Who Is Going to Pay My Bills?

Can you pay my bills? Can you pay my telephone bills? Do you pay my automobile bills? If you did then maybe we could chill.

Okay, so maybe we are not concerned about a boyfriend taking advantage of us like Beyoncé. However, the question of who will pay your bills when you pass away is a valid question and one that is determined based on the solvency of your estate when you pass away.

If you die and your medical and credit card bills start piling up it is important to understand who will be responsible for paying off all of these debts and in what amounts. The answer will depend on whether the estate of the decedent is solvent or insolvent.

What is a Solvent Estate?

A solvent estate is one that has enough assets to pay off the decedent's bills. This essentially means, the value of all the decedent's individual assets exceeds the amount of bills owed. If the estate is determined to be solvent, then the Personal Representative of the decedent's estate will be responsible for paying all of the bills from the assets owned by the estate. So basically, if there is money to pay the bills, the bills will be paid.

Example:

If all of the decedent's individual assets equal $50,000 and the credit card and medical bills equal $25,000, then the decedent's estate is solvent and can be used by the Personal Representative to pay the bills in full and the remaining $25,000 will be paid to the beneficiaries named in the Last Will and Testament or Living Trust (if there are estate planning documents prepared). If no estate planning documents are in place, the decedent's heirs at law will receive based off Florida Statute.

“Debt collectors are very creative and persuasive. Even if you are not responsible for the debt, they may use terms such as ‘moral responsibility’ and use guilt to make family members feel they have to pay debts.”

What is an Insolvent Estate?

An insolvent estate is one that does not have enough assets to pay off the decedent's bills. So when you add up all the assets, the value of the decedent's individual assets is equal to or less than the amount of bills owed.  If the estate is insolvent, then the Personal Representative will need to prioritize payment of the bills as provided by Florida law.

Example:

If the decedent's individual assets equal $50,000 but the credit card and medical bills equal $100,000, then the deceased person's estate is insolvent by $50,000. The Personal Representative will need to look to Florida law to determine which creditors will get paid in full, which creditors will receive only a partial payment, and which creditors will get absolutely nothing.

There are different classes of creditors and depending on where that creditor ranks will depend on if they get paid in full, partial payment or no payment.

Example

For instance, medical bills incurred within 60 days of the decedent's date of death will get paid before a credit card company gets paid.  If there are not enoughassets to pay the credit card company, they will only receive a proportionate share and the remainder will have to be written off by the credit card company.

In an insolvent estate, the decedent's beneficiaries will end up getting nothing. The good news is, that they will not be responsible for paying the balance of the decedent's unpaid debts (unless a beneficiary was a co-signor or co-guarantor on the debt).  The creditors that were not paid in full will simply have to write off the bad debt.

Debt collectors are very creative and persuasive. Even if you are not responsible for the debt, they may use terms such as ‘moral responsibility’ and use guilt to make family members feel they have to pay debts.

BEWARE: Creditors always come before beneficiaries. That is why it is extremely important to protect your assets and start estate planning today!

If you live in Miami-Dade, Broward, or Palm Beach County contact an experienced estate-planning and probate attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.

            You Can't Predict The Future But You Can Plan For It.

Adding Someone To Your Bank Account For Convenience Can Cause BIG Problems

STOP, COLLABORATE AND LISTEN- think twice before adding someone to a bank account.  

In South Florida it is common for aging parents to 'add' their children, caregiver, or trusted individual on his/her personal account. A typical reason to add someone to a bank account in Florida is so that person can have access to the funds for the original owners benefit. By setting up the account this way, it will make it more convenient during the owner's lifetime to assist in managing the bank accounts and paying bills.

“An account owner’s Last Will & Testament or Trust will not prevent this presumption from arising, and the financial institution has no duty to inform the account owner of this presumption. ”

However, adding someone to a Florida bank account becomes somewhat inconvenient upon the original owner's death. Setting up Florida bank accounts in this manner can lead to expensive litigation between the original owner's heirs to determine the survivorship rights in these joint accounts. Intent will be questioned in addition to undue influence and fraud.

Under Florida Statute Section 655.79, unless expressly stated otherwise in contract, agreement or signature card executed in connection with the relevant account, any account that is titled in the names of two or more persons creates a presumption that all ownership rights in the account automatically pass to the surviving owners upon the death of any owner.  

There are no explicit words that are required for this presumption- just the fact that there are two or more owners.  An account owner's Last Will & Testament or Trust will not prevent this presumption from arising, and the financial institution has no duty to inform the account owner of this presumption. With that said, the surviving owner can simply walk into the bank after the original owners death and withdraw all of the funds as their own!

Good news, there are alternatives available to making an account a joint account. They allow flexibility and also allow the owner to revoke these designations within his/her lifetime:

Alternative #1- "DPOA"

Appoint someone to act as his/her agent under a Durable Power of Attorney

Alternative #2- "POD"

Create a 'pay on death account' where the owner can designate a beneficiary to receive the account upon his/her death

Alternative #3- "ITF"

Create a Totten Trust where the owner maintains complete control over the account during their lifetime, but all rights pass to a beneficiary who is designated 'in trust for'

If you live in Miami-Dade, Broward, or Palm Beach county contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.

You Can’t Predict The Future, But You Can Plan For It.

A Verbal Contract Isn't Worth The Paper It's Written On

Before smartphones and email, a phone call to speak with someone directly was the fastest form of communication. It was much faster then writing a letter, mailing the letter, and then impatiently waiting for the response. By the time you got a response, you might have forgotten the question asked or the question was no longer relevant.

Life moves so fast that our generation expects an immediate response to an email and text. If we don't respond immediately, we might cause a boyfriend/girlfriend to start 'wondering' why you didn't respond (which is grounds for a lot of pointless arguments).  You might lose a potential client if you don't respond immediately. They might assume you are not interested in their business or that you are too busy. The potential client will quickly move onto the next person hoping to gain the immediate attention they are seeking. 

Luckily, people still enjoy face-to-face communication. A lot of business takes place after hours over happy hour drinks and dinner.  If you verbally agree to working with someone over drinks, what are the chances one person might back out of the agreement the next day? With drinks flowing, people are more willing to enter into agreements.  Once they are sober, they might question that agreement and pretend it never existed. In the words of Jaime Foxx,  " blame it on the a a a a a alcohol"

“You should never leave your affairs up to chance. Leaving specific and detailed instructions in your will or trust can help solve complications down the line”

Well, the good thing is, it was only a verbal agreement. The bad thing is, it was only a verbal agreement.

When it comes to estate planning, many people make the common mistake of assuming their loved ones will honor their true wishes, as expressed verbally.  You should never leave your affairs up to chance. Leaving specific and detailed instructions in your will or trust can help solve complications down the line. There will be no question as to what your wishes are if they are clearly stated on paper.

In South Florida, there are a number of vehicles used with estate planning to protect both your assets and your wishes at your time of death. These documents will take away the possible 'he-said-she said' verbal agreements prior to your passing.

Revocable Trust(living trust): Allows you to control and manage assets in your trust while you are alive.

Living Will and Healthcare Surrogate- Will allow you to designate who will make medical decisions when you are unable to do so yourself.

Assignment of Property: Assign your property into your trust (real and personal property) to protect your assets.

Durable Power of Attorney: Designate and authorize someone to legally act on your behalf in the event you become incapacitated.

Last Will and Testament: Used upon death to distribute property to beneficiaries, specify last wishes, and name guardians for minor children.

If you live in Miami-Dade, Broward, or Palm Beach county contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.

You can’t predict the future, but you can plan for it.

My Future Ex-Spouse Deserves NOTHING!

First comes love, then comes marriage, then comes divorce? If you realized that you never should have gotten married before having children, we salute you. However, most people marry, have children, then have an UH-OH moment and divorce. 

While in the process of getting divorced, you wish for your future ex-spouse to receive nothing! After all, you feel they don't deserve anything. What more is there to say?

If only you could say to your future ex-spouse, 'no soup for you' when it comes to receiving anything from your estate. If you are proactive and decide to update your estate planning documents while in the midst of the divorce process (which can take months or even years), in the State of Florida you cannot fully disinherit your spouse. The only way to leave your future ex-spouse out of your will and receive nothing is to have signed a valid prenuptial or postnuptial agreement. Otherwise, your spouse is entitled to the 'elective share'.

In Florida, the elective share to which a spouse is entitled comprises an extensive list of types of assets and property, which is detailed in Florida Statute 732.2035. The spouse is entitled to 30% of your estate through the elective share. However, if your spouse is going to take the elective share of your estate, a request must be filed within 6 months of date of service of notice of administration or within 2 years after the date of the decedent's death.  

If you are in the process of a divorce it is best to update your estate planning documents as soon as possible. Make sure your soon to be ex-spouse does not benefit more then allowed by the State of Florida. Also, do not forget to change any beneficiary designations that list your spouse to receive on anypay on death accounts (ie. life insurance policy, retirement accounts, investments, etc.)

“The only way to leave your future ex-spouse out of your will and receive nothing is to have signed a valid prenuptial or postnuptial agreement. Otherwise, your spouse is entitled to the ‘elective share’.”

Once you are officially divorced, do not forget to update your will or trust yet again. You should remove any language regarding your ex-spouse from your will or trust and at this point they no longer have a legal right to receive anything from your estate.

If you live in Miami-Dade, Broward, or Palm Beach county contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida at (954) 303-9468 to discuss your estate planning needs.

You Can't Predict The Future, But You Can Plan For It!

Beneficiary Designations: More Important Than You May Think

In Florida, one of the simplest ways to ensure someone receives your assets, is to name a specific person as a designated beneficiary on your accounts. By law, beneficiaries (individuals or institutions) you designate for an account will receive assets in that account upon your death (avoiding probate).

What type of accounts allow a beneficiary designation?  

·      Retirement Accounts

·      Life Insurance policies

·      Annuities

In South Florida, it is important to name both a primary beneficiary and contingent beneficiary. The contingent beneficiary will receive the assets if the primary beneficiary predeceases you.

What type of account does not include a beneficiary designation?

Brokerage accounts do not include beneficiary designations, but you can complete a Transfer on Death (TOD) agreement to designate how your assets should be distributed.

“It is important to review your beneficiary designation regularly, especially when there is a life changing event (marriage, divorce, birth of a child, or death of a spouse)”

You must complete a separate TOD agreement for each single or joint account you have. A TOD agreement assigns beneficiaries, which helps you avoid the costs, delays and publicity of probate. Without the designation assigned to the account, the account would be subject to probate.

It is important to review your beneficiary designation regularly, especially when there is a life changing event (marriage, divorce, birth of a child, or death of a spouse). If you do not update your account beneficiaries, your assets could be inherited by someone you no longer wish to receive (ie. ex-spouse)

Keep in mind beneficiary designations trump what ever is stated in a will or trust. However, the will or trust can help direct how the funds will be distributed to the intended beneficiary. For instance, you might have a child who you do not trust with money, the will or trust will give instructions on how the money will be distributed to the child over a period of time so they don't spend all the money at once.

If you live in Miami-Dade, Broward, or Palm Beach county contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs. You can’t predict the future, but you can plan for it.

Estate Planning for Retirement: Pay on Death Accounts

Your estate consists of both probate and non-probate assets. When you prepare a will you include probate assets to be distributed to named beneficiaries. If you have non-probate assets, regardless of whom you name as a beneficiary in the will, they will go directly to the pay on death “POD” beneficiary directly in the document.

Probate Assets:

Personal items, jewelry, art, antiques

Individual assets (property titled solely in your name)

Non-Probate Assets (Pay on Death):

• Life Insurance
• Retirement Accounts (401(k)s and IRAs),
• Annuities
• Bank Accounts (some)
• Jointly owned assets “tenancy by the entirety” “ with rights of survivorship”

A pay on death (POD) account names your beneficiary. As the name suggests, when you (the primary account holder) passes away the assets that are left in the account become the property of the named beneficiary.

“If you have non-probate assets, regardless of whom you name as a beneficiary in the will, they will go directly to the pay on death “POD” beneficiary directly in the document.”

There are some positives that come along with these accounts. These assets are outside of the probate process and there is a direct transfer to the named beneficiary.  You also retain control over the funds throughout your life and have the right to change beneficiaries or even close the account if you want to. Flexibility is certainly a good thing when it comes to your hard earned assets.

However, pay on death accounts are not a comprehensive estate planning solution. These assets are still a part of your estate for estate tax purposes so they do nothing to provide tax efficiency. There are no incapacity provisions, and you may not be able to give varying percentages of the resources left in the account to multiple respective beneficiaries.

If you live in Miami-Dade, Broward, or Palm Beach counties it is time to start preparing your estate-planning portfolio. Make sure both you and your family are taken care of in the future. You can’t predict the future, but you can plan for it.

Contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.