Probate is a lengthy and expensive court process to distribute someone’s property. Here are the main ways to avoid it:
- Add a beneficiary to your financial account.
- Use a lady bird deed.
- Set up a living trust.
- Own property as joint tenants with the right of survivorship.
Beneficiary Accounts
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 havedisadvantages. 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/TODbeneficiary is not required to contribute their 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.
Get advice for your specific situation.
We can take care of the entire probate process from start to finish. We help people throughout Florida byphone or Zoom.
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 their death and the beneficiary then acquires full title to the property.
Living Trusts
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 their lifetime. The settlor is the sole beneficiary and recipient of trust income as long as they are alive.The settlor also serves as trustee over trust assets as long as they are alive and mentally competent. The trust agreement names the person who becomes successor trustee and trust beneficiaryat the settlor’s death.
Trust assets automatically pass to the named successor beneficiaries without probate. Living trust agreements are administered privately andare 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.
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.
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 andwithout court proceedings orattorney 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.
How Does Probate Work in Florida?
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 transferlegal title of the decedent’s property to theheirs listed in the decedent’s will and to pay any creditors to whom the decedent owed money at the time of their death. All property titled in the decedent’s name is subject to probate. The decedent’s probate assets are referred to as their “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 their will to be their “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 their heirs. Probate ends with a court order discharging the personal representative and conveying legal title to probate assets as directed in the will.
Probate is administered by a special civil court divisionreferred 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.
Get advice for your specific situation.
We can take care of the entire probate process from start to finish. We help people throughout Florida byphone or Zoom.
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Reason to Avoid Probate
Because probate entails filing legal documents, court hearings, and attorney representation, probate in Florida islengthy 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.
In addition, probate is a public proceeding. Avoiding probate allows your property to transfer to your beneficiaries out of the public eye.
About the Author
Gideon Alper is an attorney who specializes in asset protection planning. He graduated with honors from Emory University Law School and has over 15 years of legal experience.
Gideon has helped thousands of clients protect their assets from creditors. Before private practice, he represented the federal government while working for the IRS Office of Chief Counsel.
Learn More About Gideon
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