Probate Section Report
by
Larry E. Ciesla

The probate section held its regular monthly meeting in August 2008. Following is a summary of items discussed during the meeting. Marvin Bingham raised an issue for debate regarding the best way to handle estate planning for disposition of stock in a professional association.

Initially, the group discussed whether there is a good way to structure ownership of PA stock so as to avoid probate, such as joint ownership or ownership by a revocable living trust. Since the law prohibits ownership of PA stock by a non-professional, it was the consensus of the group that avoidance of probate would be very difficult. A couple of different scenarios were next discussed, including a one-person PA and a multi-person PA. A consensus was reached that in the case of the one-person PA, upon the death of the professional, the PA would be dissolved; there would be no further sale or transfer of the stock; and the personal representative would simply sell any tangible assets owned by the PA, such as office equipment. In some cases, such as a lawyer having open personal injury files, the personal representative would enter into a referral agreement with another firm to take over the files and pay a referral fee to the estate. In a multi-person PA, it is assumed that the shareholders would have a written shareholders’ agreement which would provide for the PA to purchase the shares of the deceased shareholder at a pre-arranged price.

Richard White pointed out to the group that the Florida Department of Revenue has promulgated a new form, to be known as a “DR-430”. The new form must be filed when there is a transfer of control of a majority ownership of an entity owning Florida real estate. The DOR and/or the property appraiser would then reassess the fair market value of the real estate, as if the land itself had been sold. It appears that with the state’s current budget woes, we can expect more of these revenue raising ideas from Tallahassee.

Steve Graves and Larry Ciesla initiated a discussion of the proper amount of documentary stamps to be placed on a deed in a case involving a deed in lieu of foreclosure where the outstanding mortgage balance exceeds the current fair market value. The main issue is whether it is necessary to purchase stamps for the amount of forgiven debt. It appears that under current regulations in the Florida Administrative Code, the transaction is treated as a sale for the amount of the outstanding mortgage balance. It was also pointed out that forgiveness of debt is treated by the IRS as taxable income, which would come in to play where the fair market value is less that the balance owing. This area is being addressed by the RPPTL Section, which is in the process of attempting to get the law changed so as to not require doc stamps on forgiven debt.

Peter Ward led a discussion of the issue of who is qualified to be a personal representative under Florida law. He pointed out what may be a fairly common factual scenario. A husband and a wife make mirror wills providing that the husband’s sister, who is not a Florida resident, shall serve as personal representative, and my wife’s sister, who is also not a Florida resident, shall serve as alternate personal representative. The wife’s will provides the same, or the inverse. In any event, a non-resident sibling of a spouse is not qualified under current law to serve as personal representative. In the foregoing example, the wife’s sister is not qualified to serve as the husband’s personal representative, as she is not a blood relative of the husband; neither is she related by marriage to one is a blood relative. Peter suggested that in such cases it would be a good idea to add some language to the designation of the wife’s sister along the lines of, “…if she is then qualified to serve…..” and to then continue to designate additional alternative choices who are more likely to be qualified to serve under current law.

Richard White, Steve Graves and others participated in a discussion of several issues involving trusts. Richard raised the question of whether a trustee has a duty under FS 736.0813, upon request by a beneficiary for a complete copy of the trust instrument, to provide copies of amendments to a trust which are not presently in effect, such as where an amendment has been revoked. The consensus was that the better practice would be to supply all such amendments, as nobody wants to be in a position of explaining to a court why he or she intentionally hid a document that clearly falls within the purview of what was requested. Steve indicated that rather than preparing amendments to a trust, it is his practice to restate the trust in its entirety each time, with an indication that he is specifically retaining the original date of execution in the name of the trust. Richard discussed a new proposed statute, FS 518.113, which would relieve a trustee of an irrevocable life insurance trust (ILET) for any responsibility to check up on and evaluate the financial stability of the life insurance company. Under this proposal, the trustee of an ILET would be responsible for paying the policy premiums and sending the required Crummey notices. The probate section continues to meet on the second Wednesday of each month at 4:30 pm in the fourth floor meeting room in the civil courthouse. All interested practitioners are welcome to attend. There are no dues and we don’t take roll.

 
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