By Leah Foertsch

As autumn shadows lengthen, the Floridian humidity finally relents, and the last leaves fall, we find ourselves in the season where ghosts of the past and whispers of the future linger.

Trusts and estates may not be the stuff of haunted mansions (although one could inherit such things) but like any good horror story, they are full of what-ifs, business left unfinished, and the chilling consequences of things left undone.

Like Edgar Allen Poe’s tell-tale heart beating beneath the floorboards, an outdated will or neglected plan can thump beneath the surface—unseen, but impossible to ignore. Confusion, madness and marred legacies abound.  This Halloween, we invite you to peek behind the curtain with us as we confront the eerie but essential truths about planning for the future. While monsters, vampires, and haunted houses are the stuff of legend, probate disputes, tax traps, and family feuds are all too real.

So settle in, light a candle, and join us…if you dare.

By Leah Foertsch

In Stephen King’s It, Pennywise tempts children into the sewers of Derry, Maine with the foreboding promise that “you’ll float too.”  In estate planning, a Spousal Lifetime Access Trust (SLAT) can feel just as unnerving—once the assets float off into the trust you set up for your spouse, they’re gone…or are they?

Briefly, a SLAT is an irrevocable trust for the benefit of one’s spouse and descendants.  The trust is funded with the donor spouse’s separate assets.  Properly drafted, assets transferred to the SLAT are available for distribution to the beneficiary spouse (and indirectly, the settlor spouse) and their descendants.  In doing so, the SLAT provides a mechanism for estate tax efficiency while preserving some access to the gifted assets.   However, when the question of divorce arises, the donor spouse’s indirect access to the SLAT can cause concern.  If the wrong clown drafts your SLAT, your ex-spouse could end up with control and ownership of the assets. 

That’s where the floating spouse concept arises.  Like a red balloon drifting just within reach (don’t reach into the sewer to grab it!), this SLAT preserves flexibility by allowing the spouse who benefits from the SLAT to shift- essentially, the spouse is “that person to whom the grantor is married from time to time.”  Unlike Pennywise’s sinister promise,  “floating” is a good thing in a SLAT- it is a way to secure access, adaptability, and tax efficiency.

But donor spouse beware - the rules can be as dark and twisty as the sewers of Derry.  If drafted poorly, haunting- and dare I say deadly- surprises await.  Drafted well, the plan will float smoothly over life’s bumps, bruises and scary clown encounters.

By Ryan McDermott

Hopefully, no trustee has ever, or will ever, truthfully make such a statement.  However, nowhere in the rules does it say that a person is barred from serving as a trustee for being a cannibal, or (believe it or not) for having any other sort of criminal conviction. While Clarice is out catching the bad guys, let’s dive into the nature of the trustee-beneficiary relationship.

While there is nothing on the books about what to do if your trustee turns out to be Hannibal Lector, the Florida Trust Code does provide rules governing the duties and obligations of a trustee, and can even shed light on a beneficiary’s rights in relation to their trustee.

Ideally, a trustee would be of sound mind and most upstanding moral character. The probate code provides that a trustee owes beneficiaries a duty of loyalty, impartiality, and  prudent administration of the trust. The probate code also provides a trustee shall keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration. Upon reasonable request a trustee must provide a qualified beneficiary with a copy of the trust instrument, and a trust accounting annually and upon termination of the trust.

It is prudent for a trustee to seek advice of counsel regarding the scope of these duties. Often times questions arise as to what constitutes “keeping qualified beneficiaries reasonably informed.” Likewise, beneficiaries can make demands of a trustee that they may or may not be entitled to. For example, can a beneficiary demand a trustee to provide them with copies of the trust tax returns? It is this writer’s opinion that a trustee may oblige such a request but is not required to. In other words, you can ask your trustee politely to ‘put the lotion in the basket’, but they won’t ‘get the hose’ if they don’t. A disagreement between a trustee and a beneficiary over this type of request is one that can lead to litigation.

Under Florida law, a trustee must exercise powers “in good faith and in accordance with the terms and purpose of the trust and the interests of the beneficiaries.” Trustees often make discretionary distributions of trust income and/or principal to beneficiaries for their health, education, maintenance, and support during their lifetimes. That is why open communication between a trustee and such a beneficiary is critical. It makes it easier to provide for the health, education, maintenance, and support of a beneficiary when the trustee knows what those needs are. In having conversations about those needs, many demands, contentions, and potential issues can be smoothed out. With the beneficiary then “reasonably informed,” a trustee will not have to ask:

Pictured left: Our trusty intern, Casper, proofreads this month's newsletter.

By Leah Crespi

In the shadows of an estate plan lurked a trust no one understood… until it was too late. The story always starts off so innocently, your estate plan is drafted and it seems perfect, so you sign the documents and finally breathe a sigh of relief believing your estate is totally safe and protected. But what happens when there’s a real danger within the trust itself and no one notices it?

Everyone wants an estate plan that brings certainty and peace of mind for the remainder of their life and after. Unfortunately, it is very common for a plan to include issues like vague or ambiguous terms, like driving down a foggy road, you can’t see too far ahead, but a real danger lurks around you. Generally, when there are vague or ambiguous terms, Florida probate courts will consider extrinsic evidence to determine what the grantor’s wishes were at the time of execution. This is not always an easy process, and it is very possible that the grantor’s wishes cannot be followed simply because it is too difficult to determine. 

This may not sound like a huge deal, but it can cause confusion, conflict amongst your family and very costly litigation. Don’t think this would affect you because your family is “easygoing” and would be able to work it out? As we often tell our clients - the closest of families can become hostile when it comes to money and what they believe they are owed. 

Take this seemingly harmless phrase: “my necklace to my sister.” What necklace? What if you have more than one sister? Although this could be clear to the grantor, would it be clear to the grantor's two sisters? Probably not. Cue the courtroom horror story. Two sisters pitted against each other hoping the judge will rule in their favor. Terrifying, right? 

Good news! It can be simple to ensure your trust does not come back to haunt your heirs. The easiest way to do this: spell out all terms that are not self-explanatory to a third person who does not know you, your family, or your assets. The big question to ask yourself is whether a judge who is reading your plan after you have died would be able to determine what exactly your wishes are? When a trust becomes the source for confusion and litigation, the danger isn’t lurking outside – it is rooted in the very plan itself. Listen to the call coming from inside the trust before it is too late!

As the jack-o’-lanterns dim and the last piece of candy is eaten, we’re reminded that the most frightening tales are not those of ghosts and goblins, but of families left unprepared, of legacies unsettled, and of voices that can no longer speak for themselves. In this choose-your-own-adventure, however, you are in the driver’s seat. Use your estate plan to bring clarity, provide guidance, and communicate the family values you have sought to instill. Consider what stories your own legacy will tell- and make sure you are planning for it. As the nights grow long, dust off the estate planning folder, call up your lawyer, and find out whether the future you planned is in agreement with the future you are creating.