Probate Formal Administration

This week, I will walk us through the steps necessary to open and eventually close a formal administration of probate. I will attempt to offer a simplified explanation of the probate process, keeping in mind that West’s 2008 Probate Code and related laws and court rules are over 850 pages, plus an index of 160 pages.

 

If the decedent’s assets do not qualify for summary administration, or the will directs formal administration, or there are issues such as keeping the homestead free from creditor’s claims, elective share issues, federal estate tax obligations, then the attorney will have to commence formal administration for large estates. Formal administration may also be necessary where a life insurance product names the estate as beneficiary or where assets cannot be located and banks require the letters of administration issued in formal administration in order to avoid a confidentiality issue for their deceased client.

 

Commencement of the estate is done by the attorney preparing a petition for administration, which is filed with the probate court in the county of the decedent’s death, together with a certified short form death certificate. The long form can be purchased when a life insurance company, for example, requires the form to list the cause of death. Cause of death is normally nobody’s business, but may be grounds for the insurance company to contest payment of the claim.

 

The petition, among other things, must inform the court of the decedent’s death, the decedent’s residence at the date of death, even though he may have died elsewhere on vacation, and Social Security number, and lists his spouse, if any, and his next of kin. It also states the name of the person nominated as personal representative, if qualified, and a list of assets or general nature of the assets, and whether a federal estate tax return will have to be filed. Tax matters at death are so complicated that I decided to devote next week’s article to that.

 

The attorney must also prepare an oath of personal representative to promise the court that the nominee will diligently and faithfully administer the estate. The oath, signed before a notary, must include a designation of resident agent, who must be a resident of the county where the estate is pending. The agent, who is typically the attorney for the estate must sign accepting this designation. Anyone suing the personal representative, either in its representative capacity or in his individual capacity, for claims arising out of the estate, may serve papers on the attorney as agent for service of process.

 

Once all papers, together with suggested orders prepared by the attorney for the judge’s signature, and together with a court filing fee of approximately $285, are submitted to the clerk of the probate court, the judge will review the file and may request a hearing. If everything is in order, the judge will sign the Letters of Administration, of which the attorney will purchase, from the clerk, multiple certified copies. The court may require a surety bond be purchased from an insurance company in an amount the judge deems fit, which the attorney must arrange. Sometimes the attorney can obtain the waiving of the bond, but the bond is a good protection so that the estate will be reimbursed by the insurance company if the personal representative does not do the right thing.

 

Often, the relatives are told by the bank all they need to cash out the account is a letter of administration, but understanding the whole process shows it is not that simple. The Letter of Administration is a form prepared by the attorney that orders and authorizes any person with assets or financial information to deliver that information and those assets to the personal representative to be held and administered according to the will. The personal representative now has court authorization to find assets and locate creditors and take other appropriate action to fully administer the estate.

 

The attorney will then arrange a notice to creditors to be published in an appropriate local newspaper once a week for two consecutive weeks. This notice should also be served on known creditors. The notice also sets a time limit of 30 days after the date of service on the creditor and 90 days from date of first publication of the notice, unless claims are barred because the decedent has been dead for two years. The attorney for the estate has a duty to creditors according to the U.S. Supreme Court and must carefully keep track of these many time limits. After letters of administration are issued, the attorney will prepare a Notice of Administration to be served on beneficiaries and interested parties. This notice gives time limits to any person who objects to the validity of the will or the person nominated as personal representative to file their claim with the probate court, with copy to the attorney.

 

The rules contain a specific procedure and time limits for creditors to make their claims. If the estate disputes the claim, the attorney may prepare an objection to the claim within 30 days and the creditor must then file an independent lawsuit to collect the claim within 30 days unless a written motion for extension has been filed with the clerk and copy served on the creditor. There is also a procedural requirement to notify the Florida Department of Revenue, in case it has a claim for back taxes. If the decedent is over age 55, there is a procedure to notify the group which administers the Florida estate recovery program for Medicaid.

 

There are deadlines for inventories of the estate to be filed and on whom copies must be served. There are also forms, procedures, and time limits for the personal representative to file accountings of the estate’s property and income during the period of administration. Finally, to close the estate, the personal representative must seek an order of discharge after properly investing the estate, making distributions called for in the will and obtaining the consents of the beneficiaries or holding a hearing on the petition for discharge. The estate may be further complicated by problems with the elective share of the surviving spouse, the collection of sufficient assets from the trust to pay all creditors and obligations of the estate, Medicaid recovery issues, cash security, Medicare, determination of exempt assets, the fighting among beneficiaries that is quite common, Blue Cross/Blue Shield, convenience accounts set up as paid on death transfers, joint property issues and a whole host of other unforeseen problems.

 

The attorney and the personal representative should not be expected to handle these matters, which involve significant responsibility and personal liability, for free. Fortunately, Florida statute sets some guidelines for payment of fees, which will be discussed next week, along with the very complicated tax issues that face the attorney and the personal representative.

 

Source:  William Edy, Fort Myers News-Press

Probate Summary Administration

When an individual dies owning assets that must be probated in order to change title to the beneficiaries or to make distributions to the beneficiaries, the attorney handling the probate process will have to decide whether the estate must utilize formal administration, or whether the estate qualifies for one of the simpler forms of informal administration for small estates.

 

 

The summary administration is commenced by the filing of a petition for summary administration, which must list the beneficiaries, the assets subject to probate, and all known creditors. The petition must be signed by a licensed Florida attorney. In a testate estate, the petition must also be signed by the surviving spouse, if any, and all beneficiaries of the estate. If there was no will, the petition must be signed by the attorney, the surviving spouse and all heirs at law. If the petition is not signed by a beneficiary who will receive their full share, the beneficiary must receive a formal notice of a hearing on the petition. Those signing the petition do so under penalty of perjury. Any omitted beneficiary or creditor of the estate may recover attorney’s fees for enforcing their rights.

 

To qualify for summary administration, the estate subject to probate must be under $75,000, excluding exempt property, or the decedent must have been dead for more than the two years that creditor claims can be made. If summary administration is allowed, it saves having to appoint a personal representative and saves the expense of posting a surety bond. If a decedent of any size estate is survived by a spouse or child, exempt property includes the homestead and the automobile and up to $10,000 in household furnishings and certain other benefits, all of which will not count in the $75,000 limit.

 

It is important to review the title to all of the assets of the decedent to determine which assets count as probate assets. Probate assets will not include, for example, tenancy by the entirety property owned by husband and wife that will automatically pass to the surviving spouse. It does not include property owned by joint tenants with right of survivorship that will pass to the surviving owner. Probate assets do not include assets that have a beneficiary designation, such as paid, or transfer, on death designation. It does not include assets that are owned by the trustee of a trust, unpaid wages, unemployment compensation and other benefits.

 

It is entirely possible that a millionaire could plan to avoid probate with a trust and beneficiary designations, but find after death that an account or vacant lot purchased for investment was titled by mistake in the decedent’s name, which would require probate to transfer title to the trust or beneficiaries. If the assets requiring probate are valued at less than $75,000, summary administration may be available, unless the will states that formal administration is required. If the surviving spouse is omitted from the will or given less than 30 percent of the elective share estate, it may be necessary to apply for formal administration to seek the determination of the amount the surviving spouse is entitled to receive from the probate assets and to seek non-probate assets to fully fund the spouse’s entitlement. Formal may also be required when a life insurance company requires, or where there is pending litigation, such as for wrongful death or malpractice, that requires a personal representative to conduct.

 

If the decedent owned real estate in another state, that property would not be a probate asset in Florida. Only that state can transfer title to that property. The filing of probate in both estates could be required. If the real property in the other states was transferred to a revocable trust prior to death, probate in either state could be avoided.

 

If summary administration is filed, the petition must state that either there are no creditors or the payment of creditors have been provided for, unless claims have been barred by the two year non-claim statute. If claims are asserted after the assets have been distributed to the beneficiaries, those beneficiaries are liable for their pro-rated share of the claim, up to the value of the asset they received.

 

After the judge reviews the petition, or after the court has held a hearing, the judge will sign an order, prepared by the attorney signing the petition, that orders the distribution to the proper beneficiaries. A certified copy of the order presented to the financial institution will secure the transfer of that asset to the persons named in the order. The order will be filed where deeds are filed to act as a deed of the property to those designated in the order.

 

Summary administration is available to both the assets of a Florida resident and to the assets located in Florida belonging to a non-resident. The statute provides for the method to admit foreign wills to probate and the steps required to authorize a foreign personal representative to administer estates. If a decedent owns real property in other states, an attorney in those states must be hired by the Florida attorney to handle the out-of-state property, since the rules of probate differ greatly among the states. Dying with real property located in many different states can become very expensive, unless the property is owned by an LLC which converts the decedent’s interest to personal property administered in Florida or the different properties have been transferred to a trust prior to death.

 

There are other forms of informal administration available for small estates in certain instances. Suppose a person receiving Medicaid nursing home benefits dies with $1,800 in a checking account, because his or her asset limit is $2,000. There is a procedure to obtain these funds to reimburse the relative who paid the cremation or funeral costs. Florida Statute 735.301 allows certain personal property to be distributed without formal administration or the involvement of an attorney or personal representative. It provides that when the only property subject to administration is personal property with a value that does not exceed the value of the preferred funeral expenses and reasonable and necessary medical and hospital expenses of the last 60 days of the last illness, no administration is required.

 

I occasionally hear of situations when the decedent’s child who has paid the funeral bill, decides not to file probate to obtain these limited funds because Florida Statute sets the minimum attorney’s fees at $1,500. Perhaps during the initial free consultation that many attorneys offer, the adult child should be advised to write a letter or send an affidavit to the probate division of the clerk of court at the courthouse. The deputy clerk will assist with the paperwork and obtain from the judge a directive under the seal of the court authorizing the transfer, payment or disposition of the funds to the person who paid the expenses. The limit for this procedure is the total of funeral expenses and recent medical and hospital bills up to the value of the assets. Family often inquire whether, if they front funeral expenses, will they be reimbursed, even though the will gives the total estate to another person. The answer is yes if there are funds.

 

Often, the client has properly planned their estate through trusts and other probate avoidance strategies, only to find the automobile was held in the decedent’s name. Many insurance companies will not insure a car owned by a trust because they are basically insuring the driver and need to know the age of the driver. There exists a procedure for transferring title. FS 319.28(1)(b) makes it possible to secure transfer of motor vehicle title without probate.

 

If there is no will, an heir can sign an affidavit stating that the natural heirs have agreed to transfer the automobile to that individual and that the estate is not indebted. In a testate case, the affidavit must accompany the will and death certificate and be signed by the personal representative nominated in the will and state the estate is not indebted. Paperwork is submitted to the office where you change title to a car and they will effect the transfer, without the involvement of an attorney.

 

Florida Statute also has a method where the spouse or decedent’s children can obtain the income tax refund, provided the refund is under $2,500, if the application states that the decedent is not indebted or all assets are exempt from creditors.

 

It is important that soon after death, the family begins to work with a knowledgeable probate or elder law attorney to review the assets and receive information on these various methods of informal administration, some of which do not require retaining an attorney other than to make the family aware of their availability.

 

If the review indicates the assets do not qualify for summary administration or that there are issues such as homestead, elective share issues, of federal estate taxes possibly due, then the attorney will have to commence formal administration for large estates. Next week, I will walk us through the steps necessary to open and eventually close a formal administration. I will also discuss the fees and costs.

 

Source:  William Edy, Esq. in Fort Myers News-Press

Your Will: Who can legally serve as your personal representative?

In a follow up post, the NewsPress posted the following about who can validly serve as your personal representative:

Last week, I discussed how, and to whom, your assets will be distributed to your family after you die as dictated by Florida Statute, in the event you have not signed a last will prior to your death. I indicated that having a valid will is greatly preferable to having no last will, although trust planning is generally even more preferable. Signing a last will generally ensures that your assets will be distributed to those beneficiaries you chose during your lifetime and that, under most circumstances, you can designate who will do the distributing.

 

 

Other advantages of dying with a last will rather than dying intestate include the possibility of requesting the court to waive the expense and hassle of having to buy a fidelity bond from an insurance company for the personal representative and your ability to make certain tax elections while living. This week, I will begin to review the general process of filing for probate with a last will. I will also mention the requirements for serving as personal representative. Our readers should realize that in some instances you cannot decide to whom all of your assets will be distributed, and you cannot decide who will do the distributing, even with a last will.

 

Some individuals are prohibited from serving as your personal representative, even if designated in the will or given preference under the Florida intestate statute. We have had occasions where a deceased person named his oldest son as personal representative, but when it was disclosed to the court by his disinherited daughter that the son had pleaded no contest to a felony DUI more than 12 years ago, with adjudication entered, the judge of the probate court was prohibited from appointing him and chose the daughter because her minor children were the majority beneficiaries.

 

It is not true the will signor can choose any person they like to serve. Some attorneys, and document preparation services, have the prospective client fill out an intake form from which the will is prepared and do not ask sufficient questions about each beneficiary, which unlearned clients often find intrusive.

 

If the will signor nominated a friend to be personal representative, the attorney should require his or her address and phone number. If the nominee is not related by blood, a person who does not reside in the state of Florida cannot serve as personal representative, even if he or she has no felony record. If you have designated a person who has subsequently moved out of state who is not a blood relative, you should consider signing a new will or codicil naming a Florida resident or blood relative.

 

If you have designated a person who now, not when the will was signed years ago, has been convicted of a felony anywhere, or is not mentally or physically able to perform the duties, or is under age 18 years of age, the person will not be appointed by the judge. Instead, the judge must appoint the alternate nominee in the will and if none, then the person who is listed as first in order of preference under the intestate law that governs persons who have died without a last will.

 

Even if the person who is a non-resident of this state, but promises the will-maker that he or she will move to Florida in order to administer the estate after his friend dies, that promise will not comply with the law. The friend must be a resident of this state at the death of the will-maker. The individual appointed must also be “sui juris,” which means a mentally competent adult, over age 18, who is presumed to be able to be bound by a contract. It is opposed to a person under age 18, legally called an infant and a person who is non compos mentis, or mentally incapacitated. In order to sue a person you must allege that the person is sui juris. The term comes from the latin term meaning “of one’s own right’ which means of full age and capacity. Although it is not impossible to sue a non-resident, it is more difficult and expensive for the estate to do so if an out-of-state person abused the position.

 

It is a good idea to ask a person who you have named, or are considering naming, to serve as personal representative, if he or she has ever been convicted of a felony and, if not a blood relative, if he or she intends to maintain residency in Florida. Also, if the friend or relative owes the deceased money, he or she may still be appointed, but the appointment will not extinguish the debt. If a person simply fails to disclose that he or she would not be qualified to serve and another person files to remove that person, the person who signed the oath of personal representative under oath and penalty of perjury will be liable for the attorney’s fees and costs, in addition to other damages in a removal action. If the person does meet these qualifications and desires to serve and is either next in line in the intestacy statute or clearly named in the will, the court must appoint that person even though the siblings disagree.

 

Any document purporting to be a last will or document attempting to make dispositions of a person’s property after his or her death must be filed with the clerk of court within 10 days after receiving notice that the will-maker, called the “testator,” is dead. If the document is a trust, the original trust does not need to be filed, but a notice of trust must be filed by the successor trustee. Even if they believe the will is invalid or fraudulent, the custodian of the will must still deposit the will with the court for the proper county where the probate judge will decide if it is valid and should be admitted to probate.

 

Even if there are no assets in the probate estate, and even if no one intends to file a petition for administration, the custodian must still file the will with the court. If assets were to show up in later years, as often happens, at least the will in the hands of the probate court will be able to be probated and transfer the asset to the proper person. The deceased person may win a suit for wrongful death which will require a personal representative to be appointed, perhaps many years after his or her death. Additionally, the will is needed to distribute the personal injury award to the proper beneficiaries.

 

If the custodian refuses to file the original will with the court after the death of the testator, any interested party may file suit to obtain the filing of the will. Unless the custodian can show just cause for the refusal, he or she will be liable to the petitioner for all damages, costs and attorney’s fees. Willfully refusing to produce the will can be very costly.

 

When the will is filed the person filing the will must provide the clerk of court with the testator’s date of death and Social Security number, both usually accomplished by providing an original death certificate to the probate clerk. Additional death certificates must be provided to each county recorder if deeds will be filed to change ownership of real property and to any financial institution or insurance company before they will pay a beneficiary.

 

Most attorneys recommend ordering from the funeral director at least 10 to 12 death certificates, which cost $10 each. All death certificates had formerly contained a section for the doctor to sign stating the cause of death. Since the legislature was convinced that those dying from AIDS should not have to disclose that cause because of prejudice, now when ordering the death certificates, you must ask for some with the cause of death, for example to be given to an insurance company who may challenge the issuing of the policy for failure to disclose an illness, and others without the cause of death that can be supplied to financial institutions and to be recorded where deeds are recorded to pass property, which makes them quite public.

 

Source

If you have no Will, You have no control over assets–State determines beneficiaries

This article from the Fort Myers, Florida News-Press gives a great illustration of why it is so important to have a Will or other Estate Planning documents in place.  Further, as you can tell by the complexity of the issue, it’s also important to see a legal professional to guide you through the process to achieve your intended results.

Probate is quite different than it is often portrayed in movies. Most individuals do not understand the process unless they served as personal representative for a close relative who passed away in Florida. If they served in a different state, they may find the rules in Florida are different.

In the movies, the family gathers to hear the will read by the family attorney. This hardly ever happens. By the time the relative notifies the attorney about the death, the will has already been read by most of the relatives. Those who are beneficiaries will soon get appropriate notice of the probate process. Understanding this process is important to the person who signed the will, to the beneficiaries of the estate, and to the creditors of the deceased person. Understanding this process will allow the reader to evaluate the recent proposal to broaden the reach of probate which I will discuss next week.

The word “probate” comes from the Latin phrase “to prove.” If an individual dies, who will ensure that his final wishes as to the disposition of his assets are carried out? If a beneficiary was allowed to simply show the will to the bank to “get the money,” what if the will was invalid or the bank misinterpreted who should “get the money,” or if there was a lien on the money? The bank would be responsible. This potential liability would cause the bank not to act. Nothing would get distributed.

Fortunately, we have a legal process to allow the will to be proved as the valid instrument to legally pass title of the decedent’s assets to those individuals chosen by the deceased person prior to death. Although this process usually starts with the proving of the will, the term “probate” covers the entire process of winding up the decedent’s financial affairs after death, overseen by a circuit court judge.

Before we can understand the process and options, if the person had a will, we must understand the process if the individual died without a will. The person who signs the will is called the testator. If the person dies with a valid will, the person is said to have died testate. A person who dies without a valid will is said to have died intestate. To whom the estate will be distributed intestate is governed by Florida Statute 732.101 through 732.111, which may be read at the state site, MyFlorida.com.

If a person dies intestate, or if the will fails to fully determine the beneficiary, such as when the will fails to include a residue clause which says who the remaining beneficiary is after the specific beneficiaries have been paid, then Florida Statute determines who shall inherit all or a portion of the estate. It makes a difference whether there is a surviving spouse.

If there is no surviving spouse, the estate is divided equally among the lineal descendants, per stirpes, which is the Latin phrase meaning “by the roots.” For example, if the deceased had three children, one of which predeceased the person whose estate is being administered intestate and had three children of her own, the estate would be distributed one third to each of the two surviving children and one ninth to each grandchild who are the children of the deceased child. The grandchildren who are the children of the living children would receive nothing.

If there are no lineal descendants, that is no living children or grandchildren of the person whose estate is being administered intestate, then the estate will be distributed equally to the decedent’s mother and father. If only one parent is living, that parent will receive the entire estate. If there are no living parents, and no lineal heirs, then the estate will be divided equally among the brothers and sisters, and the descendants of the brothers and sisters.

If there are none of the above, then to the paternal and maternal kindred as provided in the statute. If there are none, then the estate will be distributed to the kindred of the last deceased spouse of the decedent as if the spouse had died intestate immediately after the decedent.

If there are none of the above living at the death of the decedent, then the estate will escheat, or be paid, to the state of Florida. It will be liquidated and held by the chief financial officer of the state and deposited in the state school fund. If no one entitled to the estate files a claim within 10 years of receipt by the chief financial officer, the state’s right to the funds shall become absolute. If an individual entitled to a portion of the estate is living at the time of the death of the decedent, but dies before the estate is administered, their share vests and that beneficiary’s person’s estate would have to be probated.

If the decedent died with a surviving spouse, even if the surviving spouse died before the estate was fully administered, the surviving spouse would inherit all of the estate only if the decedent had no living lineal descendants. If the decedent had living lineal descendants, the amount that the spouse would receive depends on whether the lineal descendants are also the spouse’s descendants.

If all of the lineal descendants are also the descendants of the spouse, then the spouse is entitled to the first $60,000 plus one-half of the remainder. The lineal descendants would divide the rest, per stirpes. If at least one of the lineal descendants is not the lineal descendant of the spouse, then the estate is divided one half to the spouse and one-half among the lineal descendants, per stirpes.

You may have to read this three times to figure out who would inherit your estate if you died without a valid will. The best way to avoid this situation is to sign a valid will. I say “valid will” because not every will that is submitted to the probate judge is determined to be valid. I will review the requirements for the will to be valid next week. You will have a better chance of leaving a valid will if the will is drafted by a knowledgeable attorney. When you leave a valid will, you determine who will inherit your estate.

Even if your will would leave your estate to the identical beneficiaries as the intestate statute would designate, there are additional disadvantages to dying intestate. Your will should designate who will be entitled to serve as the administrator of your estate, and who would be the alternative if that person was unavailable or did not qualify. The administrator is called the personal representative in Florida, but in some states is called the executor. If you die intestate, you must look to Florida Statute to determine who is entitled to serve as personal representative and to file the petition for administration with the probate court.

F.S. 733.301 states that the surviving spouse is entitled to administer the intestate estate. If there is no surviving spouse, the person entitled to appointment is that person selected by a majority in interest of the heirs. That means you must add the percentages and not just take a majority of the heirs. If the heirs cannot agree, then the person entitled to serve is the nearest heir in degree. If more than one applies, then the court may select the one best qualified. If no heir applies, perhaps because they do not want to pay the court costs and attorney’s fees, and the estate has creditors, one of the creditors may apply to serve. I would think most individuals would not want their creditor to administer their estate.

Other advantages of dying with a will rather than dying intestate, as well as the difference between filing formal administration and summary administration, will be discussed next week.

I will also mention the requirements for serving as personal representative and who is prohibited from serving, even if designed in the will or given preference under the intestate statute.

Source: http://www.news-press.com/apps/pbcs.dll/article?AID=/20080810/BUSINESS/808100343/1014/BUSINESS