Probate Avoidance

 

Section 733.6171(3) of the Florida Statutes outlines the amount that is presumed to be reasonable compensation for attorneys representing a personal representative in a formal estate administration. Currently, these amounts are:

  • $1,500.00 for estates of less than $40,000.00.
  • $2,250.00 for estates of greater than $40,000.00 but less than $70,000.00.
  • $3,000.00 for estates of greater than $70,000 but less than $100,000.00.
  • Three percent (3%) of the value of the estate greater than $100,000.00 but less than $1 million.
  • Two and one-half percent (2.5%) of the value of the estate greater than $1 million but less than $3 million.
  • Two percent (2%) of the value of the estate greater than $3 million but less than $5 million.
  • One and one-half percent (1.5%) of the value of the estate greater than $5 million but less than $10 million.
  • One percent (1%) for everything above $10 million.

These amounts are considered “reasonable fees” only for ordinary legal services and do not include such extraordinary issues such as will contests, contested claims, tax advice and ancillary administration.

Many of our clients are troubled when confronted with the possibility handing 3% or more of their family estate over to an attorney at a time when their families can use it most. Thankfully, Ourednik Law Offices is able to help.

Given the high costs that are commonly associated with probate, individuals are rightfully seeking methods by which to avoid this process altogether. Some common forms of probate avoidance are:

  • Jointly Owned Property: When two or more people acquire property, they may hold title to that property in several different ways, each of which will have a different impact on their relationship and provide different benefits to the owners. Where probate avoidance is a primary goal, there are two forms of joint ownership commonly recognized in Florida that may be beneficial. These are known as “joint tenants with rights of survivorship” and “tenancy by the entirety (TBE).” Under a joint tenancy with rights of survivorship arrangement, each person is considered to be an owner of the “entire” property interest, together with the other owners(s). This means that if one owner dies, the property will not be transferred by will or probate. Instead, title remains in the surviving owner(s). A tenancy be the entirety arrangement is a special form of joint tenancy reserved only for married spouses. TBE has much the same probate avoidance features as joint tenancy with rights of survivorship, in that the death of one spouse will automatically vest title in the surviving spouse, without the necessity of a will or probate. Many different kinds of property, including real property, personal property, and bank or brokerage accounts may be held as joint tenants with rights of survivorship or TBE, provided the property legal procedure is followed.
  • Life Estates: A life estate is an interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons (commonly referred to as the “measuring life”). When the person whose life is the measuring life dies, the property is transferred to a remainder person without the requirement of a will or probate. Life estates are often created through the use of a deed, trust agreement, or some other document that establishes an ownership in property. A life estate may be freely sold, gifted, or otherwise transferred by the owner. However, practically the sale of a life estate for significant value is often difficult to accomplish because the buyer can only purchase the same interest as the owner, which means the buyer will cease to own the interest upon the passing of the measuring life.
  • Beneficiary Designations: Also may be known as payable on death (POD) or transfer on death (TOD) accounts. Beneficiary designation arrangements are commonly established on bank accounts, brokerage accounts, life insurance policies, and retirement accounts. In this arrangement, assets are disbursed to the designated beneficiary upon the death of the individual, without the need for a will or the probate process. This valuable service is often offered free of charge by most financial institutions and should be established and reviewed frequently by the account or policy owner.
  • Living Trusts: A very common method of probate avoidance is the use of a revocable living trust. A person who establishes a revocable living trust (commonly referred to as a “settlor” or “grantor”), may freely make changes to the provisions of the trust, as well as transfer assets into and out of the trust, during their lifetime. Upon the death of the settlor, the revocable trust is usually designed to become irrevocable and any trust assets are distributed according to the terms of the trust document. Often, the settlor serves as the trustee of their revocable living trust during their lifetime, with a successor trustee taking over in the event of death and serving a function that is akin to that of a Florida “personal representative” (also known as an “executor”). Revocable living trusts are considered beneficial for estate planning because, when the trust is fully funded, the assets that are owned by the trust pass to the beneficiaries named in the trust agreement (or to trusts for their benefit) without the need for probate. This probate avoidance means that revocable trusts are effective at maintaining the privacy of the decedent and can also save the estate time, court costs, and attorneys’ fees.

Does engaging in probate avoidance mean that
my estate will not have to go through probate?

It is a common misconception that taking probate avoidance measures will negate the need for any form of probate. In many cases, probate administration will still be necessary even if one or more of the above-described methods is utilized. This is because the probate process serves a legal purpose beyond that of distributing the decedent’s assets to the beneficiaries. For example, probate is a method to settle the claims of creditors to the estate. Additionally, it is not uncommon for the decedent to leave property that was not subject to a probate avoidance measure, and this property must then go through probate. Finally, individuals may successfully challenge the decedent’s probate avoidance measures in a court of law, thus making probate necessary.

The primary goal of probate avoidance planning is to minimize the cost to the estate, maintain family privacy, and get as much of the assets in the hands of the beneficiaries as soon as possible. Whatever issues remain may be subject to probate, but the hope is that the effects will be minimal.

Does probate avoidance equal asset protection?

No! While it is true that some of the probate avoidance measures described above can also provide asset protection benefits, it is an error to equate probate avoidance with asset protection. For example, the formation of a revocable living trust is an excellent method of probate avoidance but generally provides no asset protection from creditors of the settlor either during the settlor’s lifetime or after their death. Although they may overlap at times, asset protection and probate avoidance are two entirely separate areas of law and should always be approached as such.

How can I determine what method of
probate avoidance is right for me?

The easiest way is to speak with a knowledgeable Florida estate planning attorney before making any changes. It is usually a very bad idea to start titling property or establishing trusts without consulting with a professional. Each of the methods described above can lead to legal results that may be either positive or negative, depending on the individual and their personal circumstances. Beyond probate, there are many other areas of the law that may apply to any transaction. For example, two big considerations in Florida are state taxes and Florida homestead. Thus, you should always speak with a Florida attorney before engaging in any probate avoidance measure as this can help avoid any unforeseen and unfortunate consequences.

Many of our clients are troubled when confronted with the possibility handing 3% or more of their family estate over to an attorney at a time when their families can use it most. Thankfully, Ourednik Law Offices is able to help them by recommending and implementing probate avoidance measures.

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