The majority of adults in the United States have not made any plans for leaving their property to their friends and relatives upon their deaths. For the few that have taken this step, the time-tested Last Will and Testament is the document most used. While the Last Will and Testament may be the best document to use in other states, in Florida that may not be so, due to a judicial administrative process here called “Probate.”
In Florida, when a person disposes of his or her property at death by using only a Last Will and Testament, or if a person dies with no Will at all, all property held by the decedent that does not have a beneficiary designation (e.g., IRAs and life insurance), is not held as “joint tenants with right of survivorship”, or as “tenants by the entireties” (only husbands and wives can hold property this way), or is not held in an account with an “in trust for” or “pay on death (“POD”)” or “transfer on death (“TOD”)” designation, must go through a process known as probate. Most persons living in South Florida know that they want to avoid the probate process, but many are not sure of the reasons “why”. The information that follows will help to clarify those reasons.
In Florida, the person named to carry out the terms of your Will, after death, is called a Personal Representative. You may have heard the term “Executor” before; this is the name for the same job title in many other states. After your Personal Representative (PR) takes an inventory of all of your assets, he or she will have your Will “admitted to Probate” (the process whereby the Court formally accepts your Will) and this process becomes part of the public record. Following this step, a notice will be placed in the newspaper notifying your creditors of your death and giving them ninety (90) days to make a claim against your estate (known as the “creditor period”). During the creditor period, your PR will determine the exact value of all of your property, and, in theory, after the period has ended, the estate can be closed.
For these duties, your PR is entitled to approximately three (3%) percent of the value of your estate, and so is the attorney who provides legal counsel for your PR, totaling six (6%) percent of the value of your estate. These figures are set by the Florida Statutes. For a modest $200,000.00 estate, these combined fees, or six (6%) percent, would be a minimum cost to your estate of $12,000.00. However, the fees oftentimes go higher because the Court approves the majority of requests for additional fees for providing additional services not covered by the Statute. Most people prefer to avoid these fees.
In addition to the easily calculable cost of probate, the hypothetical quick closing of the estate I just described rarely happens. More typical are periods from six (6) months to two (2) years, depending on the complexity of the assets owned and the cooperation of the various persons and institutions involved. This waiting period is also something that most people would prefer to avoid.
As part of the probate process described above, the Probate Court will grant your PR the authority to re-title your assets in the name of the persons you have named in your Will (as bequests or devises).
Contrasting the Probate process described above, with the use of a Revocable Living Trust (RLT) established during your life, the latter document eliminates the need to seek authority from the Probate Court to retitle your assets after your death. If a RLT is established, and if the RLT has been properly funded, the Probate process may not be needed. If this is the case, much time and money can be saved, however, please remember that the use of a RLT may assist with saving probate fees. In cases where a Federal Estate Tax is applicable, a tax will be due on all assets transferred during life or upon death which exceed the exemption amount in effect at the time of your death, unless Congress were to otherwise eliminate or modify this. In certain cases, other techniques may be used within your RLT to reduce or eliminate the Federal Estate Tax.
When drafting an RLT, we also draft a special kind of Will called a Pour-over Will as part of our Estate Plans for both individuals and married couples who wish to reduce or eliminate the Probate process following death. This special kind of Will together with your RLT will provide instructions for your PR to transfer to your RLT any assets you may have neglected to transfer during your life. While some “left-out” assets may require a small Probate, the property will be distributed to your RLT beneficiaries as you instructed. Additionally, all our Estate Plans include the following documents: Assignment of Personalty, Separate Writing document, Durable Power of Attorney, Living Will and Designation of Health Care Surrogate.
If you own real property, whether located in Florida or in another state, a new Deed will need to be drafted for each parcel of real property you own, in order to retitle that property in your name, as Trustee of your Trust. A Florida Deed is also included in our Estate Plans. Any exemptions you have on the property will remain, and you will continue to have the same rights, including the right to lease, mortgage, or sell without the need to obtain permission from any beneficiary.
What are some other advantages of a Revocable Living Trust? During your life you are the Trustee of your RLT and continue to manage your assets (if married, it is possible that you and your spouse may both serve as Co-Trustees), and, no special tax returns need to be filed. Also, a properly structured RLT will also allow the person you have designated as your Disability Trustee to manage all the assets funded in your Trust during any time in which you are disabled or ill; this feature avoids the concern and potential need for an involuntary, costly Guardianship proceeding on your behalf, in the event of a disability due to an unexpected illness or accident – this arrangement cannot be made when using a Last Will and Testament alone. Another benefit of an RLT is that unlike the Will of a decedent, which becomes part of the public record, a Trust can remain private. In addition, your RLT may be amended or revoked at any time, provided it is done in accordance with Florida law. At death, your RLT becomes Irrevocable, and the person you named as your Successor Trustee(s) cannot change the terms of the Trust.
In summary, a Revocable Living Trust is an investment made at present that can make your everyday affairs more manageable during your lifetime in the event of a disability, should that become necessary. It is also an investment that will significantly ease the handling of your affairs following your death, as it allows you not only the ability to provide instructions for final distributions to your beneficiaries following your death, but also allows the option for you to provide instructions for interim or periodic distributions for the care and benefit of your loved ones over an extended period of time should you wish to do so.