Myth # 1 – I’ve got a Will, I’m good with estate planning.
Yes and no. A Last Will and Testament (“Will”) is an important estate-planning document but can leave your family with unforeseen inheritance issues. Wills are used to designate who should receive your assets upon your death. The people or charities you designate are called beneficiaries. Wills do not avoid the probate process. Meaning that even beneficiaries listed in the Will must go through a court process to inherit.
Probate, or probate administration, is a court process that passes ownership of the decedent’s assets to their family or the beneficiaries listed in their Will. The Will needs to be admitted to probate court and pass through the steps necessary to validate that each beneficiary will receive their rightful share, provide notice to any outstanding creditors, settle those debts or claims against the estate, and lastly, pay approximately 3% of the estate assets in attorney’s fees. Conversely, Living Trusts help to avoid probate. If the decedent had a Living Trust, the probate process may be avoided altogether as the inheritance passes directly to the beneficiaries.
Myth # 2 – Joint bank accounts and beneficiary designations trump your Will.
This myth is true although many people don’t know it. If you own a joint bank account with someone and you pass away, the other co-owner inherits the entire value of the account. Regardless if your Will or Trust says otherwise. Likewise, if you have an account with a pay-on-death beneficiary listed, that person receives the full value of that account.
Further implications can arise for those who neglect to update their beneficiary designations after marriage, divorce, or other changes in their family situation. It’s easy to forget to do this and, of course, it involves paperwork- and who likes paperwork? The problem is that regardless of whether you are divorced, separated, have adult estranged children, etc., the beneficiary designation is legally binding (as is joint ownership of accounts) and these rules of ownership override your Will or Trust. Therefore, you must go through every account you have and make sure the beneficiary designation and account ownership are up to date to reflect your latest wishes.
Myth # 3 – Financial account and beneficiary designations only need to get updated when the 2nd spouse passes away.
Wrong. If your spouse passed away first, and you didn’t retitle everything to you name, your heirs may have to go through probate TWICE. Estate planning attorneys see this all the time. One spouse passes away and the surviving spouse is so distraught they forget to update their joint accounts, late spouse’s assets, and beneficiary designations to just their name alone. Rightfully so, a spouse passing away is one of the most stressful experiences in a person’s life. Give yourself time to grieve and then meet with professional advisors and estate planning attorneys to properly update the titling of all accounts and beneficiaries designated on those accounts.
We often see the frustrating scenario where one parent has passed away yet remains listed on accounts or as a beneficiary on a policy, such as a life insurance policy. When the second parent passes away, children are left sorting through invalid beneficiary designations and must open two probates with the court. First to pass assets from the first deceased parent to the surviving spouse, and then from the second deceased parent to themselves. This creates a tremendous amount of unnecessary expense for the heirs. With the right people and right decision making, the transition to widowhood can be a gentler financial process for everyone.
Myth # 4 – I’m leaving everything to my minor children.
No, you are not. Florida law states that children can’t inherit more than $15,000. Although you can technically list your children as your beneficiaries in your Will, your Trust, or on your bank accounts, they won’t see that money until they are adults and must jump through the arduous and expensive guardianship process to get it. Here’s why.
If a minor child, (under 18 years of age in Florida), experiences the loss of a parent, and is entitled to receive an inheritance, Florida law governs how this inheritance will be managed until the child turns 18. This is through a court process called “guardianship.” Inheritance includes real estate, proceeds in a bank account, life insurance proceeds, stocks, CDs, cash in a safety deposit box/vault, or any other investments. When a child is set to inherit anything in excess of $15,000, a court must appoint a legal guardian to manage the minor child’s inheritance and to safeguard the minor’s interests. The process takes time, involves court expenses, and requires an attorney. All these fees usually come out of the inheritance. Note that although a parent is considered a “natural” guardian, only a court can appoint them as a “legal” guardian. A way around the guardianship process involves creating a Trust where you list a Trustee to manage the money until the child becomes an adult. This must be done through an estate planning attorney.
Myth # 5 – Killers Can’t Inherit – The Slayer Law
An oldie but goodie in honor of the spooky month of October. Florida has a “Slayer Law” that prevents people who have been accused of killing someone from receiving an inheritance from the person they killed. This law, imported from England, was formed to prevent princes and princesses or other members of the royal family from killing parents and relatives in order to inherit titles, land and other assets. This rule not only includes people directly involved in the death of others but also those who assisted or played a role in the death.
However, if you happen to be a family member of the killer and are set to receive this wealth without any direct involvement in the killing, worry not. Florida’s Slayer Statute says that courts do not have the authorization to extend this statute to the killer’s family members. Essentially, this rule is supposed to deter murderers motivated by economic reasons, and not punish innocent parties who receive an unexpected windfall of an inheritance.
Our firm is here to clear up all the spooky myths of estate planning. Contact OC Estate & Elder Law at (954) 251-0332 or firstname.lastname@example.org for a free consultation to secure your peace of mind. Our attorneys are fluent in English, Spanish and Russian.