Southwest Florida's Health and Wellness Magazine Health and Wellness Articles
By Steven J. Gibbs, Esq.
The above list is NOT exhaustive and MANY additional steps will likely be required in order to obtain a final order to allow the distribution of assets to heirs and/or beneficiaries.
A Florida last will and testament is essentially an instruction sheet for the probate court and must be deemed “admissible” to be allowed to be so. The way that the last will is deemed admissible is for the court to confirm that it meets all of the required formalities for wills in Florida. A well-drafted Florida last will and testament can make the probate process in Florida much easier.
So a little more about the history of probate…
Probate in the United States is best explained by time traveling back to small town America. In the old days, a family member would pass away, and the other family members would go to the butcher, who was also the probate judge, and he would tell them to sell dad’s plow and pay the livery stable, sell the tools and pay the general store, and so on and so forth.
Today, the butcher is no longer the probate judge and the creditors are not the livery stable and general store. Today, judges are often overwhelmed with a crammed caseload and the creditors are national and international corporations. This all leads to probate having become an extremely complicated and burdensome process. In many jurisdictions, you must be an attorney to handle a probate and in every jurisdiction, it tends to be expensive. You can figure that the average probate will take 12-18 months to complete and will cost anywhere from 3 to 10% of the gross estate value or even more if there are complications in the estate such as non-ascertainable beneficiaries, creditor issues or family conflicts.
There are different types of probates to be aware of as well, and the type is based upon circumstances surrounding the estate as well as the state laws.
The three types of probate in Florida are: formal administration, summary administration, and ancillary administration.
A Florida formal administration generally means that there are no shortcuts and that a full petition will be filed complete with a formal “notice to creditors” and full process that will take time to allow all assets to be inventoried prior to the final court order. The average time span for a probate in Florida is 6 -12 months but can extend to several years if complications occur.
A Florida summary administration is often for cases with less than a minimum amount of around $75,000 (total assets) in the estate and this option usually takes less time and is less expensive to file. In some states, there is also a summary proceeding in some form that does not require an attorney and is only an administrative process. However, in Florida, even summary proceedings require the assistance of a experienced Florida probate attorney. This kind of proceeding is usually reserved for estates with minimal assets.
A Florida ancillary administration is a probate in another jurisdiction from where the testator resided, so an example would be a resident of Florida who also had real property in Indiana. A probate would need to be filed in both states if the testator had real property in both states, so perhaps a formal administration would be filed in Florida, and an ancillary administration would be filed in Indiana. The cost and time burden of probate, along with the possibility of multiple probates, has necessitated options to allow beneficiaries to avoid this process altogether.
Florida Revocable Living Trusts Steps to Avoid Probate
One solution, and arguably the most complete estate planning solution is the using a Florida revocable living trust to avoid probate.
Because probate is the court process that becomes necessary to retitle your asset when they are left in your individual name, properly funding a revocable living trust in Florida should ideally avoid the probate process. However, even if a Florida revocable living trust has been established, a probate may be required if a few easy steps are not taken.
1. Deeds for Real Property Must Be Properly Prepared in Florida and Other States.
This is the easy step that will correct the highest likelihood of a probate being required. It is common for folks, particularly in sunbelt states, to have real property “up north” or in other locations. If this is your situation and you neglect to file appropriate “deeds” to transfer your real property to your Florida revocable living trust, then multiple probates will be required in order to transfer your real property to your heirs. By “properly prepared” Deeds, I am referring to a Deed that is compliant with the local jurisdictional requirements and thereby properly transfers the real property ownership to your Florida revocable living trust. Deed and title requirements can vary by jurisdictions.
For example, sometimes a notary and 2 witnesses are required to transfer title and sometimes the notary may serve as a witness. Of course, the Deed must be recorded in the jurisdiction which is usually the County in which the real property is situated. The local records clerks may be a valuable resource to make sure that your Deed complies or poses any concerns. Notably, if your attorney who prepared your Florida revocable living trust is licensed in your home state, and your real property is somewhere else, it is worthwhile to do your own research and potentially check with a locally licensed attorney if there is any confusion.
2. Business and Investment Entities in Florida and Other States Must Be “Titled” Properly.
This second easy step is also easily missed during the process of preparing your revocable living trust in Florida, and also can lead to a probate. Again, especially in sunbelt states, people often have business entities (such as corporations and LLCs) in multiple jurisdictions. It is easy to forget about making changes to your business entity when you’re working on your estate planning and creating your Florida revocable living trust.
Hopefully, your Florida estate attorney will address this concern; however, corporate shares or LLC membership units may become a “probate asset” if these easy steps aren’t taken. This step involves one of two ways to retitle the ownership of the shares or membership units in the name of your Florida revocable living trust. The first option is to “assign” the shares or membership interest to your trust so that you’re holding them as trustee and not individually. A second option that may be preferred, depending upon your unique situation, is to create a “transfer upon death” (TOD) provision in your corporate or LLC agreement. TOD and POD designations are discussed more to follow.
3. Financial Accounts Must Be Titled Properly
This third easy step is also easily missed during the preparation of your Florida revocable living trust because folks inevitably open new accounts in their individual names rather than as trustee of the trust. Unfortunately, this misstep also leads to probate in Florida because multiple accounts, especially if they are in different states, can also lead to unnecessary probate as well as probates in multiple jurisdictions. It is all too common, and frustrating for loved ones, to find bank accounts in the deceased individual name. Even if the sum of money in the account is small, the bank may insist upon a probate court order to allow the funds to be accessed. Depending upon the jurisdictional probate rules, a probate process may be required, as is the case in Florida, despite the fact that only a simple account or a small amount of money is in question. Remember that multiple accounts in multiple states equals multiple probates in multiple jurisdictions.
There are other ways to make sure you are using your Florida revocable living to trust maximize your estate planning. 7 ways to fine tune your Florida estate plan with your Florida revocable living trust.
Non-Trust Options for Avoiding Probate in Florida
Although I recommend using a Florida revocable living trust as the best option for avoiding probate, there are a few other strategies that can be used in select circumstances as follows:
1. Using enhanced life estate deeds in Florida
Enhanced life estate deeds or “lady bird deeds” in Florida are a way to designate beneficiaries to receive real property as an automatic transfer upon the owner’s death. These have been a common Medicaid approach also, and may be advisable where the owner has no other probate assets. These are different than other life estate deeds because they preserve the owner’s right to sell the real property if needed, and thus they should only be prepared by an experienced attorney.
2. Using joint titling of real estate, financial accounts and other assets in Florida
Joint titling of assets in Florida, done the wrong way, often creates more problems than it solves, as discussed concerning why to avoid jointly titling Florida assets with adult children. However, there are circumstances where it can work, such as joint titling between a husband and wife, known as tenancy by the entireties in Florida, OR as joint tenancy with a right of survivorship co-owner with an equal financial stake in the real property. NOTE: titling as a tenancy in common in Florida with another person will still require a probate for BOTH parties without additional planning. This strategy can also work with an adult child when a parent is again and may need long term skilled nursing care AND that child will be the sole heir to the estate.
The same principle and rules may apply for other non-real estate assets; however, I advise CAUTION in this kind of strategy, because, as discussed in the referenced article, when you jointly title your assets, you EXPOSE them to the joint owner’s liabilities that may include divorce, foreclosures or bankruptcies.
3. Using TOD and POD designations for financial accounts in Florida
A TOD (transfer on death) or POD (pay on death) designations in Florida, whether on a financial account or other asset may also work if there are very few assets in an estate. These account designations can be used on unqualified accounts such as checking and savings as well as CDs, stock accounts and mutual fund accounts. This designation, if properly done, should provide that the monies in the account will pass automatically to the designated beneficiary upon the death of the owner. I do suggest that this can be an inefficient and inflexible way to plan that should only be used for the smallest and simplest estates.
4. Using beneficiary designations on insurance, IRAs and 401(k) accounts in Florida
Most life insurance policies and qualified accounts will require that you name a primary beneficiary for the account. Lesser known is the fact that these accounts allow for a contingent beneficiary to be appointed. A life insurance policy may designate a Florida revocable trust as beneficiary and this can be advantageous where life insurance is used for Florida estate planning. A revocable living trust may also be a contingent beneficiary of an IRA and this can be a very advisable strategy as discussed in our article about IRA beneficiary trusts in Florida. Note, IRA beneficiary rules have changed dramatically due to recent updates via the The Secure Act.
With all of the above in mind, remember that the ultimate key to avoiding probate in Florida is for no asset to be left in the individual name of the deceased. There may be other less common approaches, such as using irrevocable trusts, that are advisable for your specific circumstances so it is important to get the expert advice you need.
All of the above steps are easy to take, and I do recommend they should be taken with the help of an experienced estate attorney. The potential probate costs are expensive and the the other aspects of probate in Florida can be a frustrating experience, so all of this needs to be planned right in advance.
Even after taking numerous precautions, sometimes a probate will still be recommended due to things like multiple creditor claims or other title issues. Even if that happens, following the above suggestions can dramatically simplify anything that needs to be done and will most likely avoid the need for multiple probates.
Finally, if it becomes necessary for you to file a Florida probate for any reason, it is important to understand that opening a probate in Florida is like running a business.
239.415.7495 | www.gibbslawfl.com
