RPPTL Section Homestead Series Webinar - April 15th

Don't miss a great opportunity to attend the second session in the RPPTL Section's Homestead Series Webinars on April 15th at noon. This session will be hosted by Melissa Murphy, General Counsel for Attorneys Title Fund Services, LLC. Register here:

https://member.floridabar.org/s/lt-event?id=a1R1R000006fXIbUAM

National Consumer Law Center Digital Library Resources for Americans in Need

The National Consumer Law Center has compiled resources for consumer relief during these challenging times.  It should be very helpful for those in need. Here's the link:

National Consumer Law Center Digital Library

IRS Relaxes Tax Filing Deadlines for Some, BUT NOT ALL, Tax Returns

 



In times of confusion and uncertainty, it's important to find a good source for information. I've received many summaries from various sources about the effect of IRS Notice 2020-18, which delayed some, but not all, tax filing deadlines. For those of us in planning and estate administration, the deadlines for gift and estate tax returns are not extended, but the deadline for Form 1041 (Income Tax Returns for Estates and Trusts) is extended. Here's a link to the IRS site, which has a link to the actual text of the notice. Here's a link to the IRS Website with answers to questions about the modified tax deadlines. IRS FAQ's about Notice 2020-18. 

As with all tax matters, it is best to consult with your tax adviser. A trained, licensed and experienced professional will save you time and avoid risks when handling tax matters, which can be complex, making tax-related decisions an area that should not be handled without training and experience. Even intelligent, diligent individuals who excel in other professional areas may have a hard time comprehending the tax laws. Experience does matter. 

Tenants Need Estate Planning

First, I do not represent landlords or tenants. I have, however, represented many personal representatives appointed to administer an estate in Florida. The law prevents the landlord from taking possession of a rental until certain conditions are satisfied.  landlord who won't grant access to the decedent's apartment or rented home.  This situation is another example of the need for planning, even by people who think they don't have enough to write a will. 

Several questions arise:  Does the landlord have the right to change the locks?  Does the landlord have the right to remove the property?  Does the estate owe the rent for the remaining lease term?  

When does the landlord have the right to take possession?

The Florida Landlord and Tenant Act, Chapter 83 of the Florida Statutes, says a landlord cannot take possession of a dwelling unit until 60 days after the last tenant dies if rent is current. Here’s what the statute says when a landlord files an action for possession:

83.59. Right of action for possession.—

(3) The landlord shall not recover possession of a dwelling unit except:

(d) When the last remaining tenant of a dwelling unit is deceased, personal property remains on the premises, rent is unpaid, at least 60 days have elapsed following the date of death, and the landlord has not been notified in writing of the existence of a probate estate or of the name and address of a personal representative. This paragraph does not apply to a dwelling unit used in connection with a federally administered or regulated housing program, including programs under s. 202, s. 221(d)(3) and (4), s. 236, or s. 8 of the National Housing Act, as amended.

The landlord does not have to recognize anyone who has not been appointed to serve as personal representative. That requires probate and letters of administration. It assures the landlord that they are dealing with the right person. 

What about the deceased tenant's property?

Section 83.67 talks about the tenant's personal property:

(5) A landlord of any dwelling unit governed by this part shall not remove the outside doors, locks, roof, walls, or windows of the unit except for purposes of maintenance, repair, or replacement; and the landlord shall not remove the tenant’s personal property from the dwelling unit unless such action is taken after surrender, abandonment, recovery of possession of the dwelling unit due to the death of the last remaining tenant in accordance with s. 83.59(3)(d), or a lawful eviction. If provided in the rental agreement or a written agreement separate from the rental agreement, upon surrender or abandonment by the tenant, the landlord is not required to comply with s. 715.104 and is not liable or responsible for storage or disposition of the tenant’s personal property; if provided in the rental agreement, there must be printed or clearly stamped on such rental agreement a legend in substantially the following form:

BY SIGNING THIS RENTAL AGREEMENT, THE TENANT AGREES THAT UPON SURRENDER, ABANDONMENT, OR RECOVERY OF POSSESSION OF THE DWELLING UNIT DUE TO THE DEATH OF THE LAST REMAINING TENANT, AS PROVIDED BY CHAPTER 83, FLORIDA STATUTES, THE LANDLORD SHALL NOT BE LIABLE OR RESPONSIBLE FOR STORAGE OR DISPOSITION OF THE TENANT’S PERSONAL PROPERTY.

For the purposes of this section, abandonment shall be as set forth in s. 83.59(3)(c).

This gets the landlord out of storing abandoned personal property, but I still think the landlord has to get an order of possession. In some cases, the landlord does not want to pay court fees or an attorney, so they just take possession. It looks like they really don’t have a right to take possession until 60 days after the death. They might changes locks thinking they're helping, but they also really can't grant entry to the apartment to someone who is not on the lease or appointed to serve as personal representative. From the landlord’s perspective, they don’t know who is entitled to the deceased tenant’s possessions without the appointment of a personal representative by the court.  They’re usually less cooperative if the rent has not been paid and the heirs don’t get the 60 day window.

If the death certificate lists a parent or next of kin, that must give them some assurance that the person has the authority to remove personal items, including the cat. In the past, some of my clients have related that the landlord was cooperative and things worked out without legal action.  That's not always the case, however. 

The take-away is to carefully read lease documents and plan by having a will and naming someone in the lease to access your rental unit.  A small amount of money and time can save a lot of expense and aggrevation for your loved ones. 

Veterans Benefits

M. Brandon Robinson, an attorney with our firm, is an accredited VA Attorney, as well as a Marine Corps veteran. He is a welcome addition to our firm, especially given the number of veterans who call the Tampa Bay Area their home. As part of his commitment to serving fellow veterans, Brandon serves on the Florida Bar's Military Affairs Committee.

 

The VA web site describes the role of a VA Attorney - Information about VA Accredited Attorneys - and lists the many benefits that are available to those who served our country.  VA Benefits Page 
You can see Brandon's profile on our firm website by clicking here - Brandon's Firm Profile.

FREE UNCLAIMED PROPERTY SEARCH - FIND YOUR BURIED TREASURE

The State of Florida wants you to find your unclaimed property.   

The states website explains:

Why Search?

It only takes 30 seconds.

$323 Million

paid out to Floridians last year!

One in Five

chance you have unclaimed property

It's FREE!

No cost to reclaim your funds

You don't have to hire anyone to help with the paperwork.
Just go to https://www.fltreasurehunt.gov/ and enter your name.

Other states have free searches as well, so you should check each state where you lived, established a bank account, or owned property.  Here's the link to the National Association of Unclaimed Property Administrators.  They have a map of the 50 states with links to each state. https://unclaimed.org/

You can also checked for deceased family members.  Often people never learn about their unclaimed property, but the heirs can follow the procedures to prove they are entitled to claim the funds.  Sometimes that requires probate work, but it's at least worth checking.

I hope you find buried treasure!

In Tough Times, More Than Ever - Plan, Protect and Pay Attention

As we are affected by current health concerns, let's not forget about those unscrupulous individuals who would take advantage of others.  Our inboxes are full of notices, warnings, and news updates about the the Corona virus. 

The Florida Bar web site https://www.floridabar.org/news/releases/covid19/  contains a warning about a false map being circulated.  It purports to show the location of virus outbreaks.  Instead, it contains malware.  This is a reminder that even when we're tired, not feeling well, or worried about others, DON'T CLICK ON EMAIL LINKS OR IMAGES unless you are certain that the email, and its links, images and attachments are reliable. Like a virus, malware can hide on your computer system, totally inactive, only to have devastating consequences at a later time.  Malware can also leave your computer unaffected, but be transmitted to others on your network or email contacts. 

Just like estate planning, health care and electronic security are best handled by planning, protecting and paying attention. 

The Uniform Partition of Heirs Property Act Passed by Florida Legislature

The Florida legislature has passed the Uniform Partition of Heirs Property Act. Click here for the  Enrolled version of CS/CS/SB 580. It is expected that the governor will sign.  The Agriculture Improvement Act of 2018 passed by Congress ties funding to the passage of the Uniform Partition of Heirs Property Action. Text of the Agriculture Improvement Act of 2018.

Florida Bar Journal Article.  University of Florida professor Joan M. Flock and two recent UF Law graduates studied Alachua County statistics and made the argument that special partition procedures were needed for heirs who inherited property, but never properly probated the estate of the original owner.  Here's a link to their article in the Florida Bar Journal.  The Disproportionate Impact of Heirs Property in Florida's Low Income Communities of Color   In poor communities, this can mean generations of heirs who never hired a lawyer to clear title  need to prove ownership for programs like the Manatee County SHIP program and for homeowner’s insurance. The same problem arises when the family wishes to sell because they can no longer afford to maintain the property.  

RPPTL Section Response. As Co-Editor of the RPPTL Section column in the Bar Journal, I helped with a response to explain why current partition proceedings could be utilized to address the problem.  The Uniform Partition of Heirs Property Act - A Solution in Search of a Problem In addition to Chapter 64 partition action procedures, which already exist, there is a section in the Probate Code that authorizes the partition of non-homestead property by the court.  Section 733.814, Florida Statutes, When property qualifies as the deceased owner's homestead and it passes to family members, the Probate Code should not apply and family members would have to utilize the normal partition procedures. The new partition procedures still don't avoid the need to probate or otherwise establish the passage of ownership from the original owner to the heirs. A partition lawsuit, including ones under the new Act, could include a count for a declaratory judgment that establishes ownership in the heirs.

No Place Like Home. The Real Property, Probate and Trust Law Section Section has addressed the problem with the “No Place Like Home” program that coordinates pro bono attorneys to help these families.  I handled an estate where the daughter of a deceased veteran could not recover insurance proceeds after a hurricane damaged the home. More information on the program can be found here: RPPTL Section No Place Like Home Program.

Application of the New Act. The new law would also apply to cases where heirs inherited under a Lady Bird deed. This is often a problem because Lady Bird deeds are viewed as an estate planning tool for the poor, but they often result in situations where multiple owners can’t or don’t maintain the property and won’t hire a lawyer to address the problem.  The law would apply to cases where the original owner had a will and cases where the owner did not. 

South Carolina History. Advocates of the new law often cite South Carolina as a place where the heir's property problem is common.  On a personal note, I am a descendant of George Goethe, who came to South Carolina in the 1760's.  He received 800 acres from England and established a lumber mill.  Records indicate that he fought in the American Revolution, was captured, and was held on a British prison ship off the coast of South Carolina. To the best of my knowledge, none of George Goethe's ancestors own any portion of the 800 acres he owned.  (I have not traced the title back to the 1760's.) 

South Carolina Non-Profit Organization. The Center for Heirs' Property Preservation is a non-profit organization in South Carolina that advocates proper planning as an important way to prevent the heirs' property situation.  They conduct educational outreach programs to stress the importance of having a will and utilizing probate proceedings when a landowner dies.  A major source of the problem is that families often wait until several generations of owners die before seeking legal assistance.  By then, the number of heirs involved has increased exponentially and many of the heirs holding an interest in a piece of land may be minors, incapacitated, or deceased.  Here's a link to their web site:  https://www.heirsproperty.org/

The Need for Estate Planning. Overall, the new law highlights a problem that is not unique to low income families.  A study reported at Caring.com is summarized with a startling graphic: 

Just about anyone who owns property, or will own property, should have a will.  For something so important, and so easy to get wrong, it really is important to seek the assistance of a professional. 

How Much Coverage Do I Get for my FDIC Insured Trust Account? As concerns for our economy grow, some individuals are looking at FDIC coverage for their accounts.         According to the FDIC According to the FDIC, only 1 bank failed in 2019 and 4 failed in 2018. https://www.fdic.gov/bank/historical/bank/ For an account held subject to a revocable trust, the coverage is per beneficiary. The owner, or the creator of the trust, does not count in the calculation. In determining coverage for “beneficiaries,”  it is tempting to look to the Florida Trust Code for the definition of Beneficiary: The 2019 Florida Statutes
Title XLII ESTATES AND TRUSTS Chapter 736 FLORIDA TRUST CODE View Entire Chapter
736.0103 Definitions.—Unless the context otherwise requires, in this code:  (4) “Beneficiary” means a person who has a present or future beneficial interest in a trust, vested or contingent, or who holds a power of appointment over trust property in a capacity other than that of trustee. An interest as a permissible appointee of a power of appointment, held by a person in a capacity other than that of trustee, is not a beneficial interest for purposes of this subsection. Upon an irrevocable exercise of a power of appointment, the interest of a person in whose favor the appointment is made shall be considered a present or future beneficial interest in a trust in the same manner as if the interest had been included in the trust instrument.

http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0736/Sections/0736.0103.html.

The FDIC looks to the trust document to identify beneficiaries.  The state law definition should help determine when the document is not clear. Beneficiaries don’t have to be labeled “beneficiaries”, or even identified by name, but the trust needs to reflect who will receive a distribution.  Here’s what the FDIC says on its web site:  https://www.fdic.gov/deposit/diguidebankers/revocable.html#maximum_di_coverage

 

4. Identifying Beneficiaries

For deposit insurance purposes, beneficiaries are those persons or entities who shall become entitled to the trust funds upon the death of the last trust owner.

In identifying the beneficiaries of a formal revocable trust, search for those sections or paragraphs that provide instructions for the distribution of the trust funds following the death of the last owner. It is not necessary that the beneficiaries be individually identified in the trust agreement by name, but the designation must be specific enough to clearly identify the intended beneficiary, e.g., “to my children and grandchildren.” In addition, designations such as “my issue” or “descendants per stirpes” are acceptable.

However, a designation such as “my family” is not specific enough and would not be acceptable. Please note that a section outlining the designation of trustees or successor trustees in the event of the incapacitation of the grantor does not indicate who would be the beneficiaries upon the death of the grantor.

Some grantors may designate a special needs trust as the beneficiary of their trust. In calculating deposit insurance coverage, the FDIC will look through the special needs trust to the ultimate beneficiary of that trust and deem that individual to be an eligible beneficiary.

Under the terms of some living trust agreements, the death of a trust owner results in the creation of two or more trusts. If a trust agreement provides that the trust funds shall pass into one or more new trusts upon the death of one or both owners, the future trusts are not treated as beneficiaries of the revocable trust before the death of any owner. Rather, the future trusts are viewed simply as mechanisms for distributing the trust funds, and the beneficiaries are the persons and/or entities who shall receive the trust funds through the future trusts.

Some grantors may also indicate in their trust agreement that the beneficiaries are identified in the grantor’s last will and testament. Such a designation is acceptable provided that the beneficiaries in the last will and testament are identifiable as eligible beneficiaries. If the beneficiaries of a trust agreement are identified in the grantor’s will, the FDIC may need a copy of the will to determine deposit insurance coverage, if the IDI fails.

The FDIC web site gives examples and a flow chart to help with the determination of FDIC coverage for a trust account: https://www.fdic.gov/deposit/covered/trust.html.  Remember that the FDIC insurance coverage limits are per depositor, per institution.  As a result, some individuals in the past have established accounts at multiple financial institutions.

_________________________________________________________________________________

Revocable and Irrevocable Trust Accounts

FDIC deposit insurance covers trust accounts under two separate ownership categories: Revocable Trust and Irrevocable Trust.

Revocable Trusts

A revocable trust account is a deposit account owned by one or more people that designates one or more beneficiaries who will receive the deposits upon the death of the owner(s).

A revocable trust can be revoked, terminated or changed at any time, at the discretion of the owner(s). The term "owner" means the grantor, settlor, or trustor of the revocable trust.

Revocable trusts can be formal or informal.

Irrevocable Trusts

An irrevocable trust account is a deposit account titled in the name of an irrevocable trust, for which the owner (grantor/settlor/trustor) contributes deposits or other property to the trust, but gives up all power to cancel or change the trust.

Irrevocable trusts are also established following the death of an owner of a revocable trust, or by statute or judicial order.

When a revocable trust has more than one owner, each owner's coverage is calculated separately.

Does the trust meet ALL 3 of these criteria?

1

The account title at the bank indicates that the account is a trust using language such as:

Formal Revocable Trusts use such terms as:

o    Living trust

o    Family trust

Informal Revocable Trusts use such terms as:

o    Payable on death (POD)

o    Totten trust

o    As trustee for (ATF)

o    In trust for (ITF)

Or similar language, including the word "trust" in the account title.

Important Considerations

There is no six-month grace period for the death of a beneficiary for revocable trust deposits.

If there is no substitute beneficiary designated when a primary beneficiary dies, the amount of deposit insurance coverage may decrease for this deposit.

2

At the time a bank fails, the beneficiary must be entitled to his or her interest in the revocable trust assets upon the grantor's death. The FDIC recognizes life estate and remainder beneficiaries, but not contingent beneficiaries.

3

How many beneficiaries does the trust/account owner designate?

When a revocable trust owner designates five or fewer beneficiaries, the owner's trust deposits are insured up to $250,000 for each unique beneficiary.

This rule applies to the combined interests of all beneficiaries the owner has designated in all formal and informal revocable trust accounts at the same bank. When there are five or fewer beneficiaries, maximum deposit insurance coverage for each trust owner is determined by multiplying $250,000 times the number of unique beneficiaries, regardless of the dollar amount or percentage allotted to each unique beneficiary.

Maximum insurance coverage for a trust owner when there are five or fewer unique beneficiaries
Number of Unique Beneficiaries	Maximum Deposit Insurance Coverage
1 Beneficiary	$250,000
2 Beneficiaries	$500,000
3 Beneficiaries	$750,000
4 Beneficiaries	$1,000,000
5 Beneficiaries	$1,250,000

·                     Example 1:

Multiple POD (payable upon death) accounts for one owner where there are five or fewer unique beneficiaries.

·                     Example 2:

Multiple types of revocable trust accounts with five or fewer unique beneficiaries.

                   

To determine your deposit insurance coverage or ask any other specific deposit insurance questions, call 1-877-ASK-FDIC (1-877-275-3342).

Last Updated 1/31/2018

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When in doubt, it is best to ask your banker about the FDIC coverage.  The FDIC web site notes that the financial institution may ask for a copy of the trust to identify beneficiaries, but they are not required to do so.  What counts is the identification of beneficiaries at the time the financial institution fails and FDIC insurance becomes available.

This information is provided for general education purposes and is not intended to constitute legal or tax advice.  It is not an offer to provide legal services, nor is it an attempt to solicit prospective clients. For advice on your situation, please consult with your lawyer, your tax advisor, and/or the FDIC. No claim is made to the materials in the Florida Statutes or the FDIC web site.

2019 Secure Act Takes Away the Security of Stretch Distribution Planning

The Secure Act, which became effective January 1, 2020, changed the options for inherited retirement account beneficiaries.  In some cases, planners recommended that a retirement account be payable to the trustee of a trust, rather than directly to the beneficiaries. There could be good reasons to do so:  the beneficiary is too young, has a disability, or just can't manage money.  To retain the advantage of "stretching" the distribution of the inherited account funds, attorneys put special language in trusts to preserve the stretch. 

The Conduit Trust. One option was a "conduit trust" which required the trustee to collect the yearly distributions for a beneficiary and then distribute the funds in the same year for the intended beneficiary.  Even though the funds ultimately passed to the beneficiary, the trustee could at least control the timing of the distributions.  As a result, the trust was really just a "conduit" to receive and disburse funds. The trustee could make the election to take the beneficiaries over the beneficiary's lifetime, which allowed for:

• yearly distributions, 
• continued tax-free growth within the account, and 
• the avoidance of the higher income tax brackets for undistributed income within a trust.   

Under the new law, the retirement account funds must be fully distributed by the trustee by the end of the 10th year.  In some situations, this might be undesirable. 

The Accumulation Trust.  In cases where mandatory distributions from the trust each year were not desirable, the trust could provide that the trustee is permitted to accumulate income.  That gave the trustee more control over the distributions, but potentially subjected the yearly distribution of retirement account funds to the trust to income tax at much higher rates than those paid by an individual. 

Qualified Beneficiaries. Under the old rules, the beneficiary's life expectancy could be used to calculate the yearly mandatory distribution of inherited retirement account funds.  To qualify, the beneficiary would have to be an individual and have an identifiable interest in the trust.  Only surviving spouses had the option of a true roll-over, allowing them to wait until age 70 to take distributions, and then calculate the yearly distributions based upon their life expectancy. 

Eligible Qualified Beneficiaries.  Under the new law, beneficiaries only have 10 years to withdraw the inherited retirement account funds unless they are "eligible qualified beneficiaries."  This limited group includes: 

• Surviving spouses; 
• Minor children of the account owner; 
• Beneficiaries with a chronic illness or disability; and 
• Beneficiaries who are not more than 10 years younger than the deceased account owner. 

Minors loose their favorable status when they turn 18 and then have 10 years to withdraw the funds. 

Steps to Consider.  In light of the new plan, there are several options to consider. 

• Consider naming a charity or a Charitable Remainder Annuity Trust as the account beneficiary; 
• Convert to a Roth IRA; 
• Amend a trust to act as an accumulation trust instead of a conduit trust. 

The available options  should be discussed with your tax adviser and your legal adviser.  There are many factors to consider, so the best approach for one estate plan may not be the best for another.