What Estate Planning Documents Do You Need in Florida?
Florida estate planning involves certain documents that direct where property goes after your death. Basic Florida estate planning includes the following documents:
- Will. Covers the disposition of your property after your death.
- Power of attorney. Grants someone else the legal authority to act in your place.
- Health care directive. Allows someone else to make medical decisions for you if you are incapacitated.
- Living will. States your desire for when to end life-sustaining treatment.
- Declaration of pre-need guardian. Designates who should be your legal guardian if a Court determines that you need one.
Often estate planning in Florida also includes a living trust.
Frequently Asked Questions
Probate is the legal process of administering the property of a deceased person (decedent). The primary concerns of the probate court are: (i) determining the rightful heirs to property (whether such heirs are designated in a will or by laws of intestacy); (ii) making sure the financial obligations of the decedent are paid; and (iii) transferring legal title of property to the heirs. Probate proceedings are administered through the probate courts which are a division of circuit courts in each of Florida’s counties.
In Florida estate planning, the person who represents the decedent in probate is called a “personal representative.” A formal probate requires the appointment of a personal representative. Most wills nominate a personal representative.
The estate tax is imposed on the transfer of wealth at death. The calculation of the estate tax is based on the value of a decedent’s “gross estate.” The gross estate can be loosely defined as the value of all property in which the decedent had an interest at the time of death (plus certain other statutorily mandated items).
Florida estate planning law requires that an attorney prepare and file all probate pleadings including the petition. There are two main probate proceedings: formal probate and summary probate. Determining which to file depends on the amount and nature of property in the decedent’s estate and the decedent’s date of death. Formal probate is filed when the total estate value exceeds $75,000 or in a small estate where there are other issues that require the court’s action or intervention (such as estate debts which exceed the value of estate assets). Summary probate is filed when the total estate value is $75,000 or less (excluding real property) or the decedent died two or more years prior to the filing. Summary probate can be compared to a small claims case in civil matters. Summary probate does not require the appointment of a personal representative.
There are two aspects of a Florida probate. The first is identification and collection of assets which comprise the probate estate. The other part of probate is the administration of the probate estate through the probate process. Probate is conducted by a person appointed by the court to be the decedent’s personal representative.
Probate in Florida for a Small Estate
In Florida, there is a simpler process for probate of a small estate. Also known as disposition without administration, an heir or beneficiary can ask a Court to transfer the relevant assets without an extensive court proceeding. The typical limit to qualify for this small estate procedure is $6,000, but it does depend on the county. There must also only be exempt property.
Another type of probate for small estates is called summary administration. To qualify for summary administration in Florida, the value of the estate must be less than $75,000. This $75,000 limit for summary administration does not include the value of the exempt Florida homestead. Summary administration in Florida allows the estate to be distributed relatively quickly to the beneficiaries.
Florida Statutes has rules about who may or may not serve as personal representative of a Florida probate. Generally, any Florida resident over the age of 18 may serve as a personal representative. An attorney living outside of Florida may also be a personal representative here.
The personal representative is considered under the law as a “fiduciary” (a person who has been selected for a position of special faith, trust, and reliance). The personal representative has a fiduciary duty toward the decedent’s creditors and heirs and has a duty to properly conduct the probate proceeding. Personal representatives are entitled to be paid a reasonable fee for their service and to be reimbursed for any personal money spent for probate administration such as attorney’s fees, filing fees, and costs. Florida Statutes has guidelines about reasonable personal representative fees and also has guidelines about reasonable attorneys fees based upon a percentage of the probate estate. Most practicing probate attorneys charge clients less than the statutory attorneys fees.
Florida Statutes provide an order of priority for the choice of a personal representative. In most cases, the court will appoint the person nominated in the decedent’s will. If a will does not nominate a personal representative, or if the nominee is ineligible or unable or unwilling to serve as personal representative, or if there is no will, the court appoints a personal representative based on the order of priority set forth in Florida Statutes.
A person nominated as personal representative may decline the appointment. Once appointed, the court may remove a personal representative for cause such as breach of fiduciary duty or failure to properly conduct the probate proceeding. A party to a probate proceeding may petition the court to remove a personal representative. A personal representative must be represented by an attorney in all legal matters before the probate court.
Florida Probate Timeline
The personal representative has possession and control of all assets of the estate during a Florida probate. The personal representative’s primary duty is to protect and preserve the assets and also to see that the assets are invested in a prudent and cautious manner. The persons to whom you owe these duties are, first, any creditors of the estate, and second, the heirs. The personal representative is legally liable to anyone who may have been harmed as a result of improper performance of duties.
The process of probate, or administration of the estate, begins with filing the original will with the court and the preparation and filing of a petition for administration. The judge will sign letters of administration after the petition for administration is filed. The attorney for the estate will provide the personal representative certified copies of the letters of administration (which are evidence of the personal representative’s legal authority). After the letters of administration are issued, the personal representative’s attorney sends copies to parties who may be involved or interested in the estate. Beneficiaries of the estate will be sent copies of a notice of administration by certified mail if they have not previously filed waivers of notice.
A primary function of probate is to give the decedent’s creditors the opportunity to be paid from estate assets. Typical creditors in a probate proceeding are the decedent’s mortgage company, funeral expenses, and health care professionals who provided medical care during the decedent’s last illness. The personal representative’s attorney is required to send a notice to creditors to any party the personal representative knows, or has reason to believe, may have a claim against the decedent’s estate. The personal representative’s attorney must also notify potential and unknown creditors of the probate by publishing a legal notice in the newspaper.
During the early stages of administration any creditor having a claim against the estate is required to file a claim with the court. The court will send the personal representative’s attorney a copy of all claims filed. The personal representative should review claims filed to determine whether each claim is valid. The personal representative may object to any claim which he believes is either incorrect or invalid. Objections are either resolved by mutual agreement, or if settlement is not possible, then such disputes are resolved by the probate judge. Any claims not filed during this time period will not be legal obligations of the estate, and, in most instance, cannot be legally paid.
Administration entails identifying and securing assets of the estate. An important part of making certain that assets are secure is arranging for adequate insurance coverage of tangible personal property or improved real property. A list of all assets in the probate estate and their values must be filed with the court in the form of an inventory. A personal representative should begin to compile a list of assets as soon as possible after their appointment. The asset list should be provided to the personal representative’s attorney for preparation of the estate inventory to be filed with the probate court.
Another part of the estate proceedings is determining which tax returns the estate is required to file. Personal representatives will have to arrange for the filing of an income tax return for the decedent during his last year and each year during probate if the estate has more than $600 in income during the tax year. Some estates also file an estate tax return if the total taxable estate exceeds a certain valuation. The personal representative’s attorney will determine which tax returns, if any, are required to be filed. Just because the law requires that a tax return be filed does not necessarily mean that tax is due.
The personal representative is responsible to properly manage estate assets throughout the estate proceeding. Asset management includes investment of cash in bank accounts, government bonds, or other prudent forms of investment. The personal representative must also make sure the estate pays ongoing bills including mortgages on any real estate included in the probate estate. An important consideration is liquidity management. If cash available to the estate is not sufficient, the personal representative is required to sell assets or borrow money on behalf of the estate to meet cash requirements as they arise.
Once the personal representative or the court determines the validity of creditor claims filed, the personal representative pays the claims (either in total or in a prorated amount). The next step is distribution of the remaining probate assets, if any, to the beneficiaries named in the will. First, the personal representative distributes estate assets to satisfy any specific bequests in the will. A specific bequest is an instruction in the will to distribute a specific asset, such as real estate, or a fixed amount of cash to one or more persons or a charity. In some cases the personal representative will sell assets with prior court approval to get cash to pay expenses or to make bequests to the heirs.
Often estate beneficiaries will pressure the personal representative to prematurely distribute assets of the estate. As a fiduciary, the personal representative may be held personally responsible for early distributions when the personal representative learns later that the money distributed is needed to pay estate expenses, federal taxes, or for required distributions. The personal representative should never distribute money to an heir without first contacting their attorney.
In order to close the probate estate the law requires the personal representative to prepare, with professional help, a formal accounting. The accounting includes all legally significant activities which have occurred in the estate, evidence that creditors’ claims and taxes have been paid, and a statement that the remaining estate property has been distributed in proper shares to the persons entitled to that property. The proposed accounting is made available to all beneficiaries who then have an opportunity to object. Alternatively, such formal accounting may be waived by unanimous consent of the beneficiaries. Beneficiaries waive a formal accounting in most estates because the accounting is an expensive part of estate administration. The personal representative’s attorney files the formal accounting or waivers with the probate court. The court reviews the accounting and other legal forms involved in closing the estate, and if all forms are in order, the judge will sign an order discharging the personal representative and terminating further obligations regarding the probate. This order effectively closes the probate case.
The personal representative must also file income tax returns which the estate is obligated to file for the year in which final settlement occurs. When the estate is closed, the estate may have had taxable income for that year or otherwise be responsible for the payment of taxes. The personal representative must retain sufficient funds to pay any taxes which may be due as the probate closes. The law permits the IRS, and in some situations the State of Florida, to collect unpaid taxes from the personal representative’s personal assets.
Inclusions in the Gross Estate
Property interests included in the gross estate are usually valued at fair market value on the date of death. Some of the special rules regarding the inclusion of property in a decedent’s gross estate are as follows:
Property Owned Outright. This is the simplest and most obvious category of items included in the gross estate. It comprises all property that a decedent owned individually and outright.
Jointly-Held Property. If joint property is held with rights of survivorship between husband and wife, then one-half of the value of such joint property is included in the gross estate of the first joint tenant to die and the other one-half is excluded from the gross estate. If joint property is held with right of survivorship between persons who are not husband and wife (such as parent-child or brother-sister), then the entire value of any joint property will be included in the estate of the first joint tenant to die unless the estate can affirmatively prove that the surviving joint tenant supplied some, or all, of the money used to purchase the joint property.
Life Insurance: The proceeds of any life insurance on the decedent’s life is included in the gross estate if (a) the policy proceeds are payable directly or indirectly to the decedent’s estate; or (b) the decedent held any incident of ownership in the policy, such as the right to change the beneficiary, surrender or cancel the policy, or borrow against the property.
Marital Deduction Planning
Of the various estate tax deductions, clearly the most significant is the unlimited marital deduction which provides an estate tax deduction for property left to a surviving spouse. There are two basic prerequisites of the unlimited marital deduction:
An Interest Must Pass to the Surviving Spouse. A marital bequest must be to a legally recognized spouse. A bequest to a divorced or deceased spouse will not warrant a marital deduction. The surviving spouse must also be a citizen of the United States.
The Interest Must be a Deductible Property Interest. Mere passing of property from a decedent to a surviving spouse alone is not enough to warrant a deduction. An interest is deductible only to the extent such interest is included in determining the value of the gross estate. The reason for this rule is simple — if an item is not included in the gross estate, its passing should not qualify for a deduction.
What to Do Next
We help people plan how they want to leave their assets and can take care of the entire probate process from start to finish. Contact us to get started.