Personal Finance (Not Investing) • Florida Trust or will or both

In a stage to think to update the inheritance process for our family..

Single marriage, two adult kids launched, typical retirement investments, taxable investments and a home..Florida Resident

What is the recommendation....

Hearing that retirement accounts do not go to trust...

Hearing more documentation to have the home in the trust...

Can a simple will work in this situation ?

Do probate costs a lot and time ?

How the beneficiaries start the process on their inheritance, when we both kicked the bucket ?

Do we select a trustee such as Fidelity Trust services ?

Probating a Will in Florida is generally not difficult, expensive or burdensome, and isn't worth worrying about. I've probated many Wills througout Florida from my office in New York. The forms are standard throughout Florida, and they're filed electronically.

The process is to fill out and file some forms electronically, and then send in the Will and a death certificate.

You should focus on the substantive aspects of your planning rather than the procedural ones.

You may pick any one or more individuals and/or a bank or trust company as trustee(s). Fidelity isn't a common choice since their fees are comparable to conventional banks and trust companies. Vanguard and Schwab are much less expensive.

Retirement benefits are assets like any other asset. Most clients name the spouse as primary beneficiary since spouses can roll them over, and the trusts for their children as the contingent beneficiaries.

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I'm a retired, single (widowed) male living in Florida, with 2 well-established children who are my only beneficiaries. All of my taxable and non-taxable accounts (other than bank accounts, for which my children are the named beneficiaries) are held at Vanguard with my children as named beneficiaries. ...
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... my only other significant asset is my house. For that, I established and filed a Ladybird deed (valid in several states, including Florida) which allows a property owner to transfer property to beneficiaries while retaining ownership until death. ...

This is only what I've done so far. If there are any flaws or catches in this approach, I'd like to hear what they are so I can act accordingly.

It's not a good idea to name beneficiaries for taxable accounts, for many reasons.

TOD is piecemeal (asset by asset) planning.

You have to remember to update the designations each time you update your estate plan.

It makes it more difficult to provide for contingencies (such as a beneficiary predeceasing you).

It makes it more difficult to provide for your beneficiaries in trust rather than outright, to keep their inheritances out of their estates for estate tax purposes, and to protect their inheritances from their creditors and spouses, and Medicaid.

You have to make sure your designations are consistent with your estate plan.

In the case of real estate, it puts a portion of your estate plan on the public records during your lifetime. So if you change it, everyone will know what it had been.

There will be chaos if, as a result, your estate doesn't have enough money to pay your debts, expenses, taxes and preresiduary bequests, and one of the TOD beneficiaries balks at contributing his/her share.

We’ve had several well-designed estate plans defeated by probably unintended TOD designations.

In one case, a couple provided for their daughter in trust under their Wills, to keep her inheritance out of her estate for estate tax purposes, and to protect her inheritance from her spouses. After the wife died, the husband, then elderly, moved his brokerage account to the daughter’s broker. When he died, it turned out that the daughter was TOD beneficiary on the brokerage account, destroying the asset protection.

In another case, the decedent left cash bequests to various friends and family. When she died, it turned out that her residuary beneficiary was TOD beneficiary on her largest account, leaving her estate without enough money to pay the cash bequests. Fortunately the residuary beneficiary voluntarily made gifts to make up the shortfall.

In another case, the decedent left his residences and retirement benefits to his wife, half of his estate (less the assets passing to his wife outright) in trust for his wife, with remainder in trust for his children from a previous marriage, and half of his estate (less estate taxes) in trust for his children. He then sold a portion of his business and put the proceeds into a brokerage account. When he died, it turned out that his wife was TOD beneficiary on the brokerage account. That left very little for his children. Making it worse, his wife died within a year after he died, and she left everything to her daughter from her previous marriage.

It's often penny wise and pound foolish.

Statistics: Posted by LiveSimple — Sat Jan 25, 2025 8:29 pm — Replies 12 — Views 541