive the income from the property but then have the property itself actually pass to their children (or in some other designated beneficiary).
S Corporation A corporation whose income is generally taxed to its shareholders, thus avoiding a corporate level tax. An election available to a corporation to be treated as a partnership for income tax purposes. To be eligible to make the election, a corporation must meet certain requirements as to kind and number of shareholders, classes of stock, and sources of income. The rules for S Corporations are in Internal Revenue Code Sections 1361-1378.

Section 2503(c) Trust for Minors A trust designed to comply with Section 2503(c) of the Internal Revenue Code so that a gift placed in such a trust for the benefit of a minor will qualify for the gift tax annual exclusion although they are not gifts of a present interest.

Special Needs Trust/Supplemental Needs Trust: A trust established for the benefit of a disabled person to provide supplemental support without disqualifying the beneficiary from eligibility for governmental assistance programs such as Florida Medicaid. It is a discretionary trust that a person other then the disabled person serves as trustee for.

Spendthrift Trust A trust established to provide a fund for an individual that includes a provision intended to secure it against that person’s lack of caution and protect it against the claims of creditors. A person cannot typically prevent against their own creditors but they can achieve some asset protection for others they choose to provide for such as children who they have made a trust for but a trustee has discretionary powers whether or not to distribute.

Step Up In Basis A decedent’s property that passes to others escaping capital gains tax when sold by the person who inherits the property. Persons inheriting the property receive it as of the date of death fair market value (Internal Revenue Code Section 1014) In effect the basis of the property is deemed to be a “stepped up” basis and does not reflect the decedent’s original cost basis for determining applicable capital gains tax on the sale of property. Special rules are in place for 2010 though given this is the first and only year that there is no estate tax. While the estate tax is unlimited the basis is based on the carry over basis but has a $1.3 million amount that can be stepped up if not going to a spouse or up to $3m if it does.

Successor Trustee The person or institution named in the trust agreement who will assume control of the trust if the original trustee dies, resigns, or becomes unable or unwilling to act. In sporting terms, it is like someone who sits on the bench and comes out to play only if the regular can’t continue. There can be several layers of back-up trustees that take over in the order you designate.

Tax Basis The owner’s cost of an asset for income and estate tax purposes as determined under the Internal Revenue Code and IRS regulations.

The person or institution named in the trust agreement who will assume control of the trust if the original trustee dies, resigns, or becomes unable or unwilling to act. In sporting terms, it is like someone who sits on the bench and comes out to play only if the regular can’t continue. There can be several layers of back-up trustees that take over in the order you designate.The owner’s cost of an asset for income and estate tax purposes as determined under the Internal Revenue Code and IRS regulations.

Tenants in common A form of asset ownership in which two or more persons have an undivided interest in the asset, where the ownership shares are not required to be equal, and where ownership interests can be transferred by will. Unlike joint with right of survivorship it would pass through an estate and not merely go to the survivor.

Tenancy-by-the-Entirety Ownership of property only available between husband and wife. Each owns an undivided interest in the property which will pass with right of survivorship to the survivor. Creditors of just one of the spouses can not reach the property for claims. If the properties divorce it ceases to be tenancy by the entireties. While it is tenancy by the entireties joint action is needed to sell it.

Uniform Gifts to Minors Act A method to hold property for the benefit of a minor, which is similar to a trust but the rules are governed by Florida state law and the child has to receive the property upon becoming an adult. 18 is an adult in Florida.

Unified Credit amount also known as the Applicable Exclusion amount is an amount of assets that can pass without imposition of an estate tax or gift tax on the transfer. The estate tax now has an unlimited unified credit for 2010. Taxable gifts or this amount subtracted from the amount of prior taxable gifts. $1 million in taxable assets may be gifted during ones lifetime (in addition to annual exclusion amounts and other non taxable or otherwise exempt amounts such as payment of educational or medical expenses directly to the provider for a child) The estate tax exemption amount was $3.5 million for 2009. In 2011 under current law it is scheduled to return to $1 million.

Witness: A Florida will requires two witnesses and in order to be self proving also a notary who does not count as a witness. Each witness must be in the presence of each other, the notary and the testator at the time the time that the testator signs the will, the notary acknowledges it and the other witness signs the document. Unless the witnesses are personally known to the notary they should provide identification such as a Florida Drivers license.

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