Author Topic: Minimizing probate hassles in Florida?  (Read 6090 times)

TomTX

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Minimizing probate hassles in Florida?
« on: July 23, 2014, 05:23:42 AM »
So, my parents have asked me to be the executor for their will. They live in Florida, and I understand the probate hassles can be... large. The estate will be split between the 3 children. I have been put as co-owner on a ~$10,000 account for handling immediate financial needs (funeral, etc.)

I'm looking for specific tips for things we can do in advance with the intent of reducing hassles.

So far, having them designate secondary beneficiaries "per stirpes" for IRAs and possibly setting up a trust are all I have really come up with. I really don't know much about setting up a trust.

I don't know how much is in the IRAs or other accounts. They live fairly frugally in a paid-off house. Tax records value it ~$250,000.

aj_yooper

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Re: Minimizing probate hassles in Florida?
« Reply #1 on: July 23, 2014, 05:47:56 AM »
Smart parents!

Consider getting yourself off the checking account and have it changed to a payable on death designation.  This protects you and your parents. 

Develop a list of your parents'  assets, liabilities, insurance policies (health, life, nursing home) and all financial accounts (credit cards, savings, credit union, loans,etc) and put it all in a binder that can be updated regularly; include all the regular expenses that are paid automatically or by checking too.  Include passwords for electronic accounts.   You might be able to set up a transfer on death real estate title for the house or a similar measure for vehicles.   Use the beneficiary options for financial accounts and any life insurance.

Do they have a will or living trust?  Do they a have power of attorney for health care, finances, and a living will/Five Wishes documents?

Doomspark

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Re: Minimizing probate hassles in Florida?
« Reply #2 on: July 23, 2014, 06:36:14 AM »
My *understanding* is that joint accounts will be frozen until the estate is settled, so you won't have access to that bank account.  Better for them to gift you the money and you set it aside for that purpose.  I don't know if FL estate law trumps a payable on death designation.

Make sure their will is up-to-date and specifically names you as executor.  And make sure you know where it is kept.  Ditto for all important paperwork, including powers of attorney. I'll reiterate the previously mentioned idea of gathering all pertinent information together (and keeping it updated).  Make sure it includes things like auto-renewing subscriptions and any bills that are automatically paid via direct debit.

Oh, and make absolutely sure that the deed for the house is free of encumbrances and that you know about any easements.

aj_yooper

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Re: Minimizing probate hassles in Florida?
« Reply #3 on: July 23, 2014, 08:18:07 AM »
The payable on death accounts appear to solve the possibility of a 'frozen account',  according to  legal zoom:  http://info.legalzoom.com/payable-death-statute-florida-22388.html

There is no payable on death real estate transfer available in Florida.

Workinghard

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Re: Minimizing probate hassles in Florida?
« Reply #4 on: July 23, 2014, 09:27:22 AM »
The payable on death accounts appear to solve the possibility of a 'frozen account',  according to  legal zoom:  http://info.legalzoom.com/payable-death-statute-florida-22388.html

There is no payable on death real estate transfer available in Florida.

In Florida it's called a Lady Bird deed. I'm in the beginning stages of getting one set up now. An attorney friend didn't know about it until I asked him. He contacted one of his attorney friends and she sent him the papers. We have to set up an appointment, but it sounds pretty straightforward.

Daleth

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Re: Minimizing probate hassles in Florida?
« Reply #5 on: July 23, 2014, 09:34:09 AM »
Have you guys seen a lawyer? The obvious way to avoid probate is to put everything in a trust, with you as trustee and 1/3 beneficiary (I'm assuming they want things split equally between the kids), but  only a FL estate lawyer can tell you if that is a good solution for their situation.

Mrs. PoP

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Re: Minimizing probate hassles in Florida?
« Reply #6 on: July 23, 2014, 09:44:03 AM »
Have you guys seen a lawyer? The obvious way to avoid probate is to put everything in a trust, with you as trustee and 1/3 beneficiary (I'm assuming they want things split equally between the kids), but  only a FL estate lawyer can tell you if that is a good solution for their situation.

Replying mostly to follow.  But trusts are REALLY common down here, so my gut says Daleth is onto something.

former player

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Re: Minimizing probate hassles in Florida?
« Reply #7 on: July 23, 2014, 10:08:14 AM »
The will needs to deal with one or other parent surviving the other.

Joint accounts between the parents should allow the surviving parent to access the money in the joint account without waiting for probate.  A payable on death account to the executor or a joint account between the parent and executor would provide immediate funds for dealing with the estate.

Depending on how the title to the house is held, all of it might pass automatically to the surviving parent or the deceased parent's share might pass through probate.  There was another thread where the parent's house wasn't sold and one child was living in it at the expense of the others, and the suggested solution was for the will to direct the house to be sold and the proceeds split according to the wishes of the parents as stated in the will.

Agree the per stirpes thing for grandchildren to inherit the deceased parent's share.

There might be specific reasons for setting up a trust which would help in Florida law.  If money is to go to eg grandchildren who are not yet of age, they might need a trust.  But in general, I'd rather avoid the complications of a trust unless there is a very clear need or advantage.

aj_yooper

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Re: Minimizing probate hassles in Florida?
« Reply #8 on: July 23, 2014, 11:01:59 AM »
The payable on death accounts appear to solve the possibility of a 'frozen account',  according to  legal zoom:  http://info.legalzoom.com/payable-death-statute-florida-22388.html

There is no payable on death real estate transfer available in Florida.

In Florida it's called a Lady Bird deed. I'm in the beginning stages of getting one set up now. An attorney friend didn't know about it until I asked him. He contacted one of his attorney friends and she sent him the papers. We have to set up an appointment, but it sounds pretty straightforward.

My understanding is that it is a life estate, not a tod:  http://www.nolo.com/legal-encyclopedia/lady-bird-deeds.html

Workinghard

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Re: Minimizing probate hassles in Florida?
« Reply #9 on: July 23, 2014, 01:28:28 PM »
It's not a traditional life estate. Here's a web site and some info. 
http://www.floridaprobatesolutions.com/florida-lady-bird-deed/


Florida Lady Bird Deed | Enhanced Life Estate Deed in Florida
A Lady Bird deed (called an enhanced life estate deed in Florida) is a relatively new form of deed that, like a traditional life estate deed, allows property to pass automatically to one or more designated recipients at death, without the need for Florida probate.  Florida is one of only a handful of states that recognize Lady Bird deeds.

How a Lady Bird Deed Works
Lady Bird deeds are used to avoid probate.  Here’s how it works:
You sign a deed transferring your real estate to a person or group of people (called the remaindermen or remainder beneficiaries) at your death, but retaining the right to sell, use, and otherwise deal with the property during your lifetime.

If you decide to sell, mortgage, or otherwise deal with the property during your lifetime, you are able to do so without the consent of the remaindermen (this is the difference between a life estate deed and a Lady Bird deed).

Upon your death, your remainder beneficiaries simply file your death certificate in the land records. This serves as proof of yours death and allows the property to be transferred to the remaindermen without the need for probate.

Note:  The issue of whether or not a deed is a Lady Bird deed is independent from warranties of title being conveyed.  In other words, a Lady Bird deed could be a quitclaim deed, warranty deed, or special warranty deed.

Advantages of Lady Bird Deeds over Traditional Life Estate Deeds
We’ve discussed the problems with traditional life estate deeds at length in our discussion of life estate deeds.  Perhaps the biggest drawback is the inability of the person who deeds the property to change his or her mind.  Once a traditional life estate deed is signed, the grantor cannot sell, mortgage, convey, gift, or otherwise terminate the remainder interest during his or her lifetime without the consent of the remainder beneficiaries.

Lady Bird deeds are intended to avoid this problem.  Like a traditional life estate deed, a Lady Bird deed  allows you to name someone to receive the property at your death while reserving the right to use the property during your lifetime. But unlike a traditional life estate deed, you are able to deal with the property during your lifetime, without the consent of the remainder beneficiaries.
Lady Bird deeds can allow you to:

Keep complete control of the property during your lifetime without requiring consent of the remainder beneficiaries;
Retain the right to use, profit from, or sell the property during your lifetime;
Avoid triggering the Federal gift tax on the transfer during your lifetime; and
Avoid probate of the property at your death.

Application of Florida Documentary Stamp Tax
The Florida documentary stamp tax applies to transfers of real estate by deed. The Florida Department of Revenue does not assess a full documentary stamp tax if the person who transfers the property is the same person that retains the life interest. Instead, the deed is only assessed a minimum documentary stamp tax at the time that the property is first conveyed.  If the property is not sold by the date of the grantor’s death, it becomes subject to full documentary stamp tax at that point.

Common Pitfalls of Lady Bird Deeds
Lady Bird deeds are easy to mess up.  Here are a few pitfalls to watch out for:
It is important that the document be drafted by a knowledgeable attorney.  If a mistake is made, the Lady Bird deed will not satisfy the Florida title insurance companies and will still require probate.  The deed needs to be drafted so as not to allow the property to end up back in your estate through lapse (prior death of a named remainderman) or otherwise.

Lady Bird deeds require special consideration if the property is subject to a mortgage.  The cost of Florida’s mortgage taxes should be taken into account when considering whether the Lady Bird deed is the most cost-effective alternative.

Lady Bird deeds must still meet the formalities required under Florida law for a deed to be valid.  Otherwise, the deed will not achieve your goals of transferring the property without probate.
Florida’s complicated homestead laws, including the restraint on alienation of a homestead, should be considered when dealing with Lady Bird deeds.

giggles

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Re: Minimizing probate hassles in Florida?
« Reply #10 on: July 23, 2014, 02:06:16 PM »
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TomTX

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Re: Minimizing probate hassles in Florida?
« Reply #11 on: July 23, 2014, 03:59:25 PM »
Thanks for the rapid and detailed responses!

There is a formal will, where I am named executor and other than some specific items (ie - my sister gets the dishes, I get the table) it is split 3 ways evenly.*

The will is not terribly recent, and my parents were talking about updating/redoing it.

There is a file drawer with all of the accounts, bills, cemetery plots, living wills, et cetera. While I know where the files are, my parents have retained them, other than giving me a copy of the living wills.

There is no mortgage on the house, and I am fairly certain the only easements are for utilities. It is a rural neighborhood, and they are surrounded by other home plots.

I have pointed them to floridaprobatesolutions.com


*Well, my brother owes my parents a sizeable sum of money and in the likely event he doesn't pay it back, that is to come out of his share. This is also supposed to be spelled out in the will.

Workinghard

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Re: Minimizing probate hassles in Florida?
« Reply #12 on: July 23, 2014, 05:22:39 PM »
One consideration, for us, was the cost basis on the house and potential capital gains tax if the home got held up in probate. There's no mortgage on the house and it would not be split among siblings. My brother, a multi-millionaire, prefers that it goes to me. There's no downside from my step-dad's perspective because he could sell it any time he wanted to and take the cash.

Prior to her death, my mom wanted to put me on the deed but that would have increased our capital gains tax.