Legal Question in Wills and Trusts in Florida

Under Florida law such designations of beneficiaries as in a POD depend on the specific language of the POD. Generally, given the facts in your inquiry, if the designated beneficiary (#2) dies prior to person #1, then person #2 loses all rights as a beneficiary. A spouse or lineal descendants of person #2 do not receive any property unless the POD expresses such rights, and person #1 dies. A POD may designate an alternative beneficiary, joint beneficiary, or other arrangement. It is necessary to examine the POD and related applicable terms.

Without looking into alternative beneficiaries that may be named, the gift over to the POD recipient would lapse and would then be probated through the will of person #1. These POD, & TOD arrangements at banks, or perhaps through investment houses leave much to be desired, and while a bank associate or investment counselor may want to be helpful there could be serious consequences to the estate and monies of #1. The arrangements are extremely limited at best and generally are set up to: a. avoid probate proceedings; b. convenience for the customer; c. or attempt at avoidance of #1's creditors on death. Note while many of these type of accounts may already be treated as subject to #1's creditors on his/her death, they are not vigorously looked for at the present time, however the Florida Legislature should soon be codifying (creating statutory law) to treat many of these ITF and POD type accounts to be treated under law as "revocable trust funds" subjecting the Probate Courts, financial institutions to verify the same before paying them directly to #2. This could cause a problem for #2 who may receive the same only to be ordered to turn it back over to the creditor or the probate court at a later date - but we will have to wait and see how the law "shakes out" in this area.

Some of the things unplanned for with these type of accounts are: a. Cutting off #1's grandchildren should #2 die early and be a blood relative; b. Creditors or #1 accessing the monies during #1's life; c. Spouses of #2; d. Lack of liquidity in #1's estate to fund planned giving or property to others; e. POA's or attorneys in Fact getting unauthorized access to the accounts; f. Incapacity of #2 prior to #1's death. Perhaps the greatest frustration to #1 is the balancing of many of these type of accounts just to equalize her/his estate to the heirs when another Estate planning document should be used which would provide much better protection and equalization such as to: a. Not pass the money to the heir if there is drug abuse or addictions or criminal activity involved; b. not be subject to creditors of #2; c. provide for liquidity and usage of property for the benefit of many; d. income tax results. The list is too long for me to go on. It is best for #1 & #2 to have legal counsel on this before it is too late.