The Setting Every Community Up for Retirement Act, or the SECURE Act, was passed into law in December of 2019. The original SECURE Act most notably raised the age at which Americans must start taking annual Required Minimum Distributions (RMDs) from their traditional IRAs and 401(k)s from age 70½ to 72.   For more information, refer to our original SECURE Act blog. At the time that the law was passed, lawmakers insisted that this was just the beginning of retirement planning reform in America.   The House of Representatives has now followed through, approving the SECURE Act 2.0 bill with a resounding 414 to 5 vote. The bill is geared toward making it easier for Americans to save for retirement and takes a multifaceted approach to do so. The bill still needs to pass the Senate and is widely expected to become law within 2022 due to its robust bipartisan support as well as the congressional popularity of its predecessor, the original SECURE Act. While we will likely get a SECURE Act 2.0 in 2022, it may end up with some different provisions than those contained in the bill recently approved by the House.  

Effect on Employers

Currently, the highlights of the bill include requiring employers to automatically enroll eligible workers in newly created 401(k) and 403(b) plans at a rate of 3% of salary, increasing annually until the employee is contributing 10% of their pay.  Employees would still be able to opt out. Existing 401(k) and 403(b) plans would be “grandfathered” in and would not be subject to this requirement. Businesses with 10 or less employees or in existence for less than 3 years would also be excluded from this requirement. The bill would permit employers to provide financial incentives, such as gift cards, to employees for 401(k) contributions. Additionally, employers will have the option to match an employee’s student loan payments with corresponding 401(k) contributions. This could be encouraged by federal tax incentives for qualifying employers.

Required Minimum Distribution Age Increases

The bill sets out a schedule of future increases for the age at which RMDs must be taken, leading off with an increase to age 73 at the beginning of 2023. Following the initial age increase, RMDs would not increase again until 2030, when the age will increase to 74.  This would increase yet again to age 75 in 2033. While some current retirees may be disappointed by the staggered timing of the RMD age increases, one year of extra tax deferral can be impactful in the short term, and wealthy retirees in the next decade would reap the benefits of extended tax deferral.  Additionally, the current penalty for missing an annual RMD is a 50% excise tax.  making this one of the steepest penalties the IRS deploys.  This penalty would be reduced to a mere 25%, providing a benefit to taxpayers who may unknowingly fail to make an RMD withdrawal or receive bad financial advice.

Increase in Catch-Up Provision Amounts

 Another change is an increase in catch-up provisions for individuals that are closer to retirement. Currently, the maximum amount that an employee can contribute annually to their 401(k) is $20,500. Employees ages 50 years and older are allowed to contribute up to an additional $6,500 per year. This extra contribution is known as a catch-up contribution. Under the newly proposed Secure Act 2.0, workers between the ages of 62 and 64 would be able to make up to $10,000 per year in catch-up contributions to their 401(k) plan. Although it may not seem like much, every tax-deferred dollar counts in retirement, and when combined with the extended time for investments to grow resulting from the proposed increased annual RMD ages, these changes could provide some measure of last-minute relief for late retirement savers. 

Qualifying Charitable Distribution Opportunities

Wealthy individuals aged 70½ and over currently have the option to transfer up to $100,000 tax-free each year to charity from their traditional IRAs. These qualified charitable distributions (“QCDs”) are used to give the annual RMD amount to a charity, allowing the taxpayer to avoid increasing their adjusted gross income or incurring income tax on the RMD.  Transfers to donor-advised funds, charitable gift annuities, and charitable remainder trusts (“CRTs”) do not presently qualify to be treated as QCDs. If the SECURE Act 2.0 is passed by the Senate in its current form, it would permit a one-time QCD transfer of up to $50,000 to a charitable gift annuity or CRT. Additionally, the $100,000 cap would be indexed for inflation.

If you have any questions or would like to discuss or review your tax and estate planning, you can contact a member of our team directly or contact us through our website.

We enter into contracts all the time, but what exactly creates a contract? Simply put, a contract is formed when one entity makes an offer to another, and that offer is accepted. Any time you exchange money for services you have likely signed a contract with the service provider.  Have you ever hired a plumber? Did you receive a written estimate that you signed to accept the estimate and begin services? If so, you’ve entered into a contract.

The three essential elements are the offer, acceptance, and consideration. To begin a contract, an offer must first be extended. Details of the agreement, as well as its terms and conditions, should be included. Simply explained, an offer is an attempt by the offeror to enter into a contract with another party. Once the offer has been made, the offeree has the option of accepting or rejecting the proposal and its terms and conditions. Finally, to have a legitimate legal agreement, something of value must be exchanged such as money, merchandise, property, protection, or services. If the parties are not trading in money, they should ensure that whatever they are trading, commonly known as their consideration, is considered valuable by the court.

Dissecting a contract even further, there are 7 key ingredients that should be included in a contract: Who, What, Where, When, How Much, The Date, and Signatures. The “Who” in the case of contracts are the parties involved. Let’s say you call a plumber to fix a leak. In this case, you and the company the plumber works for is the “who.”

The “What” is the scope of work. The scope of work is the section of a contract or agreement where all expected activities and deliverables are detailed with the goal of harmonizing expectations between both parties is known as the “tasks and deliverables section.” You and the plumber are discussing the problem and they tell you the leak is part of a bigger problem and outline what work needs to be done to correct the issue. They write up a proposal explaining the scope of work. This is the “what.”

The ”Where” is the location of the work. In the case of the plumber, your home is likely the “where” with special attention to specific locations affected such as the front or back yard, the bathroom, the kitchen, etc.

The “When” is the timeline of work. The plumber, in their written estimate that will become a contract if you sign it, will lay out the timeline for completion of the project. It may take a week to get a special part, and then a day to do the work,  and another day to follow up.

The “How Much” is the terms of payment. What will it cost for whatever merchandise, property, protection, or services you’d receive? Going back to our plumber example, the quote you will sign will tell you how much the services will cost and the payment timeline. Will you have to pay a deposit? Will you pay the balance upon completion?

The “Date” is simply the date the contract becomes effective. Usually, that is the date the contract is signed.

Finally, the “Signatures” close the deal and the contract is complete. The plumber has given you the scope of work, the location of the work, the timeline of the work, the expected payment terms, and has dated the estimate. Now you accept or decline. You’ve decided the plumber you’ve called is giving you a good deal, so you accept and sign the estimate.

You now have a contract with the plumber’s company. You have been given an offer, you have accepted, and you have met the consideration standards. In doing so you have met all seven key ingredients for a contract. You know the who, what, where, when, how much, have the date, and have given your signature to confirm your intent to follow through with the agreement. Our commercial litigation, real estate, construction teams, and other attorneys within our practice areas are here to advise our clients on their options based on the specific terms outlined in their contracts. For more information and assistance with a contract, you can contact us here.

What is Probate?

Probate is the court-supervised process for collecting the assets of an individual who has passed away (the “Decedent”), notifying creditors, paying the Decedent’s debts pursuant to law, and distributing the Decedent’s assets to their beneficiaries.  There are two different types of Florida probate administrations: formal administration and summary administration.  There are also four different types of non-court-supervised procedures that may allow you to avoid opening a formal or summary probate administration: disposition without administration, income tax refunds, payment to successor without court proceedings, and disposition without administration of intestate property in small estates.  Each of these methods have different advantages and only apply in limited circumstances.  

Issue Number 1 – Locating the Decedent’s Will.

A will is a document in which the Decedent names who they want to receive their probate assets.  The Decedent’s will may also name who they would like to nominate as personal representative.  In Florida, a personal representative is the individual who is appointed by the Court to administer the probate estate (also known as an executrix or administrator in other jurisdictions).

Once the Decedent’s original will is located, it needs to be filed with the Court in the county in which the Decedent was domiciled.  Under Florida law, the individual in possession of the Decedent’s will must deposit or file the will within 10 days of learning of the Decedent’s death.

What happens if you cannot find the Decedent’s original will?  There is a process in the Florida probate administration that allows a party to establish and probate the Decedent’s lost or destroyed will.

What happens if the Decedent did not have a will?  Someone who dies without a valid will dies “intestate.”  If the Decedent dies intestate, Florida Statutes list who is a beneficiary of the Decedent’s estate and how the Decedent’s Florida probate assets will be distributed.

Issue Number 2 – Determining Whether a Florida Probate Estate Should Be Opened.

The main considerations in determining whether a probate estate should be opened include:

A. Are There Probate Assets?

Not all of the Decedent’s assets are included in the probate estate, and many people develop estate plans to avoid the probate process.  The most common probate assets include:

  1. Bank account in the Decedent’s name alone with no payable on death beneficiaries;
  2. Life insurance policy, annuity, or individual retirement account payable to the Decedent’s estate or having no beneficiaries;
  3. Vehicle titled in the Decedent’s name alone;
  4. Real property titled in the Decedent’s name alone or as tenants in common; and
  5. Tangible personal property of the Decedent;
  6. Decedent’s homestead.

B. Does the Decedent’s Debt Outweigh the Probate Assets?

If the Decedent’s debt outweighs their probate assets, you may want to wait 2 years from the date of death to open the probate estate.  Florida’s probate process provides creditors with the means to file a claim against the Decedent’s estate and, if their claim is valid, the creditor will need to be paid before the probate assets are distributed to the Decedent’s beneficiaries.  However, all creditors must file their claims against the Decedent’s estate within two years of the Decedent’s death.  If a creditor fails to file their claim within this timeframe, the Decedent’s estate will not be required to pay them.  In addition, certain assets may be exempt from the claims of creditors.

Issue Number 3 – Locating Probate Assets.

Once a personal representative is appointed for the Decedent’s estate, the personal representative must locate all of the Decedent’s probate assets and list them in what is referred to as the Inventory.  The Inventory is a document informing the Court and the beneficiaries of all the Decedent’s probate assets and their approximate value.  There are many circumstances where probate assets may be difficult to find.  A skillful attorney can take advantage of legal tools to efficiently locate bank accounts, real property, tangible assets, and digital assets that the Decedent may have left behind. 

Issue Number 4 – Homestead.

In Florida, homestead property is granted certain protections by the Florida Constitution.  One major protection is that property determined to be homestead by the Court may be exempt from creditors’ claims.  This means that creditors cannot force certain beneficiaries to sell the home, or use proceeds from the sale of the home, to pay the creditors’ claims against the Decedent’s estate.  To receive Florida’s homestead protections, the Court must issue an Order determining the homestead status of the real property.

Bonus Issue – Taxes.

As Benjamin Franklin once wrote, “in this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789.

Even in the event of death, the Decedent’s estate is still responsible to pay for various taxes that were owed by the Decedent, or that may subsequently be owed by the Decedent’s estate.  By accepting the position as personal representative, a personal representative assumes certain hidden liabilities in which the Internal Revenue Service or the State of Florida may collect taxes from the personal representative’s personal assets if the Decedent’s taxes are not paid properly.  Because of this assumption of risk, it is important for a personal representative to work closely with an experienced Florida probate attorney to ensure that they do not become personally liable for any of the Decedent’s taxes.

If you have questions about the probate process, contact the attorneys on our estate planning & probate team.

How will the new normal of Covid-19 affect our culture? It’s hard to know but we should focus on what we can control. External factors are hard to control but internal factors such as communication are within our control, and it helps us form our new normal for our organization. The current situation is really an opportunity for a culture shift or a refinement.

How can you protect business continuity if you get Covid-19 or someone else in your organization gets sick? From a legal prospective, review your governing documents, do you have a board structure in place, are you meeting regularly, who has authority to make day to day decisions made in the ordinary course of business in your absence? You need one or more key people who will also know the ropes and can work in your absence understanding both the big picture and processing management skills. Granting them management authority before illness happens will help them understand how to serve in this role and the work force will recognize their authority. Identify key staff and make sure they have trained someone in their department on taking on their role in the event of illness or absence.

Navigating a global pandemic is tough enough to do, more so when there are direct impacts on our day-to-day businesses. However, the silver lining when going through something like COVID-19 is the enormous amount of intelligence and insight we gain. We can’t predict the future but we can position our people and company to be ready when the time comes. Create a crisis recovery and contingency plan and encourage feedback from external and internal sources. Continue exploring the benefits of having remote workers, and consider revisiting your strategic plan to ensure you have the capital, management team and goals in alignment.
 
 

Attorneys Alex Douglas and Stephanie Cook recently contributed to a Florida Bar Real Property, Probate and Trust Law Section’s (RPPTL) ActionLine article: “As the RPPTL World Turns: The Impact of the Pandemic and Remote/Zoom Hearings, Depositions, and Mediations on Your Trusts and Estates Litigation Practices.”  The authors performed a series of interviews with a cross-section of RPPTL Section members who practice primarily Trusts and Estates Litigation. The interviews were designed to learn how their practices have been impacted by the COVID-19 pandemic. The article covered topics including working from home, Zoom hearings, depositions, mediations, business development, technology, and captured the attorney’s post-pandemic thoughts. One thing everyone agreed on was that Zoom was the new normal.

The Real Property, Probate and Trust Law Section’s ActionLine is a quarterly publication containing the latest news on Florida law of concern to RPPTL members and reporting on current Section activities.

 

The National Firearms Act (NFA) regulates and restricts personal ownership of certain weapons.  NFA firearms that are allowable in Florida include machine guns, short-barreled rifles, short-barreled shotguns, grenades, large caliber weapons, and silencers.  Such weapons, when registered directly to a Florida resident, may only be used and possessed by that individual resident.  As such, if a Florida resident, who owns an NFA weapon, becomes incapacitated at any point, their NFA weapons are subject to confiscation by the government.  When a Florida resident who owns NFA weapons passes-away, the weapons will transfer to the beneficiaries under the terms of the deceased owner’s last will and testament by way of a court-supervised probate process.  Probate can be costly and time-consuming; and, the executor of the probate estate must apply with the bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) before any NFA weapon transfer can be made to a beneficiary or other transferee.

Transfer planning for NFA weapons should be given careful consideration, as the NFA makes it illegal for a person to knowingly, or having reasonable cause to believe, sell or dispose of a firearm or ammunition to any person who is:

NFA weapons are clearly not items that can be freely given or sold to just any person.

So, what is a gun trust and who would want one?  The person who establishes their gun trust is known as the grantor.  The gun trust is the title owner of the NFA weapons and the grantor names a trustee or trustees to manage the trust and the trust owned property.  The grantor will typically name him or herself as an initial trustee of the gun trust.  When an NFA weapon is titled to a Florida gun trust it can be held and used by more than one person, e.g., a husband, wife, adult children, friends, etc.…  The grantors named trustees will all be able to possess and use any weapon owned by the trust.  A trustee must be at least eighteen (18) years old and otherwise legally allowed to possess and use a firearm.  The grantor may also name beneficiaries who would receive the weapons in the event of the grantor’s death, incapacitation, or other legal disqualification from possessing a firearm.  A beneficiary can be a minor.  The grantor is free to change any of the trustees and/or beneficiaries throughout his or her lifetime.  When the grantor is deceased or if he or she is rendered incapacitated, the NFA weapons that are titled to a Florida gun trust can avoid probate or confiscation and pass to a successor or beneficiaries pursuant to the terms of the trust.  Additionally, a Florida gun trust can provide a higher level of privacy as the NFA weapons are titled to the trust and not to individuals.  A probate proceeding is not a private affair and is in fact a matter of public record.  A trust is a private document that is not required to be made public in Florida and it is often utilized to avoid a court-supervised probate proceeding.

A Florida gun trust can be a very helpful planning tool for those enthusiasts and/or collectors who are interested in arranging for legal use by multiple people and a simple transfer once they have passed, become incapacitated, or are otherwise disqualified from possessing a firearm.  Florida gun trusts have several requirements to be legally effective and the NFA has rather strict fines and criminal penalties.  The trust should be discussed with and prepared by an attorney with advanced knowledge in firearm trust planning. To learn more about firearm trust planning, contact one of the attorneys on our estate planning teams.

 

The time may come when a parent or spouse is no longer able to make decisions or care for themselves.  Most parents and spouses will not alert family members of their diminished capacity.  What happens when a parent or spouse is lacking capacity, but does not want help or refuses to accept that assistance is necessary?

Here is an example of how a family can get a Florida guardianship of an incapacitated loved one: Ruth was 76 years old and had recently lost her husband to prostate cancer.  Ruth’s son and daughter were worried about their mother, as she had been acting a bit different after their father’s passing.  Ruth’s children thought that their mother was simply grieving and needed their love and patience.  As time passed Ruth’s behavior did not improve and her children started to worry.  Ruth began roaming the neighborhood at odd hours and needed assistance from community members to find her way back home.  When Ruth’s children inquired with their mother as to her health and state of mind Ruth would simply say, “I am just fine.”  A short time later Ruth started a small fire in her kitchen and her house alarm system sent the fire department over to her home.  On another occasion Ruth visited the bank and made a very large withdrawal from her savings account.  Ruth’s son asked his mother what she had done with the money in her savings account.  Ruth could not recall what she had done with the funds.  In fact, Ruth did not even remember visiting the bank.  Ruth’s children were now aware that their mother was not getting better and that they were going to have to do something to help.  Ruth continued to refuse assistance and maintained that she did not need any help.

Ruth’s children will unfortunately need to sue their mother so that a legal determination can be made as to her capacity.  Any adult in Florida can file a petition with a court to determine another’s incapacity in what is known as a guardianship proceeding.  A court would appoint a 3-member examining committee that would review and report on the alleged incapacity.  The court would also appoint an attorney to represent the alleged incapacitated person if that person had not engaged their own attorney.  The court supervised guardianship proceeding would continue from this point so that the court may determine whether the alleged incapacitated person is in fact totally or partially incapacitated under Florida law.  Should the court find a person to be incapacitated and a guardianship warranted, the court would next need to appoint the appropriate guardian(s).

Prior to her decline, Ruth had options that could have lessened or even avoided many of the above-described headaches; She certainly would have preferred to avoid the stress, time, expense, and public nature of a court-supervised guardianship proceeding.  Effective planning tools like a durable power of attorney, living trust, and pre-need guardianship designation could have saved Ruth and her family from a great deal of stress during an already difficult and emotional time in their lives.

A Florida durable power of attorney allows a person to act on another person’s behalf regardless of the latter’s capacity.  The power of attorney is effective immediately upon signing, so it is extremely important to choose a trusted individual to act under such power.  A living or revocable trust allows a person to name a successor manager of their assets should they become incapacitated.  A designation of pre-need guardian allows a person to elect who will serve as their guardian(s) should a court ever determine that a guardianship is necessary.

There is no such thing as too early when it comes to planning for the unexpected.  Simple and effective estate planning allows a person to answer the question of what will happen if I am unable to care for myself.  A thoughtful plan can also provide direction and simplicity to loved-ones, ultimately working to prevent the unsavory lawsuit against Mom.  If you are interested in learning more about Florida durable power of attorney or a Florida guardianship, please contact our estate planning or guardianship teams.

Florida estate plans today are highly detailed regarding what happens when one passes-away or becomes incapacitated.  However, most Florida residents who take the time to do this type of detailed planning still fail to address what will happen to a very important family member.  Pets are valued family members who are routinely left out of one’s estate plan.

Prior to 2002, Florida law only allowed honorary pet trusts, which sounded nice but did nothing to protect the deceased’s wishes for their furry (or feathered) friends.  These honorary trusts were essentially unenforceable by Florida courts.  Florida changed this law in 2002; as such, Florida residents are now free to create an enforceable trust for the care and maintenance of their beloved pet(s).

Florida’s pet trust law has three main provisions (F.S. §736.0408):

  1. The trust must benefit a pet that is alive during the lifetime of the one creating the trust, and the trust only operates until the death of the last surviving pet beneficiary.
  2. The terms of the trust may be enforced by:
  3. A person appointed by the creator of the trust;
  4. If no person was appointed, then by a person appointed by the court.
  5. Any person that has an interest in the welfare of the pet(s) may request the court to appoint a person to enforce the trust or to remove a person already appointed.
  6. If the value of the trust exceeds the amount needed to care for the pet(s), except as otherwise provided in the terms of the trust itself, the excess must be distributed to the creator of the trust, if living, otherwise as part of the trust creator’s estate.

The trusted individual(s) or organization(s) that one may choose to be responsible for the health, maintenance, and financial needs of their loyal companion(s) when they are gone is of utmost importance and should be carefully considered.  To avoid any conflicts, the person or legal entity that is chosen as a pet care-giver should be a different party than the one who is acting as trustee and administering assets from the trust to the pet caregiver.

Many planners may question their need for a pet trust as they think that their pet will simply be cared for by a friend or relative.  However, the main purpose behind estate planning is to account for the unexpected or unknown.  Hopes and assumptions never make good replacements for estate plans and can leave beloved pets without a home or proper care.

Florida residents who would like to plan for the care of their pet(s) should decide whether they want to create and fund their pet trust while they are living or if they would like the trust to begin upon their death by way of direction through their own last will and testament or grantor trust.

Florida law at long last provides residents with enforceable means to care for their pet(s) when they are either gone or incapacitated.  While the law is unique, it is a great tool to ensure that pets are respected in the manner that their families desire.

If you are interested in learning more about Florida pet trusts please contact our estate planning team.