Avoiding Probate in Florida
To avoid probate in Florida, a person must use legal tools to ensure their property is owned in some way other than solely in their individual name. The overriding goal of probate is to convey the decedent’s assets to whom they wanted, how they wanted, and free and clear of creditor claims.
But other legal tools can avoid probate and accomplish the same objectives faster and without court proceedings or attorney fees. These legal tools all involve having property owned during lifetime in a manner other than the name of an individual person. Only property owned individually in the name of a deceased person is part of the decedent’s probate property.
Understanding How to Avoid Probate
The primary purpose of probate is to transfer a decedent’s assets to their intended heirs after payment of the decedent’s debts. Probate is a legal procedure to transfer legal title of the decedent’s property to the heirs listed in the decedent’s will and to pay any creditors to whom the decedent owed money at the time of his death. All property titled in the decedent’s name is subject to probate. The decedent’s probate assets are referred to as his “probate estate.”
Probate is statutory in nature, meaning that the rules and procedures for probate were established by the Florida legislature and are expressed in Florida statutes. A probate is usually initiated and conducted by a person that the decedent nominated in his will to be his “personal representative.”
Creditors are notified and invited to file claims for money owed in probate court. Creditor claims must be paid or resolved before the court will allow the transfer of the decedent’s assets to his heirs. Probate ends with a court order discharging the personal representative and conveying legal title to robate assets as directed in the will.
Probate is administered by a special civil court division referred to as “probate court.” Probate involves filing with the court descriptions of the decedent’s assets and giving notice to the decedent’s creditors. Disputes among heirs about the interpretation of the decedent’s will and disagreements with the decedent’s creditors are resolved in probate court. The probate process requires the preparation and filing of several statutory forms, several orders issued by the probate judge, and in some cases, court hearings and trials. Florida law requires that the decedent’s personal representative retain a Florida attorney to assist with probate; the personal representative cannot file or conduct probate on their own.
Why Do People Want to Avoid Probate?
Because probate entails filing legal documents, court hearings, and attorney representation, probate in Florida is lengthy and expensive. Families typically must wait six months or more to complete the probate legal process and receive their inheritance. Florida statutes protect an attorney’s interest by establishing attorney fees based upon a percentage of probate estate value.
Ways to Avoid Probate in Florida
The most common legal tools to avoid probate in Florida involve joint ownership with rights of survivorship, beneficiary accounts, lady bird deeds, and living trusts.
Joint Tenants With Rights of Survivorship
Two people may own real estate or personal property as joint tenants with rights of survivorship (or JTWROS). Joint ownership with survivorship means that the two people listed on the title share ownership while they are both alive, and after either joint owner dies, the legal title passes to the surviving owner automatically. Probate is not required to convey JTWROS property to the surviving owner.
Married couples commonly own marital assets as JTWROS. The married couple wants their joint property to automatically pass to the surviving spouse, quickly and without probate, so that the survivor has uninterrupted access to the assets upon the first death. Another advantage of joint marital ownership is that JTWROS assets of married couples are presumed to be tenants by entireties property and are exempt from creditors of either spouse during their marriage.
Some parents make their children joint owners of their property so that the property automatically passes to their children upon death. The problem is that, unlike joint marital property, ownership property titled jointly with a child is not exempt from the creditors of either the parent or the child during the parent’s life. A judgment against either the parent or the child may result in the asset being lost to creditors.
Beneficiary accounts are financial accounts where the owner names one or more beneficiaries who take over the account upon the initial owner’s death. In other words, the initial owner states who will inherit the account upon death. On the death of a sole owner, or the last to die of multiple owners, ownership of assets registered in beneficiary form passes to beneficiaries who survive the initial joint owners.
Accounts that transfer in this way upon death are not part of the decedent’s probate estate. Florida Statute 711.507 provides that financial accounts are made beneficiary accounts by adding a “payable on death” or “transfer on death” designation. These financial accounts are referred to as “POD” or “TOD” accounts.
Using POD and TOD checking and savings accounts avoid probate, but they have disadvantages. First, the accounts are not protected from the lifetime creditors of the initial owner. Second, the immediate transfer on the initial owner’s death precludes using money in these accounts to pay death-related funeral, probate, and trust administration expenses. The POD/TOD beneficiary is not required to contribute his inherited money to share death-related expenses imposed on the family.
A retirement account is a type of beneficiary account. Retirement accounts, such as 401k and IRA accounts, typically include a named death beneficiary. The beneficiary has several years under current law to withdraw and pay taxes on inherited retirement money.
Retirement accounts are creditor protected. And the retirement account value is part of the decedent’s estate for purposes of estate taxation.
Lady Bird Deeds
A lady bird deed is a deed that transfers real property to future beneficiaries and reserves the grantor’s right to live in and control the property for the balance of their lifetime. Lady bird deeds avoid probate because the grantor’s life estate automatically extinguishes upon his death and the beneficiary then acquires full title to the property.
The most often used tool to avoid probate is a living trust. A living trust is a trust set up during the settlor’s lifetime by preparing and signing a trust agreement. A living trust agreement typically provides that the settlor may amend or revoke the trust during his lifetime. The settlor is the sole beneficiary and recipient of trust income as long as he is alive. The settlor also serves as trustee over trust assets as long as he is alive and mentally competent. The trust agreement names the person who becomes successor trustee and trust beneficiaries at the settlor’s death.
Trust assets automatically pass to the named successor beneficiaries without probate. Living trust agreements are administered privately and are not filed with a court after the settlor’s death—on the other hand, the settlor’s will must be filed in court and becomes publicly available.
A living trust does not protect the settlor’s assets from creditors during the settlor’s lifetime. The trust agreement may be drafted to protect the beneficiaries’ interest in inherited trust assets after the settlor’s death. This protection is not afforded by other means of probate avoidance discussed above. Secondly, even though living trust assets pass to heirs outside of probate, the trust assets are still subject to claims of the settlor’s creditors incurred during the settlor’s lifetime.