| Understanding Florida Probate |
Preliminary Considerations
When a person dies as a resident of Florida, a determination needs to be made whether probate is necessary in order to distribute the deceased person’s property. Some assets, such as life insurance and IRA’s, have beneficiary designations and can be distributed directly to the person(s) named without going through probate. If assets are held in a living or revocable trust, no probate will be needed in order to distribute those trust assets. However, if there are assets owned in the deceased person’s name with no beneficiary designated, then a probate will be needed in order to transfer or liquidate those assets.
Testate vs. Intestate
One of the first matters which needs to be determined is whether the estate is testate, i.e. if there is a valid Last Will and Testament, or is intestate, i.e. there is no Will. If the estate is intestate, then Florida law determines the issues which the Will would normally address. For example, the determination of who will serve as Personal Representative and who are the beneficiaries would normally be addressed in the Will. However, in the absence of a Will, Florida law governs these issues. If there is no Will, a probate can still proceed but the outcome and the steps necessary for completion will likely take longer and may produce different results.
Summary vs. Formal Administration
As a preliminary consideration, a determination must be made whether the probate will proceed as a summary administration or as a formal administration. A summary administration can be filed if the estate assets do not exceed $75,000 (excluding the homestead) or if the person has been deceased more than two years. Proceeding as a summary administration is desirable because it takes less time and costs less in terms of attorney’s fees and costs. However, even if an estate qualifies as a summary administration, sometimes a formal administration must be filed in order to have a Personal Representative (“PR”) appointed. In a summary administration, there is no PR appointed. This is sometimes a problem when there are undetermined assets and the bank, insurance company or other institution will not release any information without a court order. Therefore, if authority is needed to access estate accounts or information, a formal administration must be filed because a PR is usually the only person authorized to get that information.
There are several stages involved in a formal probate. First, there is the initial stage immediately after death. In this stage, information and documentation is gathered addressing issues such as estate assets and liabilities. After the initial information is gathered, the probate is filed. Once the PR is appointed by the court, the estate goes through a period of administration, followed by the formal closing of the estate.
Gathering Information and Documents
During the period immediately after death, the prospective PR should gather all available information and documentation regarding assets in the decedent’s name and liabilities owed by him. The attorney filing the probate will need the following items in order to file:
- Original Death Certificate (usually the “short form” is best)
- Original Will, if applicable.
- Names, addresses and ages of spouse, children and beneficiaries named in the Will (if no Will, then the names, addresses and ages of spouse and children; and if none, then the names, addresses and ages of living parents and siblings).
- List of all creditors, including the name, address, account number and amounts owed.
- List of all assets, including a description, account number or other identification, along with an estimated asset value and any liens on the assets.
- A copy of the paid funeral bill/receipt.
- For real estate, a copy of the deed or title policy with an accurate legal description, if available.
- For other titled assets (such as vehicles, boats, etc.), a copy of the title.
- A check to retain the law firm to file the probate. The amount depends on the agreement with the attorney.
Filing the Formal Administration
In opening the formal administration, the attorney will usually prepare and file a Petition for Administration with the applicable probate court. Accompanying the Petition are usually a Petition to Waive Bond, an Oath of Personal Representative, an Order Appointing Personal Representative, and proposed Letters of Administration. These are filed with the Clerk of Circuit Court, Probate Division, who submits them to the Probate Judge assigned to the case.
Appointment of the Personal Representative
After reviewing the documents submitted, if all is in order, the Probate Court enters the Order Appointing Personal Representative. In terms of who acts as PR (sometimes called the “Executor” in other states), the probate court first looks at who is designated in the Last Will and Testament. If there is no Will, then any interested person may apply for appointment. Sometimes, the court will require that the PR post a Bond. The purpose of the Bond is to protect against any loss to the estate if the PR mishandles any estate assets. Once the Bond is posted, the court issues Letters of Administration which give the PR authority to act on behalf of the estate.
After the PR is appointed, a Tax ID number may be obtained for the estate. This number can be used when opening accounts in the name of the estate (as opposed to the decedent’s Social Security number). Any assets or accounts in the decedent’s name will usually then be transferred into an account opened using this Tax ID number. If an Estate Tax return must be filed, this number will be used on that tax return as well.
Notice to Creditors
Early in the probate process, a Notice to Creditors will be filed by the PR and published in a local newspaper. Copies of the Notice are also mailed to any known creditors of the estate. The creditors who receive actual notice served on them by mail have 30 days from receipt within which to file a creditor’s claim with the probate court. Creditors who are notified of the probate via publication have three months from the date of publication within which to file their claim. After these prescribed time periods pass, the creditor’s claim is barred if not filed with the court. After a creditor’s claim is filed, the PR has 30 days within which to object to the claim if the PR disputes it. If a PR files an objection to a claim, the creditor must file an action to enforce the claim within 30 days of the objection.
Filing the Inventory
Also early in the probate action, the PR must file an Inventory which lists all assets of the estate. The Inventory is served on all of the beneficiaries of the estate. When necessary, the PR may need to obtain an appraisal of property in order to list it accurately on the Inventory. The values placed on the Inventory are important because they may later be considered when determining the beneficiaries’ tax basis in the property received.
Payment of Claims
Once the creditor claims have been confirmed as valid, the claims are paid from available, non-exempt estate assets. Certain assets, such as the decedent’s homestead, are exempt from the claims of creditors. Payment of creditor claims comes after payment of the costs of administration (such as attorney’s and CPA’s fees) and after the taxes are paid. Upon receiving payment, a creditor signs a release or satisfaction of claim which is filed with the probate court evidencing the payment.
Distribution to Beneficiaries
After all creditor claims and taxes are paid (or provision is made for their payment), then the estate assets can be distributed to the beneficiaries. Distribution can be “in cash” or “in kind”, or in combination. For example, if the estate owns 100 shares of IBM stock and there are two beneficiaries, the PR can either sell the stock and distribute the money equally or the PR can split the stock and issue 50 shares to each beneficiary. Once a distribution is received, each beneficiary signs a receipt evidencing the receipt of the distribution.
Closing the Estate
Upon payment of all legitimate creditor claims and taxes, and distribution is made of all estate assets, the estate can be closed. This is usually initiated by the PR filing a Petition for Discharge seeking to discharge the PR and to close the estate. Usually, a PR must serve a Final Accounting of assets and liabilities of the estate. However, if the beneficiaries sign a Waiver of Final Accounting and Consent to the Discharge, then a Final Accounting will usually not be required and the estate can be closed without need for a final hearing before the probate court.
The Cost of Probate
In a formal administration, there are certain costs incurred including the filing fee and the cost of publication of the Notice to Creditors. In addition, there will be attorney’s fees. In Florida, attorneys handle estates in three ways: 1) on a percentage basis; 2) on an hourly basis; or 3) on a flat fee basis. The percentage basis is limited by Florida law but can be as much as 3% of the gross estate. This can amount to a substantial fee. For example, for an estate valued at $1,000,000, the fee could be upwards of $30,000. For this reason, the more preferred fee arrangement is to pay for the probate based on a flat fee or on the hourly rate. The attorney handling the case on an hourly rate cannot give you an exact total estimate of the probate since each probate is unique. However, he should be able to give a range. For example, he could estimate a basic formal administration as costing between $4,000-$6,500. If a flat fee is quoted, the attorney will have to build in some “padding” since he cannot know ahead of time what time will be involved.
How Long Does It Take?
A frequent question is, how long does probate take? As with many areas of the law, it depends. There are numerous issues that can delay the closing of the probate. These include issues such as tax or creditor disputes, filing tax returns, selling estate property, and paying creditor claims. With this having been said, on average, a formal Florida probate generally is resolved in 8-12 months. However, depending on the circumstances, this time can extend longer but is rarely any shorter.
For additional information or to discuss Probate, visit: www.linslawgroup.com
|
The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask the lawyer to send you information about their qualifications and experience.
(c) Copyright 2008 Michael Lins, Attorney
|
|