LAW OFFICE OF ROBERT H. EARDLEY, P.A.
Wills, Trusts, Probate, Prenuptial Agreements,
Elder Law & Florida Tax Residency Planning
Prenuptial Agreement Lawyer Naples, Florida
A well-known statistic is that one of every two marriages ends in divorce. Other marriages endure until death. In either situation, a second marriage often occurs and a blended family forms.
Not surprisingly, most seniors in a second marriage desire that their separate estates be inherited by their own children. However, Florida inheritance law can inadvertently divert a large portion of a deceased spouse’s estate to the survivor and, ultimately, to the survivor’s heirs.
Specifically, Florida law provides a surviving spouse a “statutory inheritance” regardless of the terms of the deceased spouse’s Will or Trust. The two most significant inheritance rights are Homestead and Elective Share.
The Homestead right provides that the home, if not jointly owned, must be bequeathed outright to the survivor. Any other bequest is void. In the case of a void bequest, the survivor then automatically receives a “life estate” in the home. Alternatively, the survivor may opt to claim a 50% ownership interest in the home in lieu of the life estate.
In either case, the Homestead right presents difficulties.
For example, the life estate naturally affords the survivor rent-free use of the home for life, but the survivor is not obligated to use the home as a residence. Instead, he or she may rent out the home or cohabitate there.
And, upon a sale, all owners (the survivor and the deceased spouse’s heirs) are entitled to a share of the proceeds.
Elective Share affords the survivor the right to claim an “Elective Share” of the deceased spouse’s estate. The Elective Share amount is 30% of the value of the deceased spouse’s estate minus the value of the Homestead benefit. For this calculation, the Homestead benefit is set at 50% of the home’s net market value.
The Elective Share amount is calculated to a precise dollar amount and then paid to the survivor.
Two lesser spousal inheritance rights, in addition to Homestead and Elective Share, are Exempt Property and Family Allowance.
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Under these rights, the survivor may claim up to (a) $20,000 in household items, (b) two vehicles, and (c) $18,000 in cash.
Although many spouses would gladly decline to claim inheritance benefits, at a future point the survivor may be incompetent and thus unable to decline.
For example, Mr. and Mrs. Smith are in a second marriage and each is 70 years old. They verbally agree that the survivor will decline inheritance rights but do not have a prenuptial agreement legally relinquishing those rights. Fast forward 15 years. Mr. Smith has died, 85 year-old Mrs. Smith has had a stroke, and Mrs. Smith’s son Tom handles her financial affairs under a Power of Attorney.
Despite Mrs. Smith’s commitment to decline inheritance rights, Tom has no obligation to honor it. Moreover, Tom likely has a legal duty (under Mrs. Smith’s Power of Attorney) to collect all assets available to her, including her inheritance rights.
Fortunately, techniques exist to mitigate these concerns. One is for the parties to enter into a Prenuptial (or Postnuptial) agreement which alters or waives inheritance rights.
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A second technique, if one party is unwilling to sign a Prenuptial agreement, is for the other to create an estate plan which satisfies the Elective Share right but retains the assets “in the family.”
This technique places a portion of the “concerned” spouse’s estate, after death, in an Elective Share Trust. This Trust benefits the survivor for life and, at the survivor’s later death, passes to the concerned spouse’s heirs. Unfortunately, this Trust must be funded with more than 30% of the estate.
Importantly, other techniques exist to address inheritance rights which are beyond the scope of this article and best addressed on a case by case basis.
ROBERT H. EARDLEY