ESTATE PLANNING / PROBATE ADMINISTRATION
Probate / Trust Administration
Probate is the process by which a deceased person’s property, known as the “estate,” is passed to his or her heirs. The probate process only covers those assets titled in the decedent’s own, individual name. Probate does not cover those assets that are jointly held or assets that have beneficiary designations (i.e., IRA, 401k, life insurance).
Often the emotional trauma brought on by the death of a loved one is accompanied by confusion about the proper financial and legal steps that the decedent’s surviving spouse and/or heirs must take to distribute his or her assets. In many cases it was the deceased spouse who was responsible for managing the family’s finances and the surviving spouse and/or the children of the decedent are suddenly left with the responsibility of probating an estate about which he/she/they have very little knowledge. Additionally, this task may also come on top of commitments to family and work which cannot be set aside. Finally, many estates often involve assets which may be located in other states, are not easy to liquidate and/or are scattered amongst many accounts.
Probate, by definition, is the process where your estate is distributed after payment of creditor’s claims. This is a court process to distribute your assets to your heirs while contemporaneously resolving any debts and liabilities which may have been due and owing at the time of your death. If you have a will, the assets are distributed as set forth therein. If you die without a will, then assets are distributed to your surviving spouse and/or lineal descendants in a set order of distribution according to Chapter 732, Florida Statutes . Contrary to popular belief, the State of Florida is not entitled to receive any of your assets unless no known heirs can be found.
You will need to hire an attorney to probate the estate. An attorney is paid according to the statutory guidelines of §733.6171, Florida Statutes. While this statute does not provide a set fee, it provides for guidelines as to a reasonable attorney’s fee. Depending upon the size of the probate estate, a reasonable attorney’s fees can be estimated at 3% of the decedent’s probate estate exclusive of any “extraordinary services” rendered by the attorney as defined in the statute.
One matter to remember is that probate rarely takes place when the first spouse dies in a married couple. The reason for this is that most couples hold their assets jointly so that when one spouse dies, all assets pass to the survivor thereof by operation of law. Another matter of importance is that probate only covers assets held in the decedent’s own, individual name. Accordingly, as referenced above, probate does not necessarily cover IRAs, 401ks, life insurance and jointly held assets.
There are two types of probate administrations in Florida: The Summary Administration and the Formal Administration.
Summary Administration is used when a decedent’s entire probate estate in Florida is worth less than $75,000 or where the decedent has been dead for more than two (2) years. The value of “homestead” real property is not counted in totaling the value of the estate. In a Summary Administration, the estate must not be indebted or provisions for payment of debts must have been made, or if the assets are “exempt” then creditors are entitled to notice. If a Petition for Summary Administration is signed by all interested parties, a hearing on the Petition is not normally needed. If a hearing is not required, the proceeding can be finalized and an Order of Summary Administration entered in a relatively short period of time, perhaps within a month.
Formal Administration is used when the decedent’s probate estate is worth more than $75,000 and in more complex situations. The formal probate process involves the application by a qualified fiduciary to be appointed personal representative (some states use the term “executor”). That person may have to post a bond or the court may require a restricted depository in lieu of a bond. A restricted depository is a bank account from which no withdrawals can be made without court order. Both the bond and the restricted depository are intended to protect beneficiaries from misadministration of the estate, whether intentional or accidental. The duties and powers of the personal representative are set forth in great detail in Chapter 733, Florida Statutes, as are formulas for compensation for the personal representative and his/her attorney. Creditors must be notified and given an opportunity to present their claims to the personal representative. Once the assets have been marshaled and the claims of any creditors have been satisfied, then the personal representative must account to the beneficiaries for the period of administration and distribute the assets to them. Upon successful completion of administration, the personal representative is discharged from any further duties and liabilities.
The formal process typically takes six (6) to twelve (12) months to complete (unless a federal estate tax return is required). Whether an estate tax return is required will depend on the applicable (federal and state) estate laws in effect as of the date of death of the decedent. Estate tax returns are currently required to be filed within nine (9) months of the decedent’s date of death, unless an extension is obtained.
If a person was not a Florida resident at the time of his or death, but dies leaving real property in the State of Florida, a personal representative specifically designated in the decedent’s will to administer the Florida property is entitled to have Ancillary letters issued, if they qualify to act in Florida. Otherwise, the out-of-state personal representative of the decedent’s domiciliary estate shall be entitled to have letters issued, if they qualify to act in Florida. The specific requirements for ancillary administration in Florida are set forth in Chapter 734, Florida Statutes. Ancillary administrations can be either summary or formal proceedings.
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