An Introduction on How to Avoid Probate in Florida
Whether clients are aware of it or not, probate avoidance is one of the most common reasons for having a comprehensive estate plan.
Probate avoidance is the strategic planning of an individual or married couple to avoid the legal process of probate in the distribution of assets after their death.
The probate process is the legal, court-supervised procedure of validating an individual’s Last Will and Testament that distributes their assets in accordance with its terms. This procedure is known to be time-consuming even for the simplest of estates, costly and relatively publicized.
To avoid these unintended and unwelcome consequences of the probate process, Florida residents often seek ways on how to avoid probate for their estates as permitted by FLA. Stat. § 735.301.
This article investigates various options available to Floridians to avoid the probate process while streamlining the transfer of assets to loved ones and reducing both the burden and costs.
Probate in Florida
In Florida, the probate process is governed by the Florida Probate Code which outlines the procedure to administer estates – whether with or without a Will. The probate process usually includes the following:
- Filing the Petition: The process requires a petition for administration of the decedent’s estate to be filed with the probate court with proper jurisdiction. This is typically done by the executor of the decedent’s Will or a family member.
- Validating the Will: The probate court will then validate the Will to determine the list of beneficiaries. If there is no Last Will and Testament, then the court will follow Florida’s laws of intestacy.
- Inventory List: The executor or personal representative of the estate will be responsible for compiling a list of the decedent’s assets and obtaining valuations as needed.
- Taxes and other Debts: The estate is obligated to settle any outstanding debts and payment of taxes prior to the distribution of assets to the appropriate beneficiaries.
- Distribution: When the debts are settled, then the remaining assets are distributed accordingly.
Primary Goals of Probate Avoidance
The main purposes Florida residents seek to avoid probate are to:
- Simplify the Process for loved ones: During what can be considered the most difficult time for the decedent’s loved ones, having to navigate the complicated process of the probate courts can be extra burdensome. Probate avoidance measures aim to simplify the process of transferring ownership of the decedent’s assets by creating a more streamlined and easier process for heirs.
- Reduction of costs: Typical probate budgets include court costs, attorneys fees, as well as executor fees in some instances. Probate avoidance efforts automatically minimizing some of these costs while eliminating other entirely.
- Reduce Delays: Probate avoidance efforts aim to reduce the time spent transferring assets to heirs. The probate process is known to be a long and sometimes complicated process, which can be harmful to estates.
- Privacy: As probate court records are typically public, those seeking more privacy in the distribution of their assets opt for probate avoidance alternatives instead.
- Flexibility: Probate avoidance measures also allows for more flexibility and control of the distribution of assets whereas estates being by the probate court must follow rigid statutory laws. This is beneficial when dealing with blended families or if protecting assets from creditors.
Common Probate Avoidance Measures in Florida
Revocable Living Trusts
The most common option for avoiding probate administration is the creation of a revocable living trust. A revocable living trust is a legal entity that holds the legal title to a decedent’s assets during their lifetime.
It allows heirs to avoid probate because the property is owned by the trust and not the decedent.
The revocable living trust usually names a successor trustee who manages the distribution of the assets as indicated by the decedent in the document itself. This process is known as trust administration.
Aside from the obvious benefit of probate avoidance, revocable living trusts are private documents and allow for vast flexibility and customization of the distribution of assets.
The trust, through the named trustees, manages assets not only after the death of the grantor of the trust but also during incapacitation.
Notable considerations prior to opting for a revocable living trust are the initial set-up costs, which are typically higher than your average Last Will and Testament.
Additionally, there are usually management and administrative tasks that must be addressed on an ongoing basis. This, as one can imagine, can become quite costly to the estate depending on the terms of the trust.
Joint Tenancy with Rights of Survivorship
This is a form of ownership in which there are two or more individuals who own an equal and undivided share of an asset.
Joint tenancy with rights of survivorship ensures that the surviving owner(s) will automatically assume ownership of the deceased owner’s interest.
This type of ownership does not require action upon the death of the first owners but must be accounted for somehow when owned by a sole survivor to avoid having to be probated.
The main advantages of this method are that it is simple, straightforward and does not require additional action until solely owned by the last surviving owner.
However, the disadvantages are that it tends to be less flexible than a trust and there may be unintended consequences if co-owners ever change.
NOTE: the effect of joint tenancy ownership with rights of survivorship is not the same as tenancy in common in which property passes via the deceased co-owner’s will or trust upon their death, because the surviving tenant in common has no survivorship interest. This ownership structure will not necessarily avoid probate.
Enhanced Life Estate or “Ladybird” Deed
This is a type of deed in which an owner of real property is given a life estate interest with the remainder interesting vesting in specifically named heirs upon their passing.
Similarly to joint tenancy interests with rights of survivorship, no further action is needed to effectuate the ownership of the heirs upon the death of the life estate holder.
To learn more about this option, explore our article that provides a summary of the Florida Lady Bird Deed.
Payable on Death (POD) or Transfer on Death (TOD) Designations
This option is typically utilized with financial assets such as bank accounts or securities.
Essentially, these accounts will name a specific beneficiary to whom the account will be transferred upon the death of the original owner.
Usually, the financial institutions do not require a court order for the heir to obtain access to the accounts. In most instances, they simply require a death certificate and proof of identification of the heir.
This method also provides a quick and efficient transfer of assets. However, it is limited to certain kinds of assets and may not be applied universally.
Life Insurance and Retirement Accounts
Utilizing life insurance policies or retirement accounts can be one of the most beneficial assets held by a decedent with the added benefit of being able to designate specific beneficiaries to receive these assets upon their passing.
Similarly to POD or TOD assets, an order from a probate court is not needed for these assets to be properly transferred and in most instances, the financial institutions simply request that the death certificate and identification of the heir(s) be provided.
Alternatively, these assets may also designate a trust to be the beneficiary. Thereby allowing far more flexibility in determining the way the asset will be divided among multiple heirs, which is potentially the most problematic aspect of this probate avoidance tool.
The most obvious advantage to designating beneficiaries is the speed at which funds are transferred to heirs.
However, it is advisable to regularly review and update beneficiary designations as major life changes, such as marriages or divorce, occur as the named beneficiary will be the rightful owner of the asset upon the death of the original owner.
Operating Agreements and Company Bylaws
Interests in business entities such as limited liabilities companies may avoid probate in two main ways: either by transferring the owners’ interests to their trusts or by drafting governing documents that outline a succession plan in which co-owners or heirs may inherit ownership interest or corporate stock. Since business entity ownership is seen as personal property, they would otherwise have to pass through the probate process if not properly accounted for in the entity’s governing documents.
Small Estate/Summary Procedures
While not an avoidance of the probate process entirely, Fla. Stat. § 735.201 allows for a simplified probate process for small estates with a total value below $75,000 or if the decedent has been deceased for more than two years.
This process is referred to as summary administration and is much faster and less formalized.
However, there remain costs and time considerations that can be detrimental to smaller estates or those with vulnerable heirs, such as minors or disabled individuals, who are in immediate need of the assets.
How to Avoid Probate in Florida Conclusions
Probate avoidance should be an objective of any sized estate plan.
It helps not only to reduce costs and delays but also ensures a more streamlined transfer of assets and minimization of the burden of heirs during a difficult time.
Fully understanding the Florida probate process and exploring various probate avoidance strategies, such as revocable living trusts, joint tenancy, beneficiary designations, and small estate procedures, empowers individuals to make informed decisions when conducting their estate planning.
As probate avoidance may be accomplished in several ways, it is imperative that a person consult with their legal, as well as, financial professionals to determine the most appropriate options for their specific needs.
To learn more about how we may assist you with your probate avoidance objectives in Florida, contact us here.
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