How to Decant to a Special Needs Trust

How to Decant to a Special Needs Trust

In 2018, Florida revised the ability to more easily modify existing trusts.  Basically, now there are three separate ways that a trustee may engage in a decanting, a general term used to describe the trustee of an existing trust creating a new, second trust, and moving all assets of the old trust into the new trust.

1. A trustee may decant if they are given “absolute power” over distributions in the trust instrument. This method of decanting provides the most flexibility for all parties.

2. A trustee without “absolute power,” such as a distribution power limited by the ubiquitous health, education, maintenance and support, or “HEMs,” standard may decant. This method must comply with a more rigid standard.

3. A trustee may decant from any trust that does not qualify as a “supplemental needs trust” to a trust that does qualify as such. There are important limitations for this type of decanting as well. 

You can read more about the ways a trustee may decant a trust in our other article: Decanting Trusts In Florida.

New statutes in Florida for special needs trusts

The new statute provides that a trustee who has the power “to invade the principal of the first trust to make current distributions to or for the benefit of a beneficiary with a disability may instead exercise such power by appointing all or part of the principal of the first trust in favor of a trustee of a second trust that is a supplemental needs trust.”  A “beneficiary with a disability” is defined as “a beneficiary of the first trust who the authorized trustee believes may qualify for government benefits based on disability, regardless of whether the beneficiary currently receives those benefits or has been adjudicated incapacitated.”  A “supplemental needs trust” is defined as “a trust that the authorized trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits.”  That provides a great deal of flexibility in the trustee being able to create a second trust that qualifies as a supplemental needs trust, however, there are requirements specific to this type of decanting.

There are many situations where decanting to create a supplemental needs trust will be desirable.  For example, what if mom and dad create a trust that is irrevocable after their death and this trust benefits their three children?  The trust lasts for the life of the beneficiaries and allows the trustee to distribute from income or principal to the beneficiaries for their health, education, maintenance, and support. 

If after the death of their parents, one of the children is involved in an accident or suffers a brain injury with permanent damage, then the terms of the trust will no longer be the best structure.  Through decanting, an authorized trustee could create a second trust that is a supplemental needs trust for the benefit of the child with the disability and move one-third of the first trust’s assets to it through decanting.  Another second trust could be created for only the other two children who have no disability (with all other terms being the same as the first trust) and two-thirds of the first trust’s assets moved to it through decanting.  After the decantings, the disabled beneficiary may qualify for government benefits because the first trust would have been “counted” as a resource while the second trust will not.  Additionally, the beneficial interests of the other children in their new trust are substantially the same as before the decantings occurred.

Questions to consider before decanting a special needs trust in Florida

When considering decanting in the context of special needs trusts, ask these initial questions:

  • Is there a compelling reason to decant? (Will the exercise of the power further the purposes of the trust?) Perhaps the existing trust terms will prevent a beneficiary with a disability from qualifying for government benefits.
  • Is the trustee an authorized trustee (not a settlor or beneficiary)?
  • Does the trustee have the power to invade the principal of the trust?
  • Is the beneficiary under a legal disability or does the trustee reasonably believe the beneficiary is incapacitated?
  • Is the proposed supplemental needs trust one that the trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits?
  • Does the supplemental needs trust benefit the beneficiary with a disability?
  • Is the second trust’s beneficial interest substantially similar to the beneficiary’s interest under the first trust? In other words, you cannot substantially change the interests of any beneficiary; the only exception being that the interests of the beneficiary with the disability need only qualify as a supplemental needs trust would normally provide and likely their interests will be changed very substantial in order to qualify.
  • Are the beneficiaries of the second trust also beneficiaries of the first trust? In other words, you cannot add new beneficiaries.

If you have answered yes to any of the above questions and are interested in learning more about the expanded opportunities for fixing your special needs trust, please feel free to contact us.  

What is Probate and When is it Required?

What is Probate and When is it Required?

The article is co-authored with Estate Planning & Probate attorney Paige Hammond Wolpert.

What is Probate?

Probate is a court supervised process whereby the validity of a decedent’s Last Will and Testament is proven, a legal representative is appointed to the administer the estate (in Florida this person is referred to as a “Personal Representative”), and the estate is settled so that valid creditors are paid and beneficiaries receive distributions of the decedent’s property to which they are entitled.  If the decedent dies without a Last Will, also referred to as dying intestate, a similar process is followed.  However, the individuals who receive the decedent’s property (referred to as “heirs”) are determined by the Florida law.

Are There Different Types of Probate?

There are two types of probate administrations.  The amount and nature of the assets owned by the decedent dictate which type is appropriate.  Chapter 733 of the Florida Statutes provides the framework for the administration.

Formal Administration.   If the decedent owned assets in his or her sole name in excess of $75,000 (not including the decedent’s homestead property), a formal administration is usually required.  A formal administration involves filing an initial Petition for Administration with the probate court identifying the decedent, listing the decedent’s assets, and requesting that a personal representative be appointed to administer the estate.  Notice of the proceedings must be given to the decedent’s beneficiaries and to the decedent’s creditors and an inventory of the estate must be filed with the probate court.  A formal administration typically takes from 6 to 12 months to complete.  However, formal administrations that involve more complex issues such as the probate of real estate, tax issues, or litigation, may continue for a much longer period of time.  Under Florida law, a Personal Representative must be represented by legal counsel throughout the formal administration.

Summary Administration.  For a decedent with assets in his or her sole name worth less than $75,000 (not including the decedent’s homestead), a less extensive administration, referred to a summary administration, may be appropriate.  A summary administration may also be used if the decedent owned only homestead property at this time of his or her death.  A Petition for Summary Administration, along with a proposed order specifying who is to receive estate assets and which creditors should be paid and in what amount, is submitted to the probate court.  Once the order is entered, the summary administration is complete.  Some courts also require that a notice to estate creditors be published in a newspaper within the summary administration.  Summary administrations can typically be completed in a matter of months depending upon the probate court’s caseload.

What does NOT trigger the need for Probate?

Control and Disposition of the Decedent’s Remains.  Unless the decedent’s Last Will and Testament provides to the contrary, a surviving spouse or next of kin (such as the decedent’s children) can legally control the disposition of the decedent’s remains without initiating a probate proceeding.  If the surviving spouse and next of kin are in disagreement as to the disposal, Section 497.005(39), Florida Statutes, provides that the surviving spouse has the ultimate decisions making authority regarding the remains unless the surviving spouse has been arrested for committing an act of domestic violence against the decedent that resulted in or contributed to the death.

Disposition Without Administration.  For smaller estates, no administration may be required at all.  For example, if the decedent owned only certain exempt property and nonexempt personal property not exceeding the sum of the amount of funeral expenses and the decedent’s reasonable and necessary medical and hospital expenses of the last 60 days of the last illness, then a disposition without administration may be appropriate.  Pursuant to Section 735.301, Florida Statutes, the decedent’s property may be transferred if an interested party sends an affidavit or letter to the court requesting the payment or transfer of the decedent’s property to persons entitled to that property. Once the court receives the informal request, the court may authorize the payment, transfer, or disposition of the decedent’s personal property in writing without the need for a formal administration.

Decedent Owned Automobile in Sole Name.  If the decedent owned an automobile in his or her sole name, that automobile transfers automatically as an operation of law pursuant to Section 319.28, Florida Statutes, without a probate.  If the decedent had a Last Will, the Will should be presented, along with a death certificate and an affidavit that the estate has sufficient assets to pay creditors or that it is not indebted, to the Department of Motor Vehicles to show who has the legal right to take title to the automobile.  If the decedent died intestate, an affidavit stating that the estate is not indebted and that the surviving spouse (if any) and heirs of the estate have agreed who should take title to the automobile is submitted to the Department to transfer the title.

Jointly Owned Property.  If the decedent owned a parcel of real estate as a joint tenant with rights of survivorship, the parcel will pass automatically to the surviving owner or owners when the decedent dies.  No administration of the real property is required.  There is also no need to do a new deed for the real property.  A death certificate without the cause of death will need to be recorded in the public records in the county where the real property is located.  Generally, no probate administration is required for other types of property owned jointly by the decedent and another party, including bank accounts, investment accounts, and automobiles.  A determination must be made as to whether such accounts were owned by the parties with survivorship rights or whether a party was placed on the account simply for convenience, without survivorship rights.  Under Florida law, there is a presumption that the decedent intended for any joint assets to pass to the surviving joint account holder unless the presumption is rebutted in the decedent’s Last Will and Testament.

Tax Refund.  If the decedent is entitled to a tax refund from the Internal Revenue Service not in excess of $2,500, Section 735.302, Florida Statutes, states that the refund may be paid directly to the decedent’s surviving spouse, or if there is no spouse, to his or her surviving children over the age of 14.

Assets Payable to a Named Beneficiary.  Assets that are payable to a named beneficiary such as life insurance policies, retirement accounts, and some bank and investment accounts, pass directly to the named beneficiary and need not be probated.  These would include POD (payable on death) accounts, TOD (transfer on death) accounts, and ITF (in trust for) accounts.

Veterans’ Survivor Benefits.  Most benefits payable to the survivors of a decedent are paid directly to those survivors and are not probated.  Information regarding veterans’ benefits can be obtained from the United States Department of Veterans Affairs, Benefits Information and Assistance Office.

Social Security Benefits and Claims.  Social security benefits are payable directly to the decedent’s spouse or dependent.  Information on these benefits can be obtained from the Social Security Administration, which publishes a Social Security Handbook that details the programs available to survivors.

Ten Practice Points Every New Attorney Should Consider

Ten Practice Points Every New Attorney Should Consider

As a seasoned attorney, I have recently felt compelled to share some personal reflections on the practice of law. It’s well understood that all lawyers must follow a code of professional ethics and obey the rules established under law. But beyond that, experienced attorneys will no doubt be aware of the existence of unwritten rules which they may or may not choose to apply to their own standards of practice. These unstated principles should be of particular interest and importance to younger attorneys, sometimes informally referred to as “baby lawyers”, who are still in the developmental stages of learning and growing in their particular fields.

It’s useful to remind oneself that the practice of law is just that: practice. The guidelines I’m about to share with you are guidelines that many of you may already use. They have been developed over years of practice (in both senses of the word) and are mine in the sense that they come from the heart. Unfortunately, I have had to formulate these principles the hard way, through many years of trial (sometimes literally) and error. It was certainly part of a process of making, and hopefully correcting, many mistakes. It also involved the good fortune of having worked with gracious attorneys and patient judges who have helped to lead and shape me. And it was also learned by the inevitable unfortunate encounters with some not-so-gracious attorneys, whether in adversarial or non-adversarial cases.

My father, who coincidentally or not also happens to be an attorney, was fond of telling me to “never underestimate the power of a bad example.” Many times, we do learn simply by learning exactly what not to do. I have always tried to bear this simple concept in mind as I navigate through the sometimes rough waters of the legal profession.

Recently, I sat down and attempted to express in writing the ways in which I have tried to conduct my day-to-day practice, applying the perspective of what I myself would have liked to have known when I was starting out as an attorney. Keeping one’s focus can make the practice of law something gratifying rather than just grueling. My goal is to encourage other lawyers to embrace the practice of law as I have learned to do. Ideally, new attorneys will be able to retain both a strong sense of self as well as a healthy self-awareness of why they chose to become lawyers in the first place. My hope is that these basic concepts will illuminate their career pathways just as they have helped to shine a light on mine.

Ten Practice Points Every New Attorney Should Consider:

1. Never Eat One of Your Own
■ In other words, give other practitioners the benefit of the doubt, knowing how difficult this job can be. The clients and cases are difficult. The lawyers need not be.

2. Refrain From Humiliating Another Attorney in Writing in an Effort to Make Yourself Look Better
■ Whether it is in correspondence, a report to the Court or within pleadings, stick with the facts and the legal arguments that are on your side. After all, that is what we do. There is no need to make things personal with the other attorney or with clients. “Zealously representing a client” does not mean being a jerk.
3. Never Blame Your Assistant, Paralegal, and/or Associate for Your Faults
■ This applies in Court, or otherwise. The buck stops with the attorney. It is cheap for attorneys not to take responsibility for mistakes.

4. Do Not Be Afraid to Admit That You Do Not Know the Answer
■ Young attorneys tend to view this as a sign of weakness, but it is quite the opposite. We do not need to know all of the answers; we just have to have the ability to spot the issues and we need to care enough to look for solutions.

5. Do Not Forget Who You are Serving – Your Client
■ Attorneys are servants. We are listeners. When we refuse to listen to our clients, or to care about their needs, our practice becomes malpractice. Put yourself in your client’s shoes. How would you feel after reading a letter from your counsel? Is it sarcastic? Is it unclear? Would you appreciate a call beforehand, or some explanation? The practice of law is foreign to many. As attorneys, we need to be cognizant of this fact.

6. Never Underestimate the Power of a Phone Call
■ Introduce yourself to opposing counsel over the phone. It is much more difficult to be mean to someone when you realize that he or she is a human being. E-mail is impersonal and not always the best way to communicate.

7. When in Doubt, Refer it Out
■ If you bring in work that you do not know how to do, do not be afraid to send it to someone who does. Do not take on something that could give you malpractice heartburn. It is not worth it, and it is not the best thing for your client.

8. Do Not Take Advantage of “Baby Lawyers”
■ You were a baby once.

9. Dress for the Occasion
■ If you are getting paid over $200.00 per hour, look professional. Dignity within the profession and perception are important.

10. Do Not Do Something You Would Not Want God to See
■ He never takes off.