Frequently Asked Questions about Florida Estate Planning

What is Estate Planning?

Estate Planning is the process of arranging for the management and distribution of your assets after you pass away or become unable to make decisions due to incapacity. It involves creating legal documents such as Wills, Trusts, Powers of Attorney and Advance Directives to ensure your wishes are carried out regarding your property, finances and healthcare.

Why is Estate Planning important in Florida?

Florida Estate Planning is crucial for protecting your assets, providing for your loved ones, minimizing Estate taxes and avoiding Probate complications. Without a comprehensive Estate Plan, the state’s intestacy laws will determine the distribution of your assets, which may not align with your preferences.

What are the essential Florida Estate Planning documents?

Essential documents for Estate Planning in Florida include a Will, which outlines how your assets should be distributed; a Durable Power of Attorney, appointing someone to manage your financial affairs if you become incapacitated; a Health Care Surrogate designation, naming someone to make medical decisions for you and a Living Will, stating your end-of-life treatment preferences.

What is a Will in Florida?

In Florida, a Will is a legal document that allows you to specify how you want your assets to be distributed after your death. This document also enables you to name an executor who will be responsible for carrying out your wishes as outlined within. Additionally, a Florida Will can address other critical matters, such as appointing guardians for minor children, setting up Trusts and specifying funeral arrangements. Creating a legally valid Will is a fundamental aspect of Estate Planning to ensure that your wishes are legally recognized and followed upon your passing.

What is a Trust in Florida?

A Trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries according to the terms specified in the Trust document. Trusts can serve various purposes, such as avoiding Probate, offering privacy, managing assets for minor children or individuals with special needs and reducing Estate taxes.

The most common type of trust is a Revocable Living Trust. You create the Trust while you are living and amend or completely revoke the Trust at any time. You are the trustee who can manage and access the trust property while you are capable. If you become incapacitated or pass away, your designated successor trustee will take over. The trustee will then manage and distribute your trust estate according to your instructions.

On the other hand, Irrevocable Trusts cannot be modified except under strict and specific circumstances. You transfer ownership of particular assets into the Irrevocable Trust, which legally removes all the rights of the person who created it, known as the grantor. While this type of Trust can severely limit the grantor’s options, it can be an effective solution for wealthy individuals seeking certain tax advantages and asset protections.

Do I Need a Trust in My Florida Estate Plan?

While not necessary for everyone, Trusts can be valuable tools in Estate Planning for various reasons, such as avoiding Probate, providing privacy, and appointing guardians and managing assets for minor children or beneficiaries with special needs. Revocable Living Trusts are commonly used in Florida to streamline the transfer of assets.

Is it Better to Have a Will or a Trust?

Most people should have a Will as part of their Estate Plan. However, you do not have to transfer your property to your beneficiaries through your Will. Instead, you can pass your property to your heirs through a Trust. So, which is better – a Trust or a Will?
Here are some benefits of each and other factors to consider.

1. Preventing Probate

Probate is the legal process of distributing and wrapping up your Estate. A legally valid Will simplifies the Probate process, but a Trust can eliminate the need for Probate altogether. Instead, the property will be distributed directly to your beneficiaries from the Trust by your successor trustee — the most common reason people establish Trusts to pass on their estate.

2. Confidentiality

When a Will is submitted to Probate it becomes public record — anyone can access information about your estate property and assets and what each beneficiary receives. A Trust can be created by a Will, but that means the provisions of the Trust also become part of the public record. On the other hand, only your beneficiaries and trustee have access to the contents of your Trust, if created during your lifetime. For many people, this confidentiality is a compelling benefit.

3. Planning for incapacitation

Your Will becomes effective after you pass away. It does not protect you or your Estate should you become mentally incapacitated. You will need additional Estate Planning documents, such as Powers of Attorney for healthcare and property, to plan for the possibility that you can no longer manage your healthcare and financial affairs. Without these documents, the court might need to appoint a guardian.

If you have a funded Revocable Trust, the successor trustee can step in and take over if you become incapacitated, though your property will not be distributed until after you pass away. A Trust can ensure that your Estate is properly managed even if you can no longer manage it yourself.

How often should I update my Florida Estate Plan?

You should review your Florida Estate Plan every three, six, and nine years and as needed to keep current with significant life events such as marriage, divorce, births, deaths, or changes in financial circumstances.

What taxes might someone have to pay on their inheritance?

Depending on the amount of the Estate and other aspects of your particular situation, an inheritance might be subject to estate tax, inheritance tax, and/or capital gains tax.

Estate Tax

The federal estate tax is based on the current fair market value of the Estate. Only Estates worth a minimum of $13.61 million in 2024 and $12.92 million in 2023 million will be subject to the tax. When an Estate does have to pay federal estate tax, the tax rate is 18% to 40% of the assets over the $13.61 million and the $12.92 million threshold.

However, there is an exception for spouses. If your spouse inherits your Estate, they won’t have to pay federal estate taxes even if the Estate is over the threshold. Unlike several other states, Florida does not have a state estate tax. In states that have an estate tax, some people may have to pay estate taxes to their state even if they are not required to pay federal estate taxes.

Inheritance Tax

The inheritance tax is not the same thing as the estate tax. The inheritance tax is paid by beneficiaries, while the estate tax is taken directly from the estate. Also, unlike the estate tax, which can be a federal and/or state tax, the inheritance tax is strictly a state tax. Inheritance tax rates vary depending on the state and the value of the inheritance. Florida does not have an inheritance tax, but six other states do.

Capital Gains Tax

If your beneficiaries inherit property and/or investments, they pay capital gains tax at the time they sell it. The tax is calculated on a “step up basis,” which means that the market value of the property is calculated as its value at the time they inherit it, not its value at the time you originally bought the property.

An experienced Estate Planning attorney can look at your assets as a whole and create a comprehensive plan to protect your family members from tax burdens.