Author’s note from Attorney Howard Iken: Avoiding probate in Florida can save time, maintain privacy, and prevent a hassle. Options to avoid probate include simplified probate (Summary Administration), creating living trusts, joint ownership or joint tenancy, making gifts, using Florida “Lady Bird” deeds, transfer-on-death registration for securities, payable-on-death designations for bank accounts, and beneficiary designations for life insurance policies and retirement accounts. Each method has its own benefits and considerations, so it’s important to consult with an attorney to determine the best approach for your specific situation.
There are so many stories about probate proceedings being long, costly, and confusing, leaving many people to take whatever steps necessary to avoid probate in the state of Florida. There are good reasons to avoid probate when possible. First of all, probate takes time. Depending on the size of the estate, probate can take anywhere from a few months to as long as two years. Beneficiaries who might really need their inheritance have no access to the money or assets until the probate is complete. During probate, creditors are given a chance to make a claim on the estate, which is one of the reasons it can take so long. If you are a very private person who is not excited about people knowing your personal business, then you should know that probate is a public process. This means anyone who has an interest in knowing what assets were left and who they were distributed to, can find out that information at the courthouse. Plus, probate can just be a time-consuming hassle. For all these reasons and more, you may want to avoid probate and there are, in fact, ways you can do so.
There is a simplified probate process, also known as Summary Administration in the state of Florida. If the value of the decedent’s estate is less than $75,000, it could qualify for Summary Administration. The total amount of the estate does not include the value of the decedent’s protected homestead real estate. The protected homestead laws will be applied differently, in different situations. If the decedent was not survived by a spouse or any minor children, the homestead can be left to any person the decedent chooses. This means you can disinherit an adult child in favor of other children, or disinherit your child or children in favor of a sibling, friend, or relative.
If you are married, your protected homestead can be left to your spouse through rights of survivorship, and if you are not married, and have minor children, you can establish a type of irrevocable trust for the minor child until he or she is the age you select, allowing the child to inherit the protected homestead. If a Florida resident dies with $65,000 in the bank and a homestead residence worth $150,000, then the heirs are still allowed to take advantage of Summary Administration and can do so for up to two years following the death of the decedent.
If the estate does not exceed $75,000, it will qualify for Summary Administration, even for the heirs of a person who is not a resident of Florida, yet owns real estate in the state. The filing fee for a Florida Summary Administration is between $345-$400, depending on whether the decedent was a Florida resident or not. Summary Administration can take as little as a week but generally takes from a few weeks to a couple of months—still significantly less time than “normal” probate takes. There are certain situations in which Summary Administration should not be taken advantage of, even if the estate qualifies. If there is any potential for heirs contesting the will, heirs which cannot be located, real estate which the heirs plan to sell within two years of the decedent’s death, an insolvent estate at issue, or the estate has multiple creditors, it would probably be better to go through the formal probate process.
Using Living Trusts to Avoid Probate
One of the most popular—and easiest—ways to avoid probate is to create a living trust. Any assets you own can be placed into the living trust, whether real estate, bank accounts, vehicles, or personal items. A living trust is similar to a will, naming a trustee who will take over upon on your death. The ownership of your property is initially transferred to yourself while you are alive, meaning you still have control of your assets during your life. Upon your death, the successor trustee will administer your restate, pursuant to the directions specified in your trust. During your lifetime you can amend in part or revoke the entire trust at any time. You can also add or withdraw assets as you please.
As far as taxes go, all taxable income or tax losses generated through trust assets flow through the trust, to you, while you are alive. A living trust is much more private than a will that goes through probate, although it is executed with the same formalities as a will. The living trust also provides a successor beneficiary to automatically take over the administration of the trust in the event you should become incapacitated during your lifetime. Under the terms of your living trust, upon your death, all assets which are titled in the name of the trust will then be distributed to the heirs you have named in the trust.
Avoiding Probate through Joint Ownerships or Joint Tenancy
Joint tenancy is another popular way to avoid probate, especially for married couples in the state of Florida. For married couples, it is known as tenancy by the entirety, and for property owned by couples (married or not) or a father and son, two friends, etc. it is called joint tenancy. Under joint tenancy, each owner must own an equal share of the asset. If a husband and wife in the state of Florida own real estate together, the law presumes they intend to own that property as tenancy by the entirety, unless the deed specifies otherwise. Property owned in joint tenancy automatically passes, without the benefit of probate, to the surviving owners when one owner dies. Setting up a joint tenancy is easy, and costs nothing. When couples acquire real estate, automobiles, securities, bank accounts, or other valuable property, these assets can pass directly to the surviving spouse, without the necessity of probate. Of course, the surviving spouse must use another method—such as a living trust—in order to avoid probate at his or her death, and probate is not avoided if both owners of the property die simultaneously.
In most cases, the surviving spouse or owner must only fill out a form and present the form, along with the death certificate, to the bank, MVD, or county real estate records office in order to take full possession of the asset in question. A downside to joint tenancy is that if one joint owner should become incapacitated, and unable to make decisions, the other owner’s freedom to act could be restricted. If each joint owner signs a document known as a Durable Power of Attorney, this is no longer a problem. Another potential problem is that the surviving spouse may miss out on an income tax break later, should the property be sold.
If the joint owner of your property is sued, then a judgment creditor may be able to take assets in the joint account or real estate which is jointly owned. If you are in a second or subsequent marriage, there can be additional issues associated with leaving property to your spouse by right of survivorship or tenancy by the entirety. This means once you are gone, your spouse will be free to do whatever he or she wants with the property later. This means that even if you would want your children from a prior marriage to have the property after your spouse dies, he or she is free to leave that property to their own children, a new spouse (and his or her children), a friend, or, really, anyone they choose.
Using Gifts to Avoid Probate
Obviously, any assets which you give away during your lifetime will not have to go through probate after your death. Many people derive a great deal of pleasure out of giving assets to loved ones, and being alive to witness the enjoyment of those assets. Gifting property lowers probate costs, as the higher the monetary value of the assets which go through probate, the higher the expenses involved. Most smaller gifts are not subject to federal gift tax, and currently, you can give up to $14,000 per year per beneficiary, without incurring any gift tax consequences. Adding your child, or anyone else, as co-owner of your asset is the equivalent of gifting them half the value of that asset. If the value of the asset you have gifted is greater than $14,000, you must file a gift tax return which will incur the tax consequences associated with the transfer.
Using Florida “Lady Bird” Deeds to Avoid Probate
Florida Lady Bird Deeds are also known as Enhanced Life Estate Deeds and can help avoid probate in the state of Florida. The Florida ladybird deed allows one or more people to possess a specific property for life, with the remainder to pass to another person upon the first owner’s death. Ladybird deeds differ from traditional life estate deeds in that the ladybird deed allows the original owner to change his or her mind without involving the life tenant. In other words, if Mary owns a home and has made her eldest son, Jim, the life tenant, or the receiver of the home when she dies, then many years later has a falling-out with Jim, she can change the life tenant to her granddaughter, Beth, without notifying Jim—or Beth, for that matter.
In order to create a ladybird deed, you sign a deed transferring your real estate to a person on your death, but retaining the right to sell, use or otherwise deal with the property during your lifetime. When you die, your named beneficiary files your death certificate in the land records, serving as proof of your death and allowing the property to be transferred to the beneficiary, with no probate required. There are some Florida title insurance companies that will not insure ladybird deeds if those deeds exclude one child from inheriting property, or giving it to one or more other children since title issues could arise from such situations.
Avoiding Probate through Transfer-on-Death Registration for Securities
In the state of Florida, you are allowed to register any stocks or bonds in a transfer-on-death form, and many people hold their brokerage accounts this way. Your named beneficiary will inherit the account automatically, upon your death, with no probate proceedings necessary. The beneficiary will deal directly with the brokerage company in order to complete the transfer.
Avoiding Probate through Payable-on-Death Designations for Bank Accounts
In the state of Florida, you are allowed to add a payable-on-death (POD) designation to your bank accounts, including checking or savings, as well as to certificates of deposit. Until your death, you have complete control over the money in the account—your beneficiary has no right and no control over the money, and if you choose to spend it all, you can do so. Following your death, whatever is left in the account transfers immediately to your beneficiary with no probate proceedings required. Although some states allow you to do the same with vehicles, Florida is not one of those.
Using Beneficiary Designation or Life Estate Deeds to Avoid Florida Probate
If you have a life insurance policy or you have assets in an IRA, 401(k) or annuity, you have already taken advantage of avoiding probate. By designating a beneficiary on these assets, no probate is necessary. When you die your life insurance proceeds will be paid directly to the beneficiary you have named on the policy, and the same is true of your retirement accounts.
As you can see, there are ways you can avoid probate in the state of Florida. What will work best for you will depend on your specific circumstances and your specific assets. It is wise to discuss your situation with one of our experienced Ayo and Iken Florida estate attorneys in order to determine the best way to proceed in order to avoid probate.