How can I avoid probate in Florida?
The probate process can be long and expensive. Even a simple estate will usually take six months or more to be processed and the estate to be distributed to beneficiaries. Any property that is devised in a will has to go through probate. Similarly, if a person dies without a will, most of the property in the estate will have to go through probate. The reasons for probate are good, which are to transfer the decedent's property to whom they want, how they want, and when they want. The other reason is to eliminate any creditors claims on the estate. However, the same things can be accomplished through other legal methods that avoid the probate process.
“The probate process can be long and expensive.”
Certain types of property do not have to go through the probate process:
- Joint tenancy with right of survivorship (JTWROS). This is a very common form of ownership for married couples. Married couples get further protection, as their joint property is presumed to be owned as "tenants by entireties," which means that the property is also exempt from creditors of either spouse during their marriage. But, for any property owned as JTWROS, it will pass to the other person automatically upon the death of the other person by operation of law and does not have to go through the probate process. One thing that is not such a great idea is when parents make their children joint owners so it automatically passes to them at death because property jointly titled with a child is not exempt from the creditors of either parent. Real property and personal property, such as bank accounts, can be owned in this way.
- Living trusts (aka revocable trusts). The most commonly used tool in estate planning to avoid probate is a living trust. A living trust is set up during a person's lifetime by preparing and signing a trust agreement. The person creating and funding the trust is called a "settlor." The trust property is managed by someone called a "trustee." The trust property is managed by the trustee for the benefit of the "beneficiaries" in accordance with the trust stipulations. In a living trust, the same person can serve as settlor, trustee (as long as alive and mentally competent), and beneficiary while they are alive. The trust names who will become the new trustee (called the successor trustee) and new beneficiaries when the settlor dies. This property does not have to go through probate.
- Beneficiary accounts. These are financial accounts, such as bank accounts or other accounts, where the owner names beneficiaries who will take over the account upon the death of the owner. The difference between this type of account and the JTWROS is that in this type of beneficiary account the other person has no rights to the account until the death of the creator. There are several examples of beneficiary accounts: retirement accounts (like 401k, IRA, or TSP) or checking/saving accounts with a pay-on-death or "POD" provision. These accounts all avoid the probate process. However, there are some down sides to a POD account. The accounts are not protected from the creditors of the decedent and the money is transferred to the new POD owner immediately, meaning the money will not be available for things like funeral expenses, probate expenses, and trust administration expenses. On the other hand, retirement accounts are generally protected from creditors and can contnue to grow tax free for several years after the death of the creator.
- Lady bird deeds. A lady bird deed is a special deed in Florida that allows a person to transfer an interest in real property to future beneficiaries and reserves their right to live in and control the property for their lifetime. It also allows the creator to revoke the transfer at anytime, which means the beneficiaries do not have a vested interest in the property, which is legally important. At the creator's (called the grantor) death the property will go to the named beneficiaries in fee simple, which means it does not have to go through probate and they get full ownership rights. This type of deed may be appropriate if the creator does not have minor children or a spouse and the residence is the primary asset in the estate. Another nice thing about ladybird deed is that the beneficiaries get a stepped-up tax basis, which is good for tax purposes. Further, it will not interfere with Medicaid eligibility for the grantor. There are more pros and cons that you can read about in the lady bird deed article. However, it is good to know it is a non-probate asset.
What should I do?
A qualified estate planning attorney can help you avoid probate to the extent possible and minimize costs to your loved ones in dealing with your estate after your death. While pursuing a DIY option may be a little cheaper up front, it can end up costing your estate and your loved ones a lot in the long run. We are here to help.
- Probate can be long and expensive.
- Some assets do not have to go through the probate process, like property in a revocable trust.
- There are a lot of things to consider in deciding how to distribute the property in your estate.