Probate administration is a court-supervised process by which “probate assets” are transferred after death to the testator’s beneficiaries. A probate asset is defined as an asset which is owned in the decedent’s sole, individual name at this time of death, which does not otherwise transfer to another person or persons by operation of law or pursuant to a beneficiary designation. Assets transferred outside of a will, such as by operation of law, pursuant to a beneficiary designation, or those planned for in a trust, are handled outside of the probate process.
If probate avoidance planning has not been implemented prior to death, Florida requires a probate court proceeding if the deceased was a resident or owned assets in the state of Florida.
During the probate process, the personal representative manages assets, pays any debts, files required tax returns and various court documents, and distributes the estate assets according to law.
Ways to Avoid Probate
Probate is a public process that can be lengthy and costly. Consequently, many people wish to avoid it at all costs. There are a number of ways, if implemented correctly, that one can plan around the probate process.
Joint Tenancy with Rights of Survivorship
Owning assets as a joint owner or “joint tenant with rights of survivorship” allows property to pass to surviving joint owners without probate. However, this strategy subjects the jointly-held assets to claims (such as lawsuits) against a co-owner, and it makes the assets available to the co-owner’s creditors.
Tenancy by the Entirety
Similar to “joint tenant with rights of survivorship” as described above, but this type of joint tenancy is only between married spouses. Tenancy by the Entirety also allows property to pass to surviving joint owners without probate, however, such jointly-held assets are not available to the creditors of either individual owner. Rather, assets owned as Tenancy by the Entirety are only available to those creditors who are joint creditors of both spouses.
Florida allows Transfer on Death (TOD) or Payable on Death (POD) beneficiary designations to be added to bank accounts and brokerage accounts. Beneficiary designations may be preferable to joint tenancy in that they allow transfers of property only upon death, without transferring current ownership. One of the drawbacks of this strategy, however, is that it can be difficult to obtain an equitable distribution of property among your beneficiaries. Additionally, TOD or POD assets will be distributed upon your death to the listed beneficiaries, even if the account owner’s last will and testament dictates otherwise (beneficiary designations supersede the account owner’s last will and testament).
Revocable Living Trust
A Revocable Living Trust is a legal document establishing a separate entity (the trust) to hold legal title to assets while the grantor (trust-maker) is still alive. The grantor names trustees to manage the trust assets according to the trust terms. Typically, the grantor will be the initial trustee and will manage the trust assets for his or her own benefit while alive and healthy. Upon the grantor’s disability or death, the trust terms appoint a successor trustee who then steps in and continues to manage or distribute the trust assets. A properly drafted trust can accomplish many goals, including guardianship or probate avoidance, as well as marital dissolution and creditor protection.
A properly drafted trust can also accomplish the goal of probate avoidance. The trust must, however, be still administered. This means that beneficiaries must be contacted, assets managed, potential creditors notified, debts, taxes and final expenses paid, and, ultimately, any remaining income and assets must be distributed in compliance with the trust terms. Successor trustees often lack the time, resources or knowledge necessary to personally administer the trust. For this reason, many choose to call upon legal, accounting and investment professionals to assist them throughout the trust administration process. Our office has significant experience in this process and can assist your successor trustee(s) in managing the complexities of administering your trust.