There’s no one-size-fits-all estate plan in Florida. Factors like your marital status and the ages of your children (if any), the complexity and size of your estate, and your personal goals and preferences can all make a huge difference in deciding on the right strategy.
For some folks, a tried-and-true Florida Last Will & Testament identifying assets and heirs is the best approach.
Complex estates, in contrast, may find that the optimal strategy includes a combination of a will and one or more trusts.
Some simple estates, on the other hand, might be able to rely on intestate succession, where no will is present and assets descend according to the laws of the State of Florida.
All of that said, the strategy adopted and documents used are always related to today’s topic, which is planning for the smooth transfer of estate assets in Florida (or wherever the assets are located).
The Administration of Estate Assets in Florida
The precise process of administration for the transfer of estate assets in Florida varies according to the assets involved and the estate-planning strategy used. In general, though, when a will is present, an executor appointed under the will inventories the estate’s assets in Florida, reviews and pays creditor claims as appropriate, and then distributes assets to the designated heirs. Intestate estates are administered by a ‘personal representative’ rather than an executor, but the basic outline is the same – inventory property, pay creditors, distribute assets – all under the supervision of the probate court. Assets held in a living trust skip probate and are distributed by a trustee according to directions set forth by the grantor in the declaration of trust.
Defining Assets in a Florida Estate
Of course, one of the most important – and occasionally overlooked – considerations in developing a proper plan for the transfer of estate assets in Florida is exactly what kinds of assets will be in your Florida estate. Different asset classes transfer in different ways, and some have options for transfer not available to others. So, planning ahead and tailoring your strategy to your assets is critical to an effective estate plan allowing for as smooth a transition as possible.
Real Estate Asset Transfers in Florida
Ownership of real estate in Florida (or “real property,” or “land”) is granted by a deed recorded with the land records of the county in which the property is located. When you purchase a property, the seller executes a deed officially acknowledging the transfer. Accordingly, to transfer real property from an estate to an heir, the executor issues and records a deed of transfer in the name of the new owner(s). If the property was held in a trust, then the trustee will issue the deed to the new owner as directed in the declaration.
Significantly, though, Florida law recognizes alternate ownership interests in land that can be used to effect a transfer without probate. A “life estate” is an ownership interest that automatically terminates upon the owner’s death. So, for instance, to transfer a property to your nephew, you could record a deed under which you reserve a life estate in the property with the remainder passing to your nephew upon your death. You would still own the property for all intents and purposes for the rest of your life, but when you pass away, title vests in your nephew without the need for probate.
Land can also skip probate through a “right of survivorship” between two owners. When a property is held by two owners as standard “tenants in common,” they each own a percentage of the title. When one dies, the decedent’s percentage passes to his or her heirs because there is no right of survivorship. With a property owned by two people as joint tenants, however, title automatically vests in the surviving owner upon the other owner’s death. This right of survivorship allows the property to pass outside of probate because, upon the owner’s death, the deceased owner’s interest ceases.
A tenancy in the entireties, which can only be held by spouses, also includes a right of survivorship, along with important protections against creditors provided by Florida law. If a married couple jointly own land as tenants in the entireties, the complete title vests in the surviving spouse upon the other’s death. Tenancy in the entireties and joint tenancy both offer a method of seamlessly transferring real estate upon the death of one of the owners – avoiding probate and the risk of dilution. But, of course, the approach is only useful under the appropriate circumstances.
Transferring Personal Property with Titles in Florida
Don’t forget about personal property which is an important part of coordinating the transfer of estate assets in Florida. There are 2 types of personal property which are assets WITH and WITHOUT TITLES.
The category of assets with titles in Florida includes vehicles, boats, and other tangible personal property that comes with a legal document officially recognizing the owner’s title to the property. If only one name is on the title, completing a transfer is fairly straight-forward. If, for example, a vehicle was bequeathed by will to the decedent’s brother, upon death the executor and inheriting brother simply apply to the Florida Department of Highway Safety and Motor Vehicles for a new certificate of title. In many cases, Florida law allows for transfer of vehicles outside of probate proceedings if the estate is solvent and the required documentation is submitted.
If two names are on the title, the process depends upon whether the title includes a right of survivorship. Florida law identifies a right of survivorship on vehicle titles by using “or” in between the two owners’ names (e.g., “John Smith or Jane Smith” vs. “John Smith and Jane Smith”). If the title includes a right of survivorship, ownership automatically passes to the surviving owner upon the death of the other. Otherwise, an application for new title submitted by the surviving owner and the executor (on behalf of the decedent) is necessary to complete the transfer.
Transferring Personal Property without Titles in Florida
Personal property WITHOUT TITLES in Florida can be bequeathed via line items in a will, a residual bequest bestowing all property not otherwise addressed, or by incorporating a “personal property memorandum” within a will. The memorandum lists specific items and identifies the heir who will receive each item. For particularly valuable personal property, like expensive jewelry or antiques, it can be a good idea to have the executor prepare an “assignment of ownership” officially acknowledging the transfer to the heir when it occurs. For inexpensive mementos and knick-knacks, a formal assignment is not necessary, but it is a good idea for the executor to carefully track who receives what and when they take possession.
An executor, also referred to as a Personal Representative in Florida is usually empowered to sell estate property not left to a specific heir and to distribute the proceeds, or to give away or donate to charity property that the executor does not believe is valuable enough to warrant a sale.
Personal property can also include intellectual property (copyrights, patents, etc.) owned by the decedent and don’t forget about digital assets in Florida such as websites and social media accounts. If not specifically given to an heir, the executor will be empowered to determine how best to use the intellectual property for the estate’s benefit. For valuable IP that earns regular royalties, creating a trust to hold patents or copyrights overseen by a trustee can be a good strategy to provide for heirs while ensuring that valuable intellectual property is wisely administered.
Transferring Bank Accounts and CD’s in Florida
Financial assets are also an important part of coordinating the transfer of estate assets in Florida. Upon the opening of an estate, the executor or personal representative will usually open a bank account in the estate’s name. The trustee can then transfer balances from the decedent’s other checking or savings accounts to the estate account and use the funds to pay estate administration costs, taxes, and creditor claims. Any funds left over are distributed to heirs when the estate is ready for closing. If a CD is close to maturity, the executor can wait till the maturity date and then transfer the funds to the estate account. Otherwise, the executor can withdraw the funds and incur the early withdrawal fee or execute an assignment of certificate of deposit in favor of the appropriate heir.
Alternatively, bank accounts held jointly become the property of the surviving account-holder automatically upon the other’s death. Thus, a checking account held in the name of a husband and wife jointly would become the wife’s sole account upon the husband’s death. Similarly, a POD (“payable on death”) designation on a financial account or CD allows the account or CD to pass directly to the designee and avoid probate.
Transferring Retirement Accounts and Other Investment Accounts in Florida
Retirement accounts are often among the most valuable assets to consider in coordinating the transfer of estate assets in Florida. Most retirement and investment accounts allow the account-holder to designate a beneficiary to take title to the account upon the holder’s death. This can be particularly beneficial with qualified retirement accounts, such as Florida IRA’s and 401k’s and even Florida 529 Plans, because spouses can often roll over the account into their own retirement accounts, thereby avoiding immediate tax liability. Otherwise, beneficiaries can choose between accepting distributions within five years or in regular intervals throughout their life expectancy.
If an account does not have a beneficiary, it becomes an estate asset upon death and is administered by the executor in accordance with the terms of the will. If the executor needs to cash out a qualified account, the decedent’s final income tax return will include the previously deferred taxes.
For individual stocks or other securities, the executor can sell the security to fund the estate or transfer it to the appropriate heir via an amended share certificate. Inherited property in Florida receives a step-up basis in Florida for capital gains tax purposes, so an heir’s future taxable gains are based on the value at the time of inheritance rather than the value when acquired by the decedent. Florida law also recognizes TOD account (“transfer on death”) designations for securities, which can avoid both probate and the need to liquidate the asset.
Life Insurance Ownership and Transfers in Florida
Life insurance may be transferred either by designating the beneficiary upon death, or moving the asset into a separate entity during lifetime, and both options should be considered in coordinating the transfer of estate assets in Florida.
If a life insurance policy insuring the decedent’s life is payable to a third-party beneficiary, the insurance company pays the proceeds to the beneficiary independently of the decedent’s estate. If the policy is payable to the estate, the executor receives the funds as estate assets like other cash payments. This is a strategy frequently used to provide liquidity for administration costs, taxes, and creditor payments. Life insurance in Florida can also be set up so that it is payable to a Florida irrevocable life insurance trust (“ILIT”) and does not become part of the estate, in which case the cash in the trust will be distributed by the trustee according to the directions set forth in the declaration of trust.
Transferring Ownership Interests in Florida Business Entities
Business entities are often a forgotten asset when it comes to coordinating the transfer of estate assets in Florida, and this can lead to needless complications. A decedent’s ownership interests in a Florida LLC or corporation can generally be passed by will or trust like other assets. However, a small business in particular may restrict transfers in its articles of organization. Along the same lines, a buy/sell agreement among owners may require that, upon an owner’s death, the entity itself or the other owners purchase the decedent’s interest from the estate. Often a buy/sell agreement in Florida will include a predetermined purchase price or formula for calculating it. In that case, the purchase amount will be paid into the estate, administered by the executor, and distributed to heirs when the estate is ready for closing.
Because the form in which assets are held can make a big difference in the effectiveness of an estate plan, it’s important to plan ahead so that asset titles complement the overall strategy. An experienced Florida estate-planning attorney can help you decide on an approach that provides for the smoothest possible transitions with the greatest benefit to your heirs.
Steve Gibbs, Esq.