The Covid-19 Pandemic has changed the world as we know it and presented daunting challenges we have not encountered in our life time. It requires a total review of your estate plan and business entities to assure you are taking full advantage of Florida laws designed to protect your family and business.

The hard new reality: What plan was best for you prior to 2020 may not be what is best for you today

Take this three minute survey for a quick assessment:

If single: Special 2020 Asset Protection Checklist for Single Professionals

If married: Special 2020 Asset Protection Checklist for Married Professionals Note to All: Two important legal documents for everyone over age 18:

• An up-to-date Florida specific Durable Power of Attorney
• A comprehensive Florida Health Care Surrogate

Special note to all parents with college students and young adults:

We now know that COVID-19 can attack any age. The last people who consider a DPA and Health Care Surrogate mentioned above are young adults. If you are a parent with adult children over age 18, I urge you to convince your sons or daughters to secure these important legal instruments. For a flat fee, we are available to prepare these documents, review the key legal provisions with your adult children, and email them for signing.

We will get through this together, as we did after Pearl Harbor and 9/11, and will be a stronger, more united country. Stay well and stay safe!

Here is an updated calculator from Turbotax: Stimulus Check Calculator When Will Checks Arrive?

If you signed up for direct deposit on either your 2018 or 2019 tax return, the IRS reportedly will start issuing electronic deposits on April 9 and they should show up in your bank account by April 14. However, remember, this program is fluid and these target dates are subject to change.

If you receive Social Security Benefits and usually don’t file a tax return, the IRS will use the information from your Social Security benefits statement to calculate the stimulus check amount. They will send the check electronically if that is how you typically receive your Social Security payments.

Note: For persons who don’t file a tax return, the IRS plans to create an on-line portal where you can file a “simple return” to provide your bank account information. This portal should go live within the next few weeks.

If the IRS has to send you a paper check, priority will be given to lower income persons; higher income persons will wait longer to get their checks.

Quick Tip: If you want to try to get your check sooner, then file your 2019 tax return as soon as possible and sign up for direct deposit.

In these challenging times, we are here to help you, your family and small business successfully navigate this massive but temporary storm. We will get through this together! Look for our future alerts.

1. Show Loyalty To All Trust Beneficiaries. Even if the successor trustee is himself a beneficiary, as trustee he has the duty of loyalty to all the other beneficiaries, including the remaindermen. Remaindermen are beneficiaries who do not have a current interest in the trust income or principal, but have a future interest in the trust.
2. Deal Impartially With Beneficiaries. The successor trustee cannot favor the income beneficiaries over the interests of the remainder beneficiaries unless the trust specifically directs otherwise. Typically, the trustee must walk a fine line that balances the interests of the income beneficiaries against the interests of the remaindermen.
3. Make Trust Property Productive Of Income. The trust portfolio of assets is expected to achieve conservative growth. Therefore, this duty may be violated if the successor trustee keeps large amounts in a checking account that does not pay interest and does not grow in value. This duty can also be violated if the trustee keeps trust assets in land that does not produce income, such as vacant land or commercial land that does not produce rental income in excess of maintenance costs.

Remember: The sole reason for the trust to exist is to serve the beneficiaries. It is not an employment program for the trustee. If you are administering a trust that has or acquires unproductive assets, consult with us and we can advise you as to your options.

4. Follow the Prudent Investor Rule, F.S. §518.11. This rule generally means that the trust portfolio should be broadly diversified and invested in conservative investments designed to stay ahead of inflation but not in aggressive growth. As a Trustee, you are not expected to be Warren Buffet, but you better not lose money or you will need to account to the beneficiaries. Often, it is best to retain the services of a Certified Financial Planner (CFP) experienced in helping manage conservative portfolios. Note: The successor trustee is obligated to exercise reasonable care, judgment and caution in selecting an investment agent.
5. Account To Beneficiaries And Keep Beneficiaries Informed. Upon commencement of the trust administration, the successor trustee must inform all income and remainder beneficiaries of his or her acceptance of the trustee duties. If a beneficiary requests it, the successor trustee is required to provide that beneficiary with a complete copy of the trust document, including any amendments as well as relevant information about the assets of the trust and the particulars relating to administration. In addition, even without request, all beneficiaries must be provided with an annual statement of the accounts of the trust pursuant to F.S. 736.0813.
6. Keep Trust Assets Separate. The successor trustee must keep the assets of each trust separate and keep his personal assets separate from the trust assets. This requires separate bank accounts, brokerage accounts, and safe deposit boxes for trust assets. It is particularly important that you keep the assets of the Credit Shelter Trust (also known as the AB Trust, Marital and Family Trust, or Bypass Trust) separate from all other assets, since these assets will pass tax-free at the death of the income beneficiary. If the successor trustee comingles any other assets in with these assets (or even simply takes the assets out of the trust and mixes them with her personal assets), in addition to breaching fiduciary obligations, the successor trustee will have subjected these assets to taxation when she dies, whereas they would not have been subjected to tax otherwise.
7. Avoid Conflicts Of Interest And Self-Dealing. The successor trustee cannot buy assets from the trust or sell his personal assets to the trust. He cannot favor himself as a beneficiary at the expense of any other remainder or potential remainder beneficiary. He cannot make any distribution to anyone or any withdrawals from the trust unless specifically authorized by the trust to do so. The trustee is entitled to a reasonable compensation for trust services or compensation as otherwise set forth in the trust. However, the successor trustee cannot otherwise profit or benefit from the trust unless also a beneficiary. Conflicts of interest and self-dealing is a broad area with many traps. If you are a trustee and have any concern as to any specific action or situation, consult with a Miami trust attorney.
8. Preserve The Trust Assets And Uphold The Trust. The successor trustee is liable if trust assets are lost, misplaced or destroyed because of inattention or negligence. If the trust assets are equities, the trustee needs to monitor their performance. If the trust assets are commercial real estate, the trustee must monitor that the properties maintain a high occupancy level, rents are collected in a timely fashion, and of course deposited in a trust account. This may require hiring a property manager. The successor trustee should be certain that all trust assets are appropriately insured. For example, if the trust owns a house in south Florida, it is imperative that the home be insured for property and wind damage that may be caused by hurricanes, heavy rains, and the weather related events we experience here. If the house is vacant, there should be a security system for obvious reasons.
9. File Tax Returns And Pay Any Tax Due. Each trust has a tax year, which like the personal tax year, ends annually on December 31. The trust must have a taxpayer identification number and file a tax return no later than April 15 of the year following. The income tax return for the trust is Form 1041, the Fiduciary Income Tax Return. The best advice here is to use a professional CPA who routinely prepares 1041’s. As mentioned above, such an expense is a typical cost paid by the trust.
10. Minimize Income Taxes. Income generally includes interest earned on bank accounts, CDs, bonds or mortgages, and dividends on stocks and mutual funds as well as all rental income. The trust has a high tax environment: income not distributed may be taxed at 39.6%. Therefore to minimize income taxes, the trustee may need to distribute income out to the income beneficiaries if the trust terms so allow.
11. Pay Trust Expenses. The administration of the trust necessarily requires certain expenditures. Example of expenses include insurance, real estate taxes, CPA fees, and legal services.
12. Good Record Keeping. The trustee needs to keep accurate records of every dime that comes into the trust and every dime that goes out. For small trusts, we recommend using Quickbooks or Quicken. If the successor trustee does not know these programs, it is highly advisable to hire a professional bookkeeper. If the successor trustee becomes disabled or dies, another person must be able to seamlessly step into her shoes and understand the current status of trust matters.

Note: Before the trust is terminated or before the trustee can be released, the trustee will need to provide a detailed accounting to all beneficiaries for all expenses, income and distributions during the time the trustee served.

EXPERIENCE MATTERS

Miami trust attorneys at Rarick Trusts & Wills Law, P.A., have assisted families and business persons for over 20 years. Our firm has worked with over 400 similar law firms located in states outside of Florida to represent their clients in legal matters concerning trust administration and probate. To schedule a meeting with a Miami trust attorney call (305) 709-2858, or e-mail info@raricklaw.com. We look forward to meeting you!

A living trust is simply detailed, legally binding instructions to care for you and your family. There are three key players in a trust. First, the Trustmaker or grantor; this is the person who makes the trust. Second, the Trustee, whose job is to follow the instructions of the trust exactly and to the spirit of the trust. The third role are the Beneficiaries. The Trustee’s fiduciary duties run like a laser beam to the beneficiaries: every penny of the Trust must be used in the best interests of the beneficiaries.

Initially, you can act in all three roles in your living trust: You can be the trustmaker, trustee and beneficiary. Your spouse, children, or other loved ones can also be beneficiaries.

Your living trust is revocable – you can change your trust instructions anytime you wish. There is only one person in the world who can change your instructions: you. In the event of your temporary or permanent mental incapacity, or upon death, the trust locks in and becomes irrevocable so that no one else can change it.

Note: To achieve the objectives noted here, your trust must be properly drafted by an experienced Miami trust attorney and funded by transferring your assets to the trust. Funding of the trust is essential to achieving the trust purpose. Your key assets must be titled in the name of the trust or flow into the trust because the trust is the beneficiary of your account. If you have a living trust, and you have not reviewed the trust funding within the past several years with your attorney, it is likely time to do so.

For more detailed information see our paper: Understanding Living Trusts For Florida Residents. Take-Away Points

1. Every person, whether you have $100,000 or $1 million, should likely have a living trust rather than a will. A will must usually go through the costly, bureaucratic court system known as probate. A trust, properly funded, can avoid probate.

2. A living trust is important to keep legal control in the family – and avoid court intervention in the form of guardianship or probate.

3. A living trust provides detailed instructions to help insure that your hard earned money goes to your children or other loved ones – and not to their spouses, or creditors. Just as important, your trust instructions can help insure that your children receive a first-rate college education to help them compete in our new global economy.

______#2. Successor Trustee. This is the person you have appointed to step into your legal shoes if you become incapacitated – in other words, one of the most important decisions you can make. Who have you appointed to take charge if you are incapacitated? What is the order of succession of trustees who will take over management of your financial affairs if you are unable to do so? If you have any question whatsoever about your order of succession, please call the office.

______#3. Transitions. Has there been a marriage, divorce, or separation of anyone named in your will or trust? Has there been a birth or adoption of a child or grandchild? If so, your estate plan may need to be amended.

______#4. Asset Protection. The recession may be over, but will your business survive the recovery? Do you know which assets you own that are protected and which are exposed? NOTE: While a living revocable trust helps avoid probate and keep legal control in your family, it does not protect your assets. We have a number of other legal tools to help make you an unattractive target for a lawsuit. If we have not done a recent asset protection analysis, now may be a good time to do so.

_____ #5. Life Insurance. When is the last time your checked (a) the owner of your life insurance policies; and (b) the beneficiary designations for those policies? Most life insurance either should be owned by an irrevocable life insurance trust or name your trust as the primary beneficiary. Why? If the policy is owned by a life insurance trust that is properly maintained, you protect the full value of the policy by avoiding estate taxation if you have a taxable estate. If the policy does not name your trust as a beneficiary, all the instructions in your trust to safely manage that money will be useless.

______#6. Corporate Minutes. If you have an incorporated business, when is the last time that you filed corporate minutes? It is important, at the least, to keep annual minutes. Remember, the corporate veil can be pierced and your personal assets attacked if you do not follow the corporate formalities. We will review your corporate minutes at no charge; if the record needs to be updated, we will advise you of the total cost to bring the record current.

______#7. $13,000 Gift Allowance. Do you wish to consider making gifts to family members to reduce your estate tax exposure? Current law allows you to make gifts of $13,000 per person per year ($26,000 if married) with little or no tax consequence to you or the recipient. For many persons, this is an effective tool to reduce your estate tax liability. However, see the warning in Point #8 for gifts to minors. NOTE: Gifting must be done prior to January 1; preferably November or early December. ______#8. Gifting To Minors. Beware of UGMA accounts! The full name is Uniform Gift to Minors Act. Unless your child is a future Warren Buffet, it is not advisable to give minors any substantial gifts without placing those funds in a trust. UGMA accounts should be used for only small amounts – such as $1,000 or less. Otherwise, the minor can have complete access to the funds when he or she turns 21.

______#9. Estate Tax Check. Do you know your current estate tax exposure? Absent congressional action the exemption will fall back to $1 million per person with a top rate at 55% on January 1, 2011. Following the Republican mid-term election successes, Congress may act to change the estate tax law. Stay tuned – we will be sending out an Alert via e-mail if Congress does so act. Note: If you have a trust with a Marital and Family Trust (technically called a credit shelter trust) and we have not recently reviewed your estate plan, we should run the numbers to see if the funding formula in the trust allocates the exemption to achieve appropriate tax planning for your family.

______#10. Health Care Surrogate. If you have a child over 18 who is now in college it is highly recommended that he/she give you legal authority to make medical decisions on their behalf. Remember, once your child turns 18, he/she is sui juris, and you have no legal authority to make any legal decision on their behalf. Also note, if we have not met to review your estate plan since 2004, it is likely that your health care surrogate is not current.

______#11. Estate Plan Review. Has it been more than two years since we sat down and reviewed your estate plan? If so, I recommend we schedule a meeting before the end of the year to assess whether it continues to meet all the needs of your family.

APPOINTMENT: To schedule an appointment to review or update your estate plan or the funding of your trust, call Rarick & Associates at (305) 709-2858 or email Phil at prarick@raricklaw.com.