When someone dies, assets titled just in the decedent's name without beneficiaries are frozen. No one can sign the deceased person's name on checks, deeds, etc. A Power of Attorney does not help, since it is effective only while the creator is living. It is similar to an employer – employee relationship. If an employer goes out of business there are no employees. The will by itself does not transfer property to the heirs. An order from the Probate Court is needed to access assets in the decedent's name.
The process where property is transferred from the decedent’s name to beneficiaries is called “Probate”. The word “Probate” essentially means "to prove.” In this process the Probate Court must be shown that everything is proceeding in accordance with Florida Statutes and Florida Probate Rules.
If the decedent left a Will it is called “Testate Probate”. When there is no Will, it is called “Intestate Probate” and Florida Statutes determine who will receive the decedent’s probate property. A surviving spouse receives the entire estate if there are no children or if all children are from the marriage of the decedent to the surviving spouse. If either the decedent or the surviving spouse has children who are not from the marriage, the surviving spouse gets one-half of the probate estate. The portion not going to the spouse (or the entire estate if there is no spouse) goes to the decedent's descendants (children, grandchildren, great-grandchildren). A deceased heir's share passes down to his/her children. If there are no descendents the statutes further define how it goes to parents, brothers and sisters, nieces and nephews, and if none, to grandparents, aunts and uncles.
The types of probate are also classified as either Summary or Formal. “Summary Administration” is available when the assets total less than $75,000 in value and there are no creditors. Two years after the date of death, creditors’ claims are barred and Summary Administration can be used regardless of the estate’s value. In this abbreviated process the court does not appoint a Personal Representative (executor). Rather than a series of court actions there is simply a petition to the court and a court order directing distribution of the assets directly to the beneficiaries.
When there is no real property, some small estates may qualify for a process called “Disposition of Personal Property Without Administration”, which is designed to eliminate the need for an attorney. Information on this process and the forms are available from the Brevard County Clerk’s office.
When the requirements of “Summary Administration” or “Disposition of Personal Property Without Administration” cannot be met, “Formal Probate” will be required. Here the court creates a legal entity (like a corporation) called the “Probate Estate” to take the decedent’s place and hold the decedent’s assets. A Personal Representative (executor) is appointed to collect the assets, pay the decedent's bills and taxes, and account to the beneficiaries. If there is a Will the first step is to petition the court to have the Will admitted to probate and the Personal Representative appointed. If there is not a Will, Florida Statutes set forth an order of preference for whom is appointed Personal Representative.
Once the court issues “Letters of Administration”, the Personal Representative will: 1] File an Inventory of assets with the court, 2] Obtain a Tax Identification Number (EIN) from IRS (since the decedent’s social security number can no longer be used to report income), 3] Open an estate account using the EIN, and 4] Publish Notice to Creditors in the newspaper and mail the Notice to known creditors.
The Personal Representative has responsibilities to the court, the creditors, the Internal Revenue Service, and the beneficiaries. Known creditors are mailed a notice advising that they have 30 days from the receipt of the notice to file a claim with the court. Other creditors have three months from the date of publication of the notice in the newspaper to file a claim with the court. A claim is barred if not filed within the time alloted. If a questionable claim is filed, the Personal Representative can file an objection with the court. As creditors’ claims are paid, satisfactions are obtained and filed with the court.
Not all assets are subject to creditors’ claims, including $20,000 in furniture and appliances, plus two motor vehicles. When the home is going to certain relatives the court can determine that it is “protected homestead“ free of most creditor claims. However, the home is still subject to mortgages on the property, IRS liens, liens for work performed on the property, and real property taxes. Two years after death all claims are barred.
The Personal Representative files a 1040 individual tax return with IRS for income received by the decedent while he/she was living. Income received by the estate after the decedent passed away is reported on a 1041 Fiduciary Tax return using the estate’s tax identification number (EIN). The Personal Representative may be personally responsible for the taxes if not paid by the probate estate.
The Personal Representative has a “fiduciary” responsibility to the beneficiaries and must act solely in their best interest. Being entrusted with someone else's property, fiduciaries are held to the highest legal standards. Beneficiaries have a right to receive a copy of the Will, Notice of Administration, Letters of Administration, the Inventory, the Accounting (showing what has occurred since the Inventory of property at the date of death to the time of distribution), and the Petition for Discharge. If there are concerns, they can file objections with the court.
Administration expenses are incurred in probating an estate for court filing fees, publication of the notice to creditors and attorney’s fees. Florida Probate Rules require that every Personal Representative be represented by an attorney unless he/she is the sole interested person. Fee schedules are set forth in the Florida Statutes. With an estate between $100,000 and $1 million, the suggested fees for the attorney as well as the Personal Representative are 3% of the gross assets.
When there is real estate in another state “Ancillary Probate Administration” will be required in that state to transfer the real property. Some states have inheritance or estate taxes on property located in that state. Although Federal Estate Taxes are paid only on amounts over $5,450,000, ($10,900,000 for both spouses) these state taxes may apply regardless of the value of the property.
When everything runs smoothly Formal Probate will take around six months from the time the Petition for Administration is filed with the court. However, problems can be encountered that increase the amount of time and expenses involved. Because of the cost and inconvenience some people look for means to avoid probate. One commonly used way is with a Revocable Trust (Living Trust) which is the next subject of discussion on this web site.