What is probate?
Probate is a court-supervised process in which the Personal Representative must identify the estate assets, satisfy the decedent’s outstanding debts, file necessary tax returns, and make distributions to the beneficiaries. A Florida estate is either considered to be “testate”, where the decedent passes away with a valid Last Will and Testament, or “intestate” where the decedent passes away without a valid Last Will and Testament. It is a common misunderstanding that a probate is not required in Florida where a valid Last Will and Testament exists. While a Last Will and Testament generally directs who receives your assets and who will act as Personal Representative, this document alone does not equate to probate avoidance. Other estate planning vehicles such as trusts and proper designations of beneficiaries can be used to minimize the need for probate.
WHAT ASSETS ARE SUBJECT TO PROBATE?
Generally speaking, assets held in a decedent’s name alone (and certain jointly held assets held as “Tenants in Common”) are subject to probate. Assets that are not typically subject to probate are as follows:
- Jointly held assets owned as “Joint with Rights of Survivorship” or as “Tenants by Entirety”
- Assets held in trust
- Accounts having proper designations of beneficiaries (i.e. life insurance policies, retirement accounts,
- Accounts properly designated as “Transfer on Death” or “Payable on Death
What Happens During a Probate administration?
The two most common forms of probate administration in Florida are known as “Formal Administration” and “Summary Administration”. The General steps for A Formal Administration are detailed below. A Summary Administration is an abbreviated process available for estates where the decedent has been dead for two or more years OR the estate assets do not exceed $75,000 (subject to certain exceptions for exempt property).
OPENING THE ESTATE
During a Formal Administration where the decedent died with a Last Will and Testament (i.e. a “testate estate”), the Personal Representative, with the assistance of an attorney, will submit certain pleadings to the court requesting the admission of the original Last Will and Testament and his or her appointment as Personal Representative. Where there is no Last Will and Testament (i.e. an “intestate estate”), the court will rely upon the Florida statutes to determine the appropriate party to act as Personal Representative. The court will grant the Personal Representative “Letters of Administration”, which effectively gives the Personal Representative the authority to take possession of the estate assets and deal with third parties such as financial institutions and creditors.
Once the estate is open, the Personal Representative must send certain notices to interested parties including beneficiaries and known creditors. A notice will be published in the local newspaper letting all unknown creditors know that an estate has been opened. All properly noticed creditors will be subject to a limited time period to file a claim in the estate for payment.
SECURING AND MANAGING ASSETS
The Personal Representative is responsible for identifying, securing, investing, and insuring estate assets. In most cases, using the Letters of Administration, the Personal Representative will open new accounts in the name of the estate and will consult with a financial advisor throughout the administration regarding reinvestment and consolidation of the estate assets. Once estate assets have been identified, the Personal Representative will report these assets to the court by filing an estate inventory. The Personal Representative must also secure estate assets (such as real property and vehicles) and arrange for proper insurance coverage to limit the estate’s liability exposure.
CLOSING THE ESTATE
Throughout the estate administration, the Personal Representative will engage a qualified Certified Public Accountant to assist with filing all necessary tax returns, such as the decedent’s final personal income tax return, estate income tax returns, and estate tax returns. Also, unless waived, all estate beneficiaries are entitled to receive a final estate accounting before the estate can be closed with the court. Once all taxes, administration expenses, and creditors have been satisfied or accounted for, the Personal Representative can make distributions to the beneficiaries and will file the necessary documents with the court to close the estate.