A couple of years ago, a very nice couple visited with me in my office. They had moved from Wisconsin, where their attorney was also licensed in Florida and had just completed a revision of their revocable trusts and related pour-over will, durable powers of attorney, health care surrogates and living wills.
They wanted me to represent them now that they had become permanent Florida residents, but they were quick to say that they had the utmost of confidence in their Wisconsin attorney who they assured me had taken the necessary steps to update their documents to Florida law. This couple merely wanted to meet with me and to seek my assistance when something happened to either of them.
“Normally, I would review your documents and your assets to ensure that your plan is up to date and congruent with your intent now that you live here,” I said.
“No, thank you. We’ll call you when we need you,” the husband replied.
That was the last I heard until recently, when the wife called me to tell me of her husband’s passing. I asked her to provide me current deeds and financial statements so that we could implement the testamentary trusts found within their revocable trusts.
That’s when we discovered that nothing had ever actually been transferred into either her trust or his trust. “The assets in your husband’s name alone will be subject to a probate proceeding in order to get them into the trust for you,” I advised.
“But we were told that our trust avoids the probate process,” she said.
“It does. But only when the accounts and properties are actually titled into the trust name,” I continued. “Here, there are accounts in your husband’s name. So his pour-over will catches those assets and deposits them into his revocable trust, but only through a probate process.”
Looking through the trust instrument carefully, I noticed another problem. “The disposition of your home inside of your husband’s trust is an invalid devise,” I counseled.
“What does that mean?” wife asked.
“Well, Florida law contains unique and peculiar homestead provisions. This doesn’t really have anything to do with your homestead property tax exemption nor your ‘Save Our Homes’ property tax assessment cap. Instead, the law centers on to whom you can leave your primary residence. When you are survived by a spouse, you need to leave it outright to him or her, or else you have an invalid devise.”
“Well, isn’t his trust mine now?”
“Yes and no. You are the trustee of his trust and you are the primary beneficiary of the credit-shelter trust created for estate tax purposes. But despite these facts, the home as a part of his trust creates an invalid devise.”
“So what happens?” she asked.
“Well, you get to share the home with the children. You can either choose a one-half interest in the home or you could choose a life estate and they would get a current vested remainder interest.” I said.
“That doesn’t sound so bad.” She said.
“It might not be, unless you go to sell the home and you need the children’s permission, their agreement on the sales price, and they get a portion of the sales proceeds. Hopefully none of the children have any divorces or creditor problems going on now as that might affect the title as well.”
Needless to say, the wife wasn’t very happy with all of the obstacles that appeared before her in a most difficult time – after the loss of her husband. All of these problems could have been avoided with a review of the trust and the assets and corresponding action taken before anything happened to the husband.
While you might point out that the Wisconsin attorney could have done more, one doesn’t know the extent and scope of his representation. Perhaps he wasn’t engaged to also help transfer the assets to the trusts that he created. As far as the homestead laws, those are very particular to Florida. While the Wisconsin attorney indicated that he was licensed to practice law in Florida, he may not have had many clients here and may have been unaware as to the issues involved in the disposition of Florida homestead. Or it could have been that the clients assured him that the home was owned differently than it really was. It all could have been an innocent misunderstanding or a lack of depth of the engagement itself.
In any event, the morale of the story is clear. Even if you have a trust you might not avoid the probate process if all of your assets were never actually transferred into the trust, and when moving to a new state, beware of how your new home state’s laws affect your estate planning.
The Sheppard Law Firm is located in Fort Myers and Naples by appointment.
© 2017 Craig R. Hersch. Originally published in the Sanibel Island Sun.