Florida Estate Planning Law Update – 2017
Florida’s 2017 legislative session resulted in a few new statutes that affect estate planning and probate law. Two of the more interesting ones are discussed below. But as is frequently the case, some of the most compelling stories come from proposed statutes that were not approved by the legislature, or that were vetoed by the Governor. That was certainly the case this year with the Governor’s veto of the “Florida Electronic Wills Act.”
FLORIDA ELECTRONIC WILLS ACT
This proposed statute was designed to use technology to assist people in making a will. It is widely reported that less than 50% of American adults have an estate plan in place. Obviously, it would be a good thing if creating a will and other important estate planning documents were more convenient, and presumably cheaper. However, beyond simply providing people with internet access to estate planning documents, the proposed Act would have allowed a person to have their signature notarized remotely, over a secure internet connection. The Governor vetoed the statute due to concerns about ensuring the authenticity of signatures on electronic wills, and the possibility of undue influence, fraud, and exploitation of the elderly.
The proposed Electronic Wills Act (HB 277) attempted to address the Governor’s concerns by requiring safeguards, such as requiring the testator (the person making the will) to answer several required questions, all while capturing a video recording that would be stored and available in the future, when the testator dies. But even then, there were concerns. What was going on “off camera” while the testator was answering questions and making statements? Would the stored video be safe and definitely available from the private video storage company when needed? How would an electronic will integrate with current law, especially when challenges to the will or questions about the testator’s intent or capacity require proof after the testator’s death? Attorneys, and apparently the Governor, generally prefer certainty when possible, and the proposed Act raised a few issues that created uncertainty. While the idea behind the Act is good because it allows people to more easily establish helpful estate plans, it is essential that the legislature gives the people of Florida estate planning laws and procedures that they can rely on with confidence. The Governor clearly felt that requirement was not achieved with this particular statute.
While several states have recently considered adopting electronic wills statutes and allowing notaries to attest to signatures on documents over the internet, as of today, only Nevada permits remote notarization. But the Uniform Law Commission has created a committee to work on a uniform statute, and the continuing march of technology almost guarantees that some form of electronic wills and remote notarization will likely be common in the years to come.
UPDATING THE TRUST CODE
Unfortunately, due to the way politics often work and legislation sometimes gets passed, several, generally unobjectionable amendments to the Florida Trust Code were attached to the Florida Electronic Wills Act, and therefore were also vetoed. You can expect to see these proposed amendments back again.
One of the important aspects of trust drafting and administration is to build in flexibility so that the trustee has some authority to change the way the trust works if unforeseen circumstances arise in the future. The proposed amendments add limited trustee authority to change the trust, including in circumstances where the beneficiary of the trust might be eligible to obtain public benefits, such as disability or medicaid benefits, but the original trust causes the beneficiary not to qualify for those public benefits.
Other proposed amendments clarified and enhanced the procedures for trustees to post notices and information for beneficiaries on a website in lieu of mailing paper notices. The notice and reporting obligations of a trustee to beneficiaries are substantial, and when there are many beneficiaries, can be overwhelming and expensive. The electronic and website notice alternative, which beneficiaries must consent to before being bound, can help make the trust administration more efficient and less costly.
AMENDMENTS TO FLORIDA’S ELECTIVE SHARE LAWS
You may be aware that Florida, like most states, prohibits a married person from completely disinheriting their spouse without the spouse’s informed consent. The Florida elective share statute (732.201-.228, F.S.) establishes a minimum amount of a deceased spouse’s estate that the surviving spouse is entitled to receive, regardless of what the deceased spouse’s will provides. Before 1999, the available “elective share” was limited to 30% of the property that was subject to probate administration under Florida law. Property that avoided probate was excluded from the elective share calculation, such as jointly owned property with someone other than the surviving spouse, life insurance and retirement accounts that avoid probate by designating a beneficiary, property held in a trust, and life estate interests in real estate. Some spouses would arrange their property ownership to avoid probate, and thereby deny their spouse a significant inheritance. The statute was amended in 1999 to overcome that tactic by expanding the property that is available for the elective share beyond only probate assets. This year, the Elective Share statute was amended in several ways to refine and clarify some important issues.
First, you may also know that the Florida Constitution protects surviving spouses by preserving at least a life estate for a surviving spouse in a homestead that was owned by the deceased spouse. Prior to the 2017 amendment to the statute, in certain situations due to the way the elective share was calculated, it was possible for the surviving spouse to obtain substantially more of the deceased spouse’s entire estate just because the homestead was not owned by the spouses as tenants by the entireties. The amendment corrects the way that the elective share is calculated to neither penalize nor reward a surviving spouse simply because of the way the homestead was titled.
Other 2017 amendments beefed up the surviving spouse’s rights by more fairly implementing deadlines to file an elective share election, to get interest on elective share payments that are delayed beyond two (2) years after the decedent’s death, and to provide for attorneys’ fees to be recovered by the surviving spouse in the event their right to an elective share is challenged.
Interestingly, a proposal to add a sliding scale elective share was not approved by the legislature. A similar proposal failed in 1999 as well. The idea behind the sliding scale is to allow an elective share based on the length of marriage. If a surviving spouse of a 20 year marriage is entitled to 30% at a minimum, is it fair to allow a spouse of only a couple of years to demand the same 30%? Maybe 30% is too low for marriages of 25 years or more? In any event, apparently there was not enough support for the sliding scale concept during the 2017 legislative session.
HOMESTEAD TAX EXEMPTION INCREASE ON THE HORIZON
Finally, while the homestead property tax exemption is not purely an estate planning issue, it is something we work to obtain and preserve in our estate plans. You may know that the current Florida homestead property tax exemption applies to the first $25,000 of the value of a homestead, which is exempt from all taxes, as well as the value of the homestead between $50,000 and $75,000, which is exempt from all but school district taxes. This year, in anticipation of a vote on a proposed amendment to the Florida Constitution during the 2018 general election, the legislature approved HB7107, which implements an additional exemption from all non-school district taxes for homestead values between $100,000 up to $125,000. The Governor signed the law on May 23, 2017. Because it would be unusual for Florida residents not to vote in favor of a tax cut, one would expect this additional exemption will be approved. 60% of the electors voting must approve the proposed constitutional amendment. If approved, it will become effective on January 1, 2019.
