Florida probate can be both expensive and time-consuming, and probate records are public court records that anyone can read. Any interested party can go to the local county courthouse and look at your probate file. There are several good reasons to avoid it.
The process isn't required in some cases, but many people nonetheless fail to take any of the steps required to avoid it. What will work the best in your situation will depend on many factors, including how your assets are titled, who you want to inherit your estate, how much of your lifetime gift tax exemption you've used, and how concerned you are about creditors and asset protection.
Get Rid of All of Your Florida Property
If you aren't a Florida resident but own real estate there, then one way to avoid ancillary probate in Florida is to get rid of all of your Florida real estate, because without owning any property located in Florida, you won't have an estate that will need to be probated in Florida. Of course, this may not be practical or desirable, but it may make sense for you to gift your Florida real estate to your children or other beneficiaries in order to both reduce the value of your estate and avoid Florida probate.
Use Joint Ownership With Rights of Survivorship or Tenancy by the Entirety
Adding a joint owner to a bank account or investment account or to the deed for real estate will avoid probate in Florida, provided that it is clear that the account or real estate is owned as joint tenants with rights of survivorship and not as tenants in common. If you're married, then in Florida you and your spouse can own bank accounts, investment accounts, tangible personal property, and real estate with rights of survivorship in a special form called tenancy by the entirety.
But beware of relying on joint ownership with rights of survivorship or tenancy by the entirety to avoid probate because there are several downsides to doing so:
- In many cases adding a joint owner to an account or deed will be a taxable gift that needs to be reported to the IRS on a federal gift tax return (IRS Form 709).
- If a joint owner is sued or gets divorced, then a judgment creditor or divorcing spouse may be able to take the assets in the joint account or real estate that is owned jointly.
- If a joint owner dies before you do, then 50 percent or even 100 percent of the joint account could be included in the deceased owner's estate for estate tax purposes.
- If you're in a second or later marriage, leaving your property to your spouse by right of survivorship or tenancy by the entirety will mean that your spouse will be free to do whatever they want with your property after your spouse later dies. This may not be what you want. In other words, you may want your spouse to have use of your property after you die, but then after your spouse later dies you may want your property to go to your own children. In this situation, joint ownership with right of survivorship or tenancy by the entirety will not accomplish your final wishes since your spouse may freely choose to leave your property to your their own children or even to a new spouse instead of your children.
Use Beneficiary Designations or Life Estate Deeds
If you own life insurance or assets held in a retirement account such as an IRA, 401(k), or annuity, then you are already taking advantage of probate avoidance through the use of beneficiary designations. What you may not know is that in Florida you are allowed to designate beneficiaries for your bank accounts (this is referred to as a "payable on death" or "POD" account), and also for your non-retirement investment accounts (this is referred to as a "transfer on death" or "TOD" account). In addition, in Florida you can use a special type of life estate deed called an enhanced life estate deed, also known as a "Ladybird Deed," to retain ownership of Florida real estate during your lifetime and then pass the property on to the beneficiaries of your choice after you die without the need to probate the real estate in Florida.
Use a Revocable Living Trust
A Revocable Living Trust is a written agreement that covers three phases of your life:
- While you're alive and well;
- If you become mentally incapacitated; and
- After you die.
Aside from allowing you to make a plan for what happens if you become incapacitated or after you die, a Revocable Living Trust is also a powerful estate planning tool that will keep your estate plan private since it will keep your final wishes outside of Florida's public probate court records. But signing the Revocable Living Trust agreement by itself isn't enough to avoid the probate of your property in Florida after you die. Instead, once the trust agreement is signed, you will need to take your assets and title them in the name of your trust—this is referred to as "funding the trust." Only after your Revocable Living Trust has become the record owner of your assets will the assets owned by the trust (instead of you) avoid probate in Florida. If you visualize your trust as a bucket, then "funding the trust" means that you need to fill the bucket with your assets in order to insure that the assets will avoid probate after you die. If any of your assets sit outside of the trust (bucket) at the time of your death, then the unfunded assets will need to be probated in Florida unless they have a beneficiary designation or are owned with rights of survivorship with someone who survives you.
The Bottom Line on Avoiding Probate in Florida
As you can see, there are only a limited number of ways to avoid probate in Florida. What will actually work the best for you and your family will depend on your own unique situation and should be discussed with your Florida estate planning attorney. But regardless of what you choose to do, if you use one or more of the techniques described above to avoid the probate of your property in Florida, then you will be creating peace of mind for you as well as peace of mind for your loved ones during a difficult time.