While probate ensures full disclosure of a decedent’s real and personal assets, shortens the timeline for creditors’ claims, and reduces the risks of errors in a will, the disadvantages outweigh the benefits. The probate process is time-consuming, has higher expenses, and intrudes on a family’s privacy. Attorney fees, court costs, estate executor/administrator fees, and accounting fees push the costs even further. In fact, the cost of probating a will usurps 3% – 8% of the gross estate value, taking up to 13 months to settle, which may extend to several years if an uncooperative beneficiary contests the probate proceedings.
You may have encountered estate planning resources that advocate for probate avoidance for the right reasons. Avoiding probate is usually beneficial because it saves you money, alleviates unwanted delays in the long term, and affords the family the privacy it needs as far as asset distribution is concerned. Estate planning attorneys who offer revocable living trusts and other probate avoidance practices, such as joint ownership, hedge Floridians against probate because they understand how complicated, costly, and time-consuming the court proceedings can be.
What Property or Assets Don’t Go Through Probate in Florida?
Many of the decedent’s assets and property may be distributed to the beneficiaries without probate. An example is a property that had a named beneficiary or rights of survivorship and may include one of the following:
- Life insurance benefits or payout
- A retirement account
- Bank account with a “pay on death” clause
Other non-probate assets and properties include those with the right of survivorship. That may consist of any real estate with a deed that specifies that the co-owner will take full ownership and responsibility upon the other party’s death. Property purchased under a spousal relationship typically has rights of survivorship under Florida law. Such a type of survivorship is referred to as “tenancy by the entirety.” It states that a couple must hold the title, in which case it will automatically be transferred to the survivor when the other spouse passes on.
On the flip side, any asset without a named beneficiary or rights of survivorship is subject to probate to ensure legal and smooth distribution pursuant to the Florida Probate Rules. Some examples of assets that go through a legal process include real estate, bank accounts, and personal property.
In the case of bank accounts, the financial institution must be contacted to determine whether the fund transfers will require probating. To determine if real-estate ownership transfers are subject to probate, an attorney must be involved to assess the deed to the property. A lawyer might provide free deed examination and even retrieve the title deeds from the state property records electronically.
Estate Planning for Probate Avoidance
After saving and amassing wealth for many years, the last thing you want is to complicate asset distribution by going through the probate process. Neither do you want your loved ones (spouse and children) to wait for months (or years) to receive a penny from your estate. Discussed below are ways you can leverage estate planning to avoid your assets being caught up in the costly and lengthy probate process.
Revocable Living Trusts
A living trust is a legal document that an estate owner creates during their lifetime to determine how their assets are managed and distributed after their death. The estate owner who builds a living trust is known as the “grantor” or “settlor,” and the one tasked by managing the trust’s assets is called a “trustee.” You may serve as the trustee or appoint a third party, which may be another individual, a financial institution, or a trust company.
It’s called a “revocable” living trust because it includes a provision that you can modify or terminate it at any time, so long as you’re not incapacitated. For instance, you may want to change the trustee or limit their powers, and you might be compelled to modify the living trust. Other circumstances that may require amending a trust include:
- Addition or removal of property from the trust
- Divorce or marriage
- A move to a state with different laws
- Birth of a child or grandchild
- A change in your financial situation
- The death of a beneficiary or successor
- Change in tax laws
The essence of a living trust is that any assets you have need to be included in the document so that the trustee assumes ownership of the assets and property instead of you. When you die, the trustee can then distribute the assets to beneficiaries directly according to the terms of the trust. Since these assets are no longer part of your estate, you technically don’t own them anymore. Hence, they are not subject to probate.
It is critical to keep in mind that simply setting up a trust does not entirely protect your assets against probate. “Funding” a revocable trust is essential to ensure successful probate avoidance. Settlors who don’t fully fund their trust usually require probate administration for the non-trust assets and trust administration to oversee the distribution of those assets. Because a revocable trust doesn’t shield you from probate, you’ll need a simple “pour over” will to successfully transfer any probate assets to the trust after death.
Joint Property or Concurrent Ownership
Another practical means of bypassing probate is joint property ownership, also known as concurrent ownership. As the name suggests, joint ownership refers to property ownership by two or more parties as specified in the property title deed. Suppose one of the property owners dies, the ownership of the property automatically goes to the other owner.
For concurrent ownership to work in probate avoidance, it’s critical to ensure that the deed lists both owners. That secures the property and shields it from probate because ownership transfers by default following the death of either deed holder.
There are three forms of joint ownership. They include:
Tenancy in common (TIC)
Tenancy in common is the most popular form of concurrent ownership. The co-tenant usually owns equal shares of a property. That implies that each co-tenant has an equal right to possess or use the entire property, although they share the rent and maintenance costs based on their ownership interest. Additionally, each co-tent possesses a share in the property’s value as it appreciates.
For instance, a co-tenant can transfer their interest in a TIC to a beneficiary through a will. The only thing a co-tenant can’t do is transfer or sell other co-tenants’ shares in the property. Once a co-tenant’s interests are transferred, the successor then assumes the seller’s position in the TIC alongside the other co-tenants.
Joint tenancy is also known as “joint tenancy with rights of survivorship.” That means that a joint tenant loses all interest in their property upon death, which is automatically transferred to the surviving joint tenant.
It’s crucial to involve a professional lawyer when creating joint tenancy to ensure proper terms and phrasing in the title deed or will. Generally, the court will look at specific wordings that indicate the intent to create a joint tenancy with rights of survivorship and not a tenancy in common.
Additionally, the joint tenants must satisfy four complicated requirements. The four requirements are referred to as “four unities” in legal terms since all joint tenants have unified rights in terms of:
- Unity of time
- Unity of title
- Unity of interest
- Unity of possession
Married couples often use joint tenancy to avoid the complicated probate process. When one partner dies, their interest in the joint tenancy is automatically transferred to the surviving spouse without going through probate.
Tenancy by the Entirety
Tenancy by the entirety is only limited to married couples who own property together. Albeit they own property together, they do not have equal but distinct shares. For this form of concurrent ownership to stand, the couples must fulfill all the four unities in joint tenancy with two additional conditions:
- They must be married at the time they purchased or secured the property
- They must remain married for the tenancy in the entirety to be legally valid
That means that an engagement is not enough to validate tenancy in entirety. Furthermore, if a married couple divorces after creating a tenancy in entirety, they become tenants in common.
Transfer of ownership in a tenancy in the entirety is similar to joint tenancy. If one tenant passes on, their interest in the property is automatically transferred to the surviving partner. Nonetheless, it’s stricter since the husband or wife cannot sever or change the tenancy by transferring ownership to another party. Transfers are only made between married spouses.
Not all states recognize tenancies in the entirety, but Florida is one of the states that allow people to establish tenancies in entirety. The state usually presumes that a property grant to a married couple automatically triggers tenancy in entirety. In other states, tenancies in the entirety only protect tenants’ real estate properties against creditors. In Florida, the case is different. Couples can own real estate, tangible, and intangible personal property as tenants in the entirety. That means they shield real property, tangible and intangible personal properties against creditors.
“Transfer Upon Death” Bank Accounts
Another practical means of protecting your assets from going through probate is by converting them to what is recognized as payable-upon-death accounts. It’s is an effective non-probate option for assets or properties that comprise financial accounts.
A transfer- or payable-upon-death account works by specifying a beneficiary as the designated recipient of the funds held in an account in the event of the account owner’s death. Although Florida does not allow real estate transfer with transfer-upon-death deeds, account holders can add a payable-upon-death (POD) designation to their bank accounts.
You’ll still be in control of the POD account, and the beneficiary has no legal right to claim the funds while you’re alive. It’s only upon your death that the assets pass to the beneficiary without probate.
Want to Avoid Probate? Partner with Experienced Estate Planning Attorneys
Estate planning is a practical means of avoiding complicated probate proceedings. At Easler Law, we have attorneys who’ve owned and sold properties, from real estate, tech-focused companies to commercial and residential properties. We can help you start your estate planning to help you avoid probate. Contact us at (321) 206-3603 or book an appointment with one of our attorneys today.