Charlotte Edition


By James W. Mallonee

AVOID PROBATE? I have many clients who ask me how to avoid probate.

The simple answer is, in Florida to avoid probate you have to have your assets not be in your individual name at death. Once that gets explained, I get asked bow to do that? That answer will be different for different assets.

Real estate is the usual reason why beneficiaries to an estate have to go through probate. The reason for this is because of the need to address the creditors of a decedent. The U.S. Supreme Court ruled that failing to give creditors the right to file a claim deprives them of due process. For example, before a buyer of a decedent’s property takes possession, he or she will generally order title insurance. Most title insurance companies will not issue a title policy unless an estate goes through probate giving creditors notice of a decedent’s death and the ability to file a claim against the decedent. This is accomplished by publishing in the paper informing the world of the death of a person, the probate case number and county where a claim can be entered. When this occurs creditors will have 90 days from the first date of publication to file a claim. Under Florida law, all credi­tors of a decedent are barred from making a claim against an estate following two ye.ars after a decedent’s death, regardless of whether an estate files for probate or not. Thus, to get a title insurance company to issue a title policy requires a notice of death to be published in a local paper or waiting two years after death.

However, by making the property a future interest in a person or entity, then at the moment of death something magical happens at the twinkle of eye; the beneficiary takes ownership without going through probate. It’s called a life estate or enhanced life estate. The benefi­ciary of the life estate is called a remainderrnan whose interest in the decedent’s property is called a vested interest. The idea is that the real property is placed into the name of the decedent who then deeds the property to themselves for their life and upon death, the property immediately vests in the name of the remainderman.

There are two distinct versions of a life estate; the life estate or an enhanced life estate (also known as Lady Bird Deed). In most cases, the enhanced life estate is preferred because it gives the life tenant the same levels of control they enjoyed when they owned the property outright. For example, when you own your property outright, you can sell it, lease it, keep the profits gained from it upon it being sold and if you did not want to pay the property tax on the property you could just ignore paying the taxes. In addition you received homestead protection and tax savings. With an enhanced life estate, you can do all of that, except you cannot commit waste to the property.

Waste would be considered not paying the taxes, insurance or mortgage or cutting down all the timber on the property without replacing it as well as allowing the property to go into disrepair. As a standard life estate, the life tenant is unable to partition the property and if the life tenant desired to take out a mortgage, he or she would have to get the beneficiary (remainderman) to consent to the encumbrance. Furthermore, a standard life estate cannot be sold without the consent of the remainderman. This is cause for frustration and lack of interest in a standard life estate.

All of that changes when you have an enhanced life estate. The body of an enhanced life estate deed will contain powers that are reserved to the life tenant. Examples are the exclusive possession, use, enjoyment of the rents, profits, right to sell and convey, mortgage, pledge, lien, lease, gift including terminate the interests of the remainderman. In essence, the enhanced life deed continues to allow the life tenant to enjoy the property in any manner they wish except the commission of waste. Thus, unlike a standard life estate, the enhanced life tenant can sell the property and keep the proceeds. At death, the property immediately transfers to the remainderman (assuming the life tenant did not already sell it). All the remainderman needs to do is record a death certificate in the county records where the property is located.

What about my bank accounts? To avoid probate with bank accounts, all you need to do is have your bank change your accounts to a pay on death or transfer on death type account. These are known as “POD” or “TOD” type accounts. At your death, the beneficiary of the account goes into the bank who is holding the account and presents an officer with a certified death certificate, the amount of the proceeds due a beneficiary will be delivered to him or her.

This is also true for IRA’s, life insurance and annuities where a beneficiary designation has been named in the application. To collect, all the beneficiary has to do is go online, down load the claim form, complete it, and send it back to the company along with a certified death certificate showing the cause of death. This also works with stock portfolios, as long as the account is set up as a POD or TOD type of account.

Many of my clients are under the impression that by placing your property into a trust you will avoid probate. That is not absolutely true in Florida because of the need to notify a decedent’s creditors of his or her death giving the creditor the ability to file a claim against the estate. So don’t be misinformed about trusts, they are not the perfect solution.

As you can see, if your objective is to avoid probate at death, talk to the attorney of your choice about your assets and discuss a plan to re-title your assets to meet your objective. Just remember that all plans are not perfect and you may need to be willing to give up some independence when implementing your objective.

This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship.

James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.

In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.

His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.

James W. Mallonee, P.A.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224

871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223

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