|
Probate is a court-supervised process for transferring assets from a deceased person to that person’s heirs. The court appoints a personal representative (Florida’s term for the executor) who is charged with the responsibility of taking possession of the assets of the estate, paying final debts, taxes and expenses, and then distributing the remaining property to the heirs. At the end of this process the personal representative is discharged and the estate is closed. All personal representatives must retain an attorney to represent them in the probate proceeding.
Only assets which are titled in the decedent’s individual name at death are subject to probate. The following general types of assets are not titled in the decedent’s individual name and are not subject to probate:
- Assets titled in the name of a revocable trust.
- Assets titled in joint names with another person subject to a right of survivorship, provided the other person survives the decedent.
- Assets which pass under a beneficiary designation to a surviving beneficiary other than the estate, such as life insurance, annuities and IRAs.
If no complications arise, a simple probate can usually be completed in 6 to 8 months. In cases where a federal estate tax return is due, or where there is a will contest or litigation concerning a creditor's claim, administration takes longer to complete; although distribution of most of the estate may occur long before the estate is ready to be formally closed.
What rights does my spouse have in my estate at my death?
If you die domiciled in Florida your spouse may have the right to an "elective share" of your estate and may also have the right to an interest in your homestead.
The elective share entitles a spouse to a portion of the total estate which has a value (for elective share purposes) of no less than 30% of an "elective estate." The elective estate includes not only the assets of the probate estate but also includes a broad range of non-probate assets. The rules concerning the computation of the elective share and how it is paid are very complex and relatively new. For a more detailed discussion of the elective share, see the publication entitled "Florida’s New Elective Share".
Your homestead is the property which you occupy as your permanent residence. If you own your homestead in your sole name at your death and your spouse survives you, your spouse is entitled to an interest in the homestead under Florida law. If you are survived by a spouse and also by children or more remote descendants, the spouse receives the right to use the homestead for life, and at the spouse’s death the property passes to your descendants. If you are survived by only a spouse, the spouse receives the property outright.
A spouse may waive the right to the elective share or the interest in homestead by a marital agreement entered either before or after marriage.
Your previous state of residence may be able to tax you as a resident if you maintain enough contacts with that state to characterize you as having a domicile in that state at your death. The factors which are considered in making the determination of your domicile vary from state to state. See the publication entitled "Establishing a Florida domicile" for guidance on how to establish a Florida domicile and clearly terminate your prior domicile. Even if you are domiciled in Florida your estate may be taxable in another state if you own real property located in that state.
If you are a Florida resident at your death and if your estate is required to pay federal estate tax then Florida estate tax will also be due. However, since the estate tax payable to Florida is equal to a corresponding dollar-for-dollar credit against the federal estate tax, the Florida tax amounts to a revenue sharing arrangement between IRS and the State of Florida. By contrast, many other states impose an estate tax which is not limited to the amount of the federal credit, and in those states the total state and federal estate tax imposed exceeds the total estate tax imposed on Florida residents. For this reason, it is often said that Florida does not have an estate tax and this is essentially, although not technically, correct.
Contrary to popular belief, it is very rare for a decedent’s property to pass, or escheat, to the State of Florida. If you die without a will your estate passes to your spouse and descendants (children, grandchildren, etc.) or, if none, to other family members, as determined by Florida statutes. Your estate would escheat to the State of Florida only if you leave no spouse or descendants, and also leave no living relative who is either a grandparent or a descendant of a grandparent of yours. The advantage of making a will is that you, rather than Florida law, will determine how your estate is distributed.
Florida law provides a statutory personal representative’s fee based on the value of the probate estate as finally determined for probate inventory purposes (plus all income earned on assets of the probate estate during administration) and computed as follows:
At the rate of 3% for the first $1 million.
At the rate of 2.5% for all above $1 million and not exceeding $5 million.
At the rate of 2% for all above $5 million and not exceeding $10 million.
At the rate of 1.5% for all above $10 million.
If the value of the probate estate is $100,000 or more and there are two personal representatives, each is entitled to a full fee; if there are more than three personal representatives the total fee to which two would be entitled is to be divided among the personal representatives. If the value of the probate estate is less than $100,000 and there is more than one personal representative, the fee to which a single personal representative would be entitled is divided among the personal representatives. The personal representative may waive the fee, if they desire to do so.
Attorney’s fees based on a similar fee schedule are presumed to be reasonable under Florida law, but are not mandatory. Our firm’s practice is to review the work likely to be required in the probate and then propose an appropriate fee, which in many cases is less than the fee based on the statutory schedule.
Both the personal representative’s fee and attorney’s fee computed under the schedule are subject to adjustment to the extent that the estate requires extraordinary services not routinely encountered in estate administration (such as the operation of a business or a will contest).
For a slightly more detailed discussion on this subject see the publication entitled "Personal Representative's and Attorney's Fees in Probate."
A will made in another state will be effective so long as it was signed with the same formalities required in Florida; that is, you must have signed the will in the presence of two witnesses, and the witnesses must have signed in your presence and the presence of each other. Most wills signed in Florida also include an optional "self-proving affidavit" in which the person making the will and the witnesses sign a second time in the presence of a notary. If your will includes a valid self-proving affidavit it may be admitted to probate at your death without the need to contact a witness. If your out of state will does not have a self-proving affidavit, or if the form of the affidavit does not meet Florida’s statutory requirements, it will be necessary to locate one of the witnesses after your death to arrange to have the witness give an oath so that the will can be admitted to probate. Locating witnesses at death often proves difficult and, even if a witness is located, obtaining the necessary oath can delay admission of the will to probate.
No. Changes to a will (called a codicil), like the original will, must be signed by the person making the will (the testator), in the presence of two witnesses, and the witnesses must then sign in the presence of the testator and in the presence of each other. If you make un-witnessed handwritten changes to your will after it is signed those changes will be ignored and your estate will be distributed as if the changes were not made.
A spouse may be excluded from your will. However, regardless of what your will provides your spouse has certain rights to an elective share of your estate and an interest in your homestead property unless those rights have been waived by a valid marital agreement. See the question "What rights does my spouse have in my estate at my death?" in these FAQs for a more detailed discussion of these spousal rights. Your children may be excluded from your will.
The latin term per stirpes is used to describe how a gift of property is to be divided among a group of related persons of multiple generations. Where a distribution is made per stirpes, the share of a beneficiary who is deceased is generally distributed to that beneficiary’s descendants by right of representation.
For example, if at your death you have two living children and one deceased child who left two children, a gift in your will to your descendants per stirpes would be distributed 1/3 to each of your living children, and 1/6 each to the two children of the deceased child.
No gift tax is incurred on gifts which are covered by either the annual exclusion or the gift tax exemption. The annual exclusion allows you to gift up to $11,000 to as many persons as you choose each calendar year. If you are married, and if your spouse agrees to have the gifts treated as if he or she made half of the gift (by making a "split gift election," up to $22,000 per recipient in annual exclusion gifts may be made. The amount of the annual exclusion is periodically adjusted for inflation.
The first $1 million in lifetime gifts in excess of the annual exclusion are tax free. Gifts in excess of this amount which are not covered by the annual exclusion are subject to gift tax. Most gifts to your spouse or to charity are tax free, regardless of the amount.
Transfers to a spouse or charity at your death are generally tax free. Transfers to others are subject to estate tax to the extent that those transfers exceed the exempt amount. The exempt amount is scheduled to change over the next several years as follows:
| 2003 |
$1,000,000 |
| 2004-2005 |
$1,500,000 |
| 2006-2008 |
$2,000,000 |
| 2009 |
$3,500,000 |
| 2010 |
Estate tax repealed |
| 2011 and later |
$1,000,000 |
The exempt amount is reduced by the amount of any gifts made during life which were not covered by the annual exclusion, but which were not subject to gift tax because of the $1 million exemption for lifetime gifts.
While use of a revocable trust can have significant advantages, it is not the best approach for everyone. If your estate is small or consists primarily of non-investment type assets, the current cost and effort necessary to create the trust may not be justified. In general, if your estate is valued at $250,000 or more and a significant portion of your assets are investment assets, or if you hold real property outside Florida, you should consider creating a revocable trust. For more information about revocable trusts and factors to be considered see the publication entitled "Do you need a revocable trust?"
Compared to a will, a revocable trust provides no unique tax advantages. The same estate tax planning which can implemented in a revocable trust may be implemented in a will or a revocable trust. The primary advantage of the revocable trust over the will is the avoidance of probate, which is entirely unrelated to estate taxation.
That depends on your particular circumstances. If you are not married and have no minor children, transferring your home to your trust should be fine. However, if there is a mortgage on your home you should get written approval from your mortgage company before doing so, since many mortgages have "due on transfer" provisions which could cause the entire amount of your mortgage to become immediately due at the lender’s discretion. If you have a spouse or a minor child, you should consult with an attorney concerning what to do with your home. Under such circumstances, your home may pass to your spouse and children as mandated by Florida law, even if the property is transferred to the trust prior to your death.
That depends on the size of your estate. If your estate is large enough to cause estate tax to be due when you die, then it may be worthwhile to create an irrevocable life insurance trust to hold the policy so that it is not subject to estate tax when you die. It is also important to note that if you transfer an existing insurance policy to an irrevocable life insurance trust you must live for at least 3 years after the transfer in order for the proceeds of the life insurance to be excluded from your estate for tax purposes.
If your durable power of attorney was signed before October 1, 1995 you should sign a new durable power of attorney. Durable powers of attorney signed before that date continue to be effective. However, due to a change in the law concerning powers of attorney, durable powers of attorney signed after that date are more likely to accepted by Florida financial institutions. Back to top
Practice Areas:
|
Graphic Chamber Inc.
