Glenn: Estate planning for Florida snowbirds


glenn-lisa-mug Glenn

By Lisa M. Glenn

Every year, many attorneys find their clients heading south to Florida for the winter. Lured by sunshine and beautiful beaches, as well as some tempting tax advantages, many of these “snowbird” clients decide to actually become Florida residents. However, some snowbirds are not able or willing to change their residency to Florida, and so attorneys should consider how those clients’ estate plans can be drafted to protect their interests in both states.

Consider having powers of attorney and advance directives in both states. Under Florida law, an “advance directive,” which includes a living will and designation of health care surrogate, is recognized as valid if it is executed in another state in compliance with the law of that state. Thus, a validly executed Indiana living will and health care power of attorney will be recognized in Florida. However, from a practical standpoint, Florida hospitals and medical providers are not familiar with the Indiana living will and health care power of attorney format and medical terminology. Therefore, they may be hesitant to honor those Indiana documents thereby resulting in your clients not receiving health care services in Florida in a timely manner. Thankfully, snowbirds can have advance directives in both Indiana and Florida. Thus, to alleviate the risk of delayed health care while spending time in Florida, your snowbird clients should consider executing Florida advance directives, including a living will and designation of health care surrogate.

Florida enacted a new power of attorney law in 2011 that made huge changes to the laws governing powers of attorney in that state. As part of those changes, Florida law requires that all powers of attorney executed after Sept. 30, 2011, be effective immediately, and not “springing,” for example, upon a principal’s incapacity. The new law also requires that certain powers given the agent be specifically authorized by the principal or such powers will not likely be honored. Thus, your snowbird clients should also consider executing a Florida power of attorney if they have property, bank accounts or other assets in Florida so as to reduce the risk that banks and other third parties will not honor their Indiana power of attorney when presented.

Consider transferring Florida property into trust. If a Florida snowbird dies leaving real property or other assets in Florida, a Florida ancillary administration may be necessary to transfer ownership of the real property and assets. What type of administration procedure is required to transfer ownership of Florida property depends in part on the type of property, value of the property, how long the person has been deceased and whether there is a probate proceeding in another state.

In order to avoid the additional time and expense associated with a Florida ancillary administration, Florida snowbirds should consider transferring their Florida property, including real property, which includes land, homes, condominiums and also timeshares, into revocable trusts. Of course, this may not always be necessary if the Florida real property would otherwise pass by operation of law. For example, if a timeshare is owned by husband and wife joint with right of survivorship, no ancillary administration would be required until after the death of the surviving spouse. Therefore, in that instance the transfer of real property to a revocable trust can be delayed until after the first spouse’s death.

When transferring real property into a revocable trust, a deed must be executed to effectuate the transfer. Notably, in Florida a “documentary stamp tax” is levied on certain documents, including deeds. Generally, the tax rate for documents that transfer an interest in real property is $.70 per $100 of the total consideration paid for the transfer. One would think there is no consideration paid when simply transferring real property into a revocable trust. However, if real property being transferred is subject to a mortgage, the outstanding amount owed on that mortgage will be deemed consideration for purposes of calculating the documentary stamp tax.

Thankfully, certain transfers of real property are exempt from the documentary stamp tax, including a transfer by a property owner to the property owner’s revocable trust, even if the real property is subject to a mortgage, provided the property owner has the same beneficial ownership in the real property in his revocable trust as the property owner had in the real property prior to the transfer. However, if the real property being transferred to a trust is mortgaged and there are other current beneficiaries with beneficial interests in the trust, the documentary stamp tax will be due on a portion of the mortgage balance.

Married couples are often surprised to learn they have to pay documentary stamp tax when one spouse transfers Florida real property to the other spouse or, into their joint names. For example, if a wife owns real property with a $1 million outstanding balance on the mortgage and she transfers the property into joint name with her husband, a documentary stamp tax of $3,500 will be due on the transfer ($1,000,000 / 100 X .70 / 2). If, however, the property is unencumbered, there is a deemed gift between the spouses and no documentary stamp tax will be imposed on the transfer.

Unfortunately, many out-of-state attorneys are often surprised by a call from their angry snowbird clients who transferred their Florida real property pursuant to the attorney’s direction without being warned the transfer would be subject to the documentary stamp tax. Indeed, there are many traps for the unwary in transferring Florida real property, as well as many nuances in Florida law that impact snowbirds’ interests in Florida. Therefore, Indiana attorneys are well-advised to have Florida counsel engaged in the planning of any strategies involving their snowbird clients’ Florida interests, and certainly in the preparation of any Florida estate planning documents. By doing so, Indiana attorneys can rest assured they have protected their snowbird clients’ interests in both states, and yet they have not subjected themselves to a potential unauthorized practice of law charge in Florida in the process. Sunshine for everyone!•

Lisa M. Glenn is a partner in the estate planning and personal services practice group at Krieg DeVault LLP. Glenn is licensed to practice law in both Florida and Indiana, and she spends considerable time in the firm’s two Florida offices. Glenn’s practice focuses on estate planning, business succession planning, and estate and trust administration. The opinions expressed are those of the author.

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