Just about every area of the country has little estate law differences by state that only experts in that area are familiar with. Even on the big-picture level, though, there can be dramatic differences. Being aware of these differences, and knowing what works in which jurisdictions, is vital to developing a successful estate plan.
Estate Law Differences by State when Making a Last Will
A last will and testament is a very important legal instrument. With so much at stake, and the risk of fraud so obvious, legislatures have understandably enacted precise technical requirements for wills. The basics are often similar on the surface, with only a few subtle differences in the fine points. Getting the details right based upon estate law differences by state is critical, though, because a will that is valid in one state might be wholly ineffective in another.
When it comes to estate law differences by state, states like Florida use a strict approach—what might otherwise be a relatively minor technical defect can render a will completely invalid. Whereas other states, like California, have a more relaxed approach that focuses more on giving effect to a decedent’s intent and wishes.
Both Florida and California generally require a valid will to be executed by an adult of sound mind and signed by at least two witnesses. California, though, also recognizes “holographic wills.” A holographic will is written and signed in the testator’s own handwriting and can be a valuable tool in an emergency situation when there isn’t time to prepare a proper will. In Florida, a holographic will is invalid unless it also meets all of the requirements for a standard will.
Another will that can be useful in emergencies, the “nuncupative will” (or simply “oral will”) is based on verbal statements made by the testator in the presence of more than one witness—usually in a near-death situation. Only a small number of states (including New York, but not Florida or California) recognize nuncupative wills. Even then, their application is typically limited to soldiers in armed conflicts or sailors while at sea.
One interesting aspect of estate law differences by state in California, is that the legislature provides a basic, fill-in-the-blank will template that’s always valid if completed correctly. This can be helpful for people who have relatively simple estates and don’t need to get too technical in their estate plans. In Florida, you either meet all statutory requirements, or you don’t have a valid will.
Estate Law Differences by State in the Probate Process
The probate process in Florida, California or elsewhere, can range from the quick, inexpensive, and relatively painless to the costly and seemingly never-ending. Much of that depends on the size and complexity of the estate, how well-planned it is, and whether it gets tangled up in litigation. But the process as a whole is much easier in some states than others. And some jurisdictions allow a streamlined procedure for less complex estates. A simple estate in a state with a straight-forward process can sometimes be administered within a few months. A complex estate administered in a jurisdiction with more byzantine probate rules might go on for years.
The costs of administration—including filing fees, attorney’s fees, and everything in between—can be dramatically different between jurisdictions. In California, the fee for opening a probate estate varies by county but is usually around $400 – $500, which is on the expensive side as initial filing fees go. California’s high probate costs in general are enough to convince many estate-planners to try to keep assets outside probate. Florida courts charge about $230 for filing, and attorney’s fees are measured on a statutory sliding scale based on estate-size brackets that mechanically work similarly to the income tax.
Speaking of taxes, the executor of an estate in Florida and elsewhere needs to pay out any taxes owed by an estate before making distributions to beneficiaries. Regardless of the jurisdiction in which they’re administered, large enough estates have to pay federal estate taxes. A dozen or so states (notably including New York and Massachusetts) also impose an estate tax on the state level, usually with a threshold lower than the federal version. Neither Florida nor California currently charge estate taxes, though the concept has some support in the California legislature.
Many estates also have to file an income tax return for income earned in the decedent’s final year. In relatively high-tax jurisdictions (such as California) taxes can have a notable impact on an estate’s expenditures and, as a result, on the amounts beneficiaries eventually receive. A few states, like Florida, don’t charge any state income tax, but, of course, the federal version still applies. It’s not uncommon for the executor of a large estate to have to file three or more different tax returns on an estate’s behalf, depending in part on the jurisdiction.
Non-Probate Assets
Avoiding probate is a common estate-planning goal and yet the probate process, if required, involves very critical estate law differences by state. In general, along with saving time and money and avoiding publicity, non-probate transfers are often more efficient in general. If your estate plan involves transferring assets outside of probate (as so many do), you’ll find that many strategies—such as POD or beneficiary designations, joint ownership, and living trusts—are available in most jurisdictions. Transfer-on-death (TOD) deeds and titles, though, are only recognized by a minority of states including Florida and California.
TOD deeds in Florida and elsewhere, if allowed, provide that real estate may automatically transfer to a named beneficiary upon the original owner’s death. About half of states (including California) recognize them; Florida does not. Florida and a few other jurisdictions do recognize “enhanced life estate” deeds (a/k/a “Ladybird deeds”), which allow an owner of land to reserve a life estate and name a remainderman to accede to the property at death without probate. Ladybird deeds avoid granting a present interest to the remainderman, which preserves the owner’s right to transfer the property in full.
TOD vehicle titles work in essentially the same way as TOD deeds except that, instead of naming a beneficiary on a real estate deed, you’re naming a beneficiary on a vehicle’s title. It’s a convenient approach that keeps a car useful instead of being tied up during probate. Around one-third of jurisdictions allow TOD vehicle titles. California and Texas are among them. Florida and most of the other states in the Southeast are not.
Intestate Succession
If someone dies without a will, he or she is “intestate.” Intestate estates in Florida and elsewhere rely on state statutes to determine where assets end up. Pretty much every jurisdiction bases intestate succession on decreasing degrees of kinship, in one form or another. A Florida surviving spouse’s rights if no last can depend on whether the deceased spouse had children. receives the entire estate unless either spouse has children with someone other than the surviving spouse. If there isn’t a surviving spouse, an intestate estate is split evenly among the decedent’s children. When there are children from another relationship and a surviving spouse, the surviving spouse receives half of the estate, and the decedent’s children split the other half. If there’s no spouse or children, the estate is distributed to parents, then siblings, and so on.
There is some variance among states as to the precise order of priority among heirs, but Florida’s system is fairly typical. However, when it comes to dividing wealth among members of inheriting generations (and especially decedent members of inheriting generations), an individual jurisdiction’s system can make a very significant difference.
The two basic approaches are called “per stirpes” and “per capita.” A state like Florida that uses a “per stirpes” system allows inheritances to pass through a “right of representation” if an heir predeceases the intestate decedent. So, for example, say a decedent had two children, each of whom stands to inherit half of the estate. If one of the children died before the decedent, the predeceased child’s children (the decedent’s grandchildren) stand in the place of their parent when the estate is distributed. If there are two grandchildren, each receives one-half of the predeceased child’s one-half share (or one-fourth of the estate to each of the two grandchildren). If there are three, they each receive a third of the half (one-sixth of the total estate), and so on.
In a “per capita” system, on the other hand, assets are divided equally among the nearest kinship class of which a member is still living. So, if a decedent had three children, but two have already died, the surviving child receives a one-third interest, and the remaining two-thirds passes to the decedent children’s children, who all receive an equal share of the two-thirds (even if one of the decedent heirs had more children than the other).
Per capita distribution is sometimes modified (usually by will) so that the pool of beneficiaries includes more than one generation. For instance, a will might divide assets among all surviving issue (direct linear descendants), per capita. Under this approach, if the testator had two children and three grandchildren, they would all receive a one-fifth interest.
California probate law uses a modified system typically called “per capita with representation.” As with standard “per capita” distribution, the estate is divided into equal shares among the members (living and dead) of the closest generation with a living member. Living members receive their shares, and a deceased heir’s share descends to his or her heirs under the same system until the entire estate is allocated.
As an example, say there are three children—a surviving daughter, a deceased daughter, and a deceased son—and the two decedent children had two and three of their own children, respectively. Under California’s “per capita with representation” system, the surviving daughter receives one-third, the decedent daughter’s children split her one-third equally among the two of them (one-sixth of the total estate each), and the decedent son’s three children split his one-third (one-ninth of the total estate each).
Remember, intestate succession laws only apply to assets that actually pass through probate. That excludes retirement accounts with named beneficiaries, land held in joint tenancy or under a TOD deed, and assets held by a trust. And, in community property states like California, intestate estates can sometimes be significantly simpler to administer when most or all of the decedent’s assets qualify as community property.
California is a Community Property State
Common Law vs. Community Property States
In “common law” states, property is assumed to be owned by an individual (even if that individual is married) unless there is some sort of title or deed that says otherwise. Property owned by one spouse cannot be attached by the other spouse’s creditors (for the most part). And a spouse is free to distribute assets by will however he or she pleases, subject only to statutory spousal shares designed to protect surviving spouses from complete disinheritance. Common law jurisdictions, including Florida, make up the vast majority.
In states with a “community property” system, notably including California and Texas, assets owned by a married person can be either community property or separate property. Community property, which consists of assets acquired during the marriage and commingled assets, is considered as jointly owned by the couple. Separate property—which consists of assets acquired prior to the marriage and gifts or inheritances to a specific spouse—is treated basically like property owned in a common law state. This makes a huge difference in estate planning because a decedent’s interest in community property automatically transfers to the surviving spouse. And in California, by filing a Spousal Property Petition, a surviving spouse can inherit all rights to the community property with only minimal involvement of the probate court, saving substantial time and money.
California law also recognizes a special class of joint ownership only available for married couples called “community property with right of survivorship.” This form of ownership, which has only been available since 2001, allows married couples and registered domestic partners to enjoy the convenience and probate-avoidance benefits of joint tenancy with the tax advantages of community property.
Spousal Shares
A spousal share is a special, legislatively created inheritance right vested in a surviving spouse and that often supersedes a will. The guaranteed interest is not the same in every state, but most states provide spousal shares in one form or another. Even in some community property states, surviving spouses are guaranteed an interest in a decedent spouse’s separate property.
Florida’s constitution refers to the interest as an “elective share” and guaranties a surviving spouse at least 30% of a deceased spouse’s estate, even if a will says otherwise. And, importantly, when calculating the 30%, the estate includes non-probate assets like property held in a living trust or as a joint tenant. The surviving spouse can disclaim the elective share (hence “elective”) if, for instance, it would interfere with an estate plan designed to minimize estate taxes. Otherwise, though, a spousal share is intended to provide a means of support for a surviving spouse inadvertently or intentionally left out of a will.
“Trusts and estates” is one of the most interesting and practical areas of the law. But, let’s face it, it’s also one of the most intellectually challenging, especially when you consider just how different estate laws can be from one state to another. A strategy that looks brilliant in one jurisdiction could result in disaster if attempted in another. Experienced estate planning attorneys in Florida and California focus on the laws of the jurisdictions in which they practice. This specialized knowledge is invaluable when navigating through the statutory weeds, avoiding unintended consequences, and identifying the best approach for an individual client’s situation and jurisdiction.
Steve Gibbs, Esq.
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