How Does Property Pass to Heirs Under The Florida Probate Code?

Posted By on September 21, 2016

Florida law is very protective of property ownership rights in our State. Under the law, there is never a moment when any piece of property is not owned by someone or something.

Maybe it’s a person, or an estate, or a trust or some other legal entity (Corporation, LLC, etc.). The kind of owner may vary.

This is important to know when a loved one passes away and you stand to inherit from their estate. As an heir, when can you take possession of a condo left to you by your deceased grandfather? What about the car, or the Microsoft stock?

 

Boca Raton, FL from fishing pier

When can you take possession of the Boca Raton condo you inherited from your grandfather?


 

Florida Law of Succession

Here’s what happens when someone passes away in Florida. Our probate code works to pass ownership of the deceased person’s real estate and personal property. It happens instantly.

There is an automatic change of legal ownership upon the moment of death. This is the “law of succession.”

Who are the new property owners?

When someone dies leaving behind a valid Last Will and Testament, it identifies the new owners of the decedent’s property. These are the “beneficiaries” to the will.

If someone passes without a valid will, then they are said to have died “intestate.” That’s legal jargon for dying without a will. Intestate succession means that Florida probate law decides who will be the new owner of the decedent’s land and other assets. These are the decedent’s “heirs.”

Florida Laws of Descent and Distribution

Heirs are vested with an interest in the decedent’s real or personal property immediately upon the death of the decedent. In re Slawson’s Estate, 41 So. 2d 324 (Fla. 1949).

Who are the rightful heirs when someone dies without a will?

Identifying the heirs to the decedent’s estate is done by applying Florida probate laws to the situation. These are the laws of “descent and distribution.” We’ve discussed how they work. See:

The laws of descent and distribution do two things. First, the statutes determine the “heirs” out of all the friends and family members. Second, they distribute the property to each heir. Spouses, children, siblings, etc., may all be eligible to inherit as an heir after someone passes away without a will in Florida.

Homesteads get special treatment. So do surviving spouses (widows and widowers).

Which family member gets to inherit? What percentage does each person get? These questions are answered by application of the Florida probate laws of “descent and distribution.”

Florida Laws of Devolution of Title

That’s just the first step. Just because you are the designated heir of the vacation home in Boca Raton does not mean that you will end up with it.

Other laws determine what each heir actually gets to take and keep as their inheritance. These are the laws of “devolution of title.”

This is a task of the estate’s Personal Representative. It is done under the supervision of the probate judge.

Here’s why. Initially, the estate itself has an ownership interest in the decedent’s property. This is deemed necessary to resolve the decedent’s personal business. It’s part of what happens during the estate administration.

The personal representative, for example, will take control of a small business and pay the decedent’s mortgage payment. The personal representative will have to keep current on condo dues as well as the taxes.

During the administration, things may change regarding what property is held by the estate (some assets may need to be sold because they are either unproductive or because the estate needs liquidity). This may affect what is left to be inherited.

Things that the heir expects to inherit — like the jewelry or the stock or the house — may be used by the personal representative for other purposes.

Heir Has Contingent Interest in Inherited Property

So what does the heir own? Until the estate’s obligations are met, and all the decedent’s debts are paid, the heirs have what is called “contingent” legal interests in the property they are to inherit.

Florida law is clear here. The decedent’s property must be used to pay all valid indebtedness (taxes, bills, mortgages, etc.) before any heir can receive anything. Farmers’ Union Warehouse Co. v. T.L. Wells & Bros., 65 Fla. 350, 61 So. 745 (1913).

1. Real Estate

Legally, in an estate estate, where the property is owned by the decedent alone, the title to the homestead real estate passes to the heirs at law (surviving spouse, children, etc.) upon the death of the decedent. However, it may pass subject to a lien by the personal representative (See Florida Statute 733.608 (3)).

2. Personal Property

For the decedent’s personal property (everything that isn’t land), title initially vests in the personal representative of the decedent’s estate. This allows for the p.r. to do what is necessary to fully administrate the estate; after all creditor claims have been satisfied and other aspects of the estate are concluded, then the property is distributed.

At that time, the heir gets legal title to the personal property. See, Brown v. Indian River Orange Lands, 131 Fla. 466, 179 So. 789 (1938); Coral Gables First Nat. Bank v. Hart, 155 Fla. 482, 20 So. 2d 647 (1945).

What Can Keep The Heir From Getting The Inherited Property?

Sometimes, the estate needs the property to pay taxes or to pay operating costs. Sometimes, the heir doesn’t want the property. And, there may be times when the heir’s creditors are entitled to the property.

1. Resolution of Estate Matters

There may be claims, debts, etc., to be applied against the property before the heir is able to possess it. (A mortgage on real estate or a car note may need to be paid off out of the decedent’s bank account; the car may need to be sold to pay income taxes; etc.)

There may be a question of transferring the asset to the heir. For example, minors cannot own certain types of property. There may be an issue if the title will be vested or contingent.

The bottom line. When someone dies without a will, the heir cannot simply take the inherited property and leave. His or her interest in the inherited property may or may not result in the heir getting to keep it. The estate administration takes priority.

2. Heir Transferring Interest in the Inherited Property

After the heirs are determined and notified, they then generally wait until the estate is resolved before the property is distributed by the personal representative (sometimes, there is a partial distribution of assets before the estate is concluded). There is no legal duty they do anything more. The heirs have no legal duty to administer the estate.

However, some heirs may think it best to take action regarding their inheritance before the property is distributed. Maybe they don’t want to end up with the inherited property. Rather than waiting to take possession of the inheritance, the heir may:

  • convey an interest in the property;
  • sell an interest in the property;
  • mortgage or otherwise encumber the property;
  • assign an interest to someone else; or
  • give away the interest.

See, Stewart v. Mathews, 19 Fla. 752, 1883 WL 2598 (1883); Smith v. Croom, 7 Fla. 81, 1857 WL 1527 (1857); In re Francis’ Estate, 153 Fla. 360, 14 So. 2d 803 (1943).

3. Heir’s Creditor Makes a Claim to Take Inherited Property

What if the heir has creditors who want to take her inheritance? Can the heir lose their inheritance to the credit card company or the mortgage lender?

Florida Statute 733.706 prohibits any levy being made against any property held in the decedent’s estate just because a creditor has a judgment against the heir. However, there are exceptions to this general rule.

Courts have allowed some creditors to go ahead and bring their creditor’s bill to the personal representative to try and collect what is owed to them by the heir. This has been allowed in situations where the creditor already has a judgment from a court that the debt is valid and owed by the heir, and where the creditor can prove to the probate court and the personal representative that it has no other legal remedy available to it. Martinez v. Balbin, 76 So. 2d 488 (Fla. 1954); Brown v. Sweat, 149 Fla. 524, 6 So. 2d 538 (1942).

So, if the creditor has a judgment against the heir in hand, then it may be able to argue a superior right to the inherited property to the probate judge. This may be something that the heir will want to contest in a court proceeding.

The Title That Passes to the Heir Under Florida Law

There are different kinds of title and ways to own property. When someone passes away and the laws of intestate succession apply, the heir will need to know what kind of title he or she is inheriting.

Let’s consider the home or condo of the decedent. If the heir is inheriting alone, then he or she takes 100% ownership or “fee simple title” to the property. (Special rules apply to homestead property.)

If there is more than one heir, say several siblings or a bunch of grand kids, then they may inherit ownership interests as “tenants in common” in the decedent’s condo. Here, they share the ownership of the condo as well as the responsibility for its repair, maintenance, and upkeep (dues, fees, taxes, etc.).

For example, in the case of Dixon v. Becker, 134 Fla. 547, 184 So. 114 (1938), the decedent’s two children inherited land with fee simple title in undivided one-half interests.

Questions About Inheritance Under Florida Law

If you or a loved one have questions about your inheritance, such as

  • when title passes;
  • if you can use it as collateral to buy a house;
  • if you can sell it;
  • when you can take possession, etc.,

then a Florida probate lawyer will be able to help you sort through the applicable laws, statutes, and court precedent to figure out your options and best interests.

You may also have questions about how the estate’s administration is being handled. Did the personal representative do the right thing with your inheritance? You may want to file an adversary proceeding with the probate court to address your concerns.

If you have a question about an intestate estate or what to learn about descent and distribution of estate assets, a good piece of advice is to talk with a Florida probate lawyer to learn about your rights. Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.
 
 
 
 
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What is a Summary Administration Under Florida Probate Law?

Posted By on August 17, 2016

Sometimes, probating someone’s estate can be complicated. It can take a long time and lots of money because of all of the rules and procedures that must be followed. Beneficiaries and creditors are usually eager to try and limit these issues — especially if no one is contesting anything and the plan of distribution is straightforward.  Why go through all of the formalities of a formal probate if the estate is small (in terms of the value of the estate assets) or there isn’t much debt in the estate?

Is there a way to handle transferring the estate assets and deal with the creditors of the decedent without having to go through the formal probate process?

 

Summary Administrations Can Circumvent the Usual Court Process

 

Florida Summary Administrations

In Florida, a summary administration is an alternative procedure for probating an estate and disposing of the decedent’s assets and debts. Essentially, it is an option to the formal probate process which is less costly and can allow for an expedited transfer of assets to the beneficiaries. However, as provided by statutory limitations, it is only available for certain estates (usually smaller estates).

In order to best explain the procedure, below are some common questions that clients have asked over the years related to summary administrations. Some of those questions include:

1. Does the decedent have to be a Florida resident at time of death in order to qualify for a summary administration?

No. Florida law allows for a summary administration for either a resident or nonresident.

2. Does the value of the estate matter?

Yes – sometimes. There is a limit to the total value of the estate to be probated in Florida and the magic number here to qualify for summary administration is $75,000.00.

If the net value of the estate subject to Florida probate laws is less than or equal to $75,000 then it is possible to request a summary administration. How is the net estate value calculated here? It is the value of the estate’s property after the creditors’ claims have been deducted from it. Florida Statute 735.201(2).

However, if the decedent has been dead over two years and the estate subject to Florida probate has yet to be probated, then summary administration is available regardless of the estate’s value. Florida Statute 735.201(2).

3. What if the Last Will And Testament specifies how probate should be administered?

If the decedent’s will provides for estate administration in its terms, then summary administration will not be allowed by the Probate Judge. The testator’s wishes will be respected and the probate will continue with a formal administration as required by Chapter 733 of the Florida Probate Code. See, Florida Statutes 735.201(1); 733.101 to 733.903.

Probate judges, as a general rule, will not replace the wishes and directives of the testator as explained in their Last Will and Testament with those of the court, or of a beneficiary, or of a creditor (even if they argue it would save money).

4. Is a Summary Administration something available only to those who die without leaving much property or assets behind?

No. With proper estate planning, someone with great wealth can provide for their loved ones and pass on their property In such a way that their estate can take advantage of a summary administration.

Even though the decedent enjoyed great prosperity prior to his or her passing, with things like inter vivos trusts and other estate planning tools, a summary administration is viable for their probated estate, too. Summary administrations are for small estates – and sometimes, estate planning works to leave a small amount of property for probate purposes because the majority of the decedent’s assets and debts have been provided for in other ways.

For example, in Ford v. Ford, 581 So. 2d 203 (Fla. Dist. Ct. App. 5th Dist. 1991), the decedent’s estate was eligible for a summary administration because Gilbert Ford had instituted an estate plan. His advanced planning had placed most of his property into a trust with his wife (now widow) named as its only beneficiary. Most of his property went into that trust. The only property left for probate after Mr. Ford’s passing was some personal property; hence, his estate met the net value qualifications for a summary administration.

5. Do you have to decide on a summary administration immediately?

No. It is possible to start the administration of an estate in the Florida probate courts, and then determine as things are progressing that it might be best to opt for a summary administration.

Under Florida law, a summary administration can be requested of the Probate Court at any stage of the estate’s administration.

Key here: the estate must qualify as it existed at the time of filing. It is not possible to begin the probate process, distribute significant assets, pay off debts, and then when things get under that $75,000 cap to switch the administration to a summary administration.

Either the estate qualifies as of time of filing or it does not. Florida Statutes 735.2055.

6. Who can request a summary administration of a Florida estate?

It’s not just the personal representative named in the Last Will and Testament that can ask the Probate Judge to allow a summary administration of the estate.  Any beneficiary named in that will can also file the request.

However, a petition for a summary administration has to be signed with a verified signature by the beneficiary requesting a summary administration as well as the surviving spouse (if there is a widow or widower here), and the other beneficiaries. Florida Statute 735.203(1).

These signatures are also needed by the personal representative if he or she is filing the request for a summary administration.

Exception here: joinder of all these interested parties isn’t needed for a beneficiary who is requesting a summary administration and who is to receive a full distributive share under the proposed distribution. Florida Statute 735.203(1). Here, this beneficiary needs to send formal notice of the petition on any beneficiary not shown as joining in the request. Florida Statute 735.203(1).

Note that if the request for a summary administration is made at the beginning of the probate process, then there may never be a “personal representative” of the estate.  There is no legal requirement for a personal representative in a summary administration.

However, if the probate process begins and the appointed personal representative determines it is in the best interests of the estate to request a summary administration, then the personal representative will have a fiduciary duty to file that formal request with the probate judge.

7. What if there are minor beneficiaries?

If the decedent has left property to people who have not reached the age of majority under Florida law (usually these are the decedent’s children or grandchildren), then a summary administration is still possible even though they themselves cannot legally act to request or to approve the summary administration.

Here, the petition for a summary administration is signed and verified by the minor’s legal guardian. This can be their remaining parent, for example.

8. What if a beneficiary under the Last Will and Testament has died?

Here, if the person who is named as a beneficiary under the Last Will and Testament has passed away, then the summary administration can still take place. The petition generally is signed and verified by the personal representative of the deceased beneficiary. Florida Statute 735.203(1).

9. Does the Last Will and Testament Have To Be Proved in a Summary Administration?

Yes. When a petition for summary administration is filed, this does not mean that the Last Will and Testament will receive any less respect from the probate court. The same laws and statutory provisions that exist to protect the sanctity of someone’s last wishes will still stand.

And when there is a request for summary administration, the Last Will and Testament still must be proved in accordance with Chapter 733 of the Florida Probate Code and then officially admitted to probate. Florida Statute 735.206.

Moreover, in a summary administration, as in any probate administration, there must be a diligent search made for creditors. All known or reasonably ascertained creditors must be served with a copy of the petition for summary administration. Provisions must be made for these creditors to be paid (if there is money to do so). Florida Statute 735.206(2).

10. Can Beneficiaries Receive Their Inheritance Faster in a Summary Administration?

Yes. In a summary administration, the probate judge is able to order the immediate distribution of an asset to the person named as beneficiary under the Last Will and Testament. Florida Statute 735.206(2).

11. How Are the Decedent’s Creditors Notified in a Summary Administration?

Once the probate judge grants a summary administration, a formal Notice to Creditors can be published in a local publication designated by the courts (this is the same requirement used in a formal probate proceeding). See Florida Statute 733.2121.

Just because there is a summary administration does not mean that creditors get less protection. As in any probate matter, it is required that the personal representative, or the petitioner for the summary administration, notify anyone with a claim or demand against the decedent that the Probate Judge has approved a summary administration of the decedent’s estate. Florida Statute 735.2063(1).

The notice to creditors has to include the total value of the estate and the names and addresses to whom it has been assigned by the order allowing the summary administration. Florida Statute 735.2063(1).

Once proof is filed with the probate court that this notice to creditors has been published, then any claims or demands of a decedent’s creditor who isn’t known or reasonably ascertained is BARRED FOREVER unless that creditor shows up and files his or her claim or demand within 90 days of the first time the notice was published (the initial publication date). Florida Statute 735.2063(2).

12. Who Gets Paid First in a Summary Administration – Beneficiaries or Creditors?

As in any probate matter, creditors that have properly vetted debts will have those debts paid from the estate’s assets before any inheritance is distributed. This includes the taxing authorities.

In fact, the Florida statutes provide a specific set of directions on who gets paid what, and when, in a summary administration. This is called the “order of distribution.”

It is found in Florida Statute 735.206(4) and includes the following provisions:

  1. Those who owe money or property to the decedent (debtors of the decedent). They can be ordered by Probate Judge to pay, deliver, or transfer what they owe to specific persons and these debtors are then not be accountable to anyone else for the property.
  2. Any bona fide purchasers for value of property of the decedent. Here, the probate judge’s order can direct they shall take the property free of all claims.

13. Can a Summary Administration Be Used if The Only Asset is the Decedent’s Homestead?

Yes –  The answer is also yes even if the decedent has creditors. The party petitioning for the summary administration may also file a petition to determine homestead to protect the property from the claims of creditors.

Should You Consider a Summary Administration?

Whether or not you should consider a summary administration of a Florida estate will be a question that is asked in times of (1) estate planning and (2) grieving the loss of a loved one who has left behind an estate here in Florida.

In either situation, it is important to have an experienced probate attorney who can help you consider your alternatives under the Florida probate process and assist you in resolving those issues that may arise throughout the process of probating an estate and distributing property after death.

The option of a summary administration is a welcomed alternative for many. If you are planning your estate, then this is an option to consider as you decide how best to leave your property to your loved ones. If you are an heir or beneficiary that is facing the sometimes intimidating probate process, the ability to have a summary administration of your loved one’s estate can be welcomed news.

A good piece of advice if you have any questions about a summary administration is to at least talk with a Florida probate lawyer to learn about your rights. Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

For more on how summary administrations work, visit our website page: Florida Summary Administrations

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.
 
 
 
 
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Can Florida Probate Law Bar an Heir’s Inheritance?

Posted By on July 20, 2016

If you are named as a beneficiary of a Florida Estate, then you are going to inherit the decedent’s property, right?  The asset may be a big thing, like an oceanfront condo, or it might be small, like a cocktail ring or antique clock, but no matter what you are going to be receiving something because you’re named in the will. Sure, that’s true — almost always.

However, there are times under Florida law when someone is legally an heir to an estate but cannot receive the decedent’s property because Florida law bars their inheritance. That’s right: there are laws on the books that will block a rightful heir from his or her inheritance and there’s nothing that the heir can do to change that.
 
Basilica of Our Lady of the Valley clock
 

1. Laches Doctrine

One way that an heir can be barred from receiving their inheritance in Florida is by the court’s application of the legal doctrine of “laches.” What is laches? It’s a legal concept that is used to give finality to things. If there is negligence on the part of an heir to claim his or her inheritance, or if an heir procrastinates and does not timely assert his or her right to inherit the property, then the court can bar that party from inheriting. See, Cone v. Benjamin, 157 Fla. 800, 27 So. 2d 90 (1946).

Estates cannot remain open forever, in the hopes that an heir will eventually claim their inheritance.

Of course, if the heir has a good reason for taking so long in claiming his or her property, then the laches doctrine won’t apply. When does laches work to bar an heir from inheriting? It’s usually years after the decedent has passed away, and the estate needs to be closed.

2. Divorce, Desertion, Abandonment

If a husband and wife get a divorce and then one of them dies, technically the surviving spouse can argue to inherit as a “surviving spouse.” However, Florida law holds that a valid divorce decree will block the ex-spouse from inheriting (The decree must be valid under the law of the jurisdiction where it was entered, and it must clearly terminate and end the marriage between the two. Under Florida probate law, once a divorce decree is entered into the probate record, it will serve as a legal bar to that ex-spouse inheriting as a surviving spouse – See Carpenter v. Carpenter).

Also, even if there is not a formal divorce, if it can be shown that the surviving spouse had deserted or abandoned the deceased spouse, then the court may also bar that surviving spouse from any inheritance. See, Doherty v. Traxler, 66 So. 2d 274 (Fla. 1953).

The Pen Pal Marriage

In Doherty, a woman named Gertrude Hammond Baxley started up a pen-pal correspondence with a man named Ezekiel Doherty. Not long after they started writing each other, Ezekiel showed up at Gertrude’s place and they got married. The marriage was never consummated. They never lived together; Ezekiel only stayed the one night there before he left “for parts unknown.”

Poor Gertrude never bothered to get an official divorce from Ezekiel Doherty. She never saw him again after that one whirlwind visit.

Sadly, Gertrude was murdered 22 years later. She left a lot of money and property upon her passing, and her only heir under Florida law was her elderly brother William, who was sickly and dependent upon his sister for years. Part of her estate was her own hard work; part of it was from an inheritance from her deceased parents.

Enter Ezekiel Doherty again. Upon hearing of Gertrude’s passing, he showed up and argued that as her legal husband he had the legal rights of a surviving spouse and her primary heir. This despite the fact that he had been living with another woman in a bigamous marriage for over 20 years in another town, and admitted under oath to the court that he had been happily living with this other wife at the time that he heard of Gertrude’s death.

The court ruled based upon equity. It found that Ezekiel Doherty appeared before the court “…openly, brazenly and flagrantly violated the laws of God and man and every principle of right, justice, decency, public policy and sound morals.” Furthermore, that Mr. Doherty “… shows no shame and offers no excuse or apology.” The court found that it would not help him in his “nefarious scheme,” and barred him from inheriting anything from the Estate of Gertrude Baxley.

3. Waiver

It is also possible for an heir to sign a written waiver that will act to bar his or her inheritance. For instance, a spouse may sign a document (usually a document known as a prenuptial or ante-nuptial agreement) that waives, in part or in sum, any right to inherit from their husband or wife. This can be done before they get married (prenuptial agreement), or it can be done many years after the wedding (ante-nuptial agreement).

The waiver needs to be legally binding, of course. It must be written, and it is considered to be a contract under Florida contract law. There must be the written signatures of both parties, as well as two subscribing witnesses who witness the waiving party signing the document.

If there is a waiver, it is assumed that it applies to all possible inheritance under the law. If the waiver is only as to specific property, then that needs to be clearly stated in order to be enforceable. See, Florida Statute 732.702(1).

4. Homicide

It may be shocking to some, but there has been the need for Florida legislature to pass a law that states someone who has killed another person cannot be allowed to inherit property from them, even if they are the deceased’s legal heir. See, Florida Statute 732.802(1)(”the Florida Probate Murder Statute.”)

Under this Florida law, if someone intentionally kills the decedent or participates in their killing, then they cannot inherit or claim any benefits resulting from that death under the Florida Probate Court. The law holds that the property will be distributed under the probate laws as if the killer had died before his victim.

This statute was originally passed into law back in the 1930s. However, there are still attempted by murderers to inherit from their victims — the law is still very much needed today.

For instance, in LoCascio v. Sharpe, 23 So. 3d 1209 (Fla. Dist. Ct. App. 3d Dist. 2009), a woman named Silvia LoCascio was in the process of getting a divorce when she was murdered by her soon-to-be-ex husband Edward LoCascio and his brother, Michael. They were tracked down, arrested, and convicted of first-degree murder.

Silvia died without leaving a will. Accordingly, the Florida intestacy statutes applied to her estate, and as her surviving spouse, Edward stood to inherit as a legal heir. The victim’s son, Edward Junior, appeared before the probate court seeking justice.

It was held that the Florida Probate Murder Statute, also known as the “slayer statute,” would bar murderer Edward, Senior, from inheriting anything from his deceased wife.

Instead, in accordance with Florida Statute 732.802, the estate would be distributed as if Edward Senior had pre-deceased Silvia, with her son Edward Junior being her primary heir.

Note however, that in the LoCascio case, the killer was not barred from retaining his separate property interest in their home. The court held that this was his legal property under Florida law and not a part of his victim’s estate for inheritance purposes.

5. Unintentional Killing and Accidental Death

The Florida slayer statute is limited to intentional acts of homicide. If the decedent dies because of the acts of an heir, this will not automatically mean that the heir cannot inherit. Key here is intent on the part of the heir.

This can be tricky. Of course, this means that if there is a car crash and one spouse dies and the other lives, the inheritance is not barred even if it is shown that the crash was caused by the surviving spouse. See, Florida Statute 782.03.

However, in criminal matters there can be distinguishing facts among the charged crimes in a killing. If the heir is charged with something like “involuntary manslaughter,” then no intent is involved in that crime under the criminal statutes.

Accordingly, if the heir is convicted of killing the decedent by involuntary manslaughter, they may be imprisoned after being convicted of this crime, but still inherit from the victim even though they have been found legally responsible for his death. (Drunk driving crashes can sometimes result in involuntary manslaughter charges, for example.)

Husband Strangles Wife, Found Legally Insane, Barred From Inheritance

Intent under the law must be proven; if the killer intended to kill then Florida bar will bar his inheritance. For example, in the case of Congleton v. Sansom, 664 So. 2d 276 (Fla. Dist. Ct. App. 1st Dist. 1995), a Florida man killed his wife.

It happened back in July 1992, when the 911 Operator got a call from Mr. Coleman C. Smith, who reported to the operator that he had just strangled his wife, Vera.

The police were dispatched to the Smith home, and the officers found Vera dead with Coleman nearby. The police officers evaluated Coleman and quickly decided that he needed to be under psychiatric care, taking him into custody for a “Baker Act evaluation.”

The District Attorney later filed second degree murder charges against Coleman for the murder of his wife. He was found by the court to be legally insane; there was never a trial. He was never convicted of a crime.

In the probate court, the personal representative sought the judge’s ruling on who should inherit from Vera’s estate. The 911 tape was placed before the probate judge, along with testimony from the attending police officers, along with experts on his mental state.

Proponents for Coleman Smith argued that since he was legally insane according to the criminal court, he lacked the needed intent to kill and should remain an heir of his deceased wife’s estate. There was no homicide conviction here.

The probate court held that a judgment from a criminal court is not sufficient to form a bar to inheritance under the Florida slayer statute. The personal representative had the duty to show that the killing was both intentional and unlawful in order for the slayer statute to apply and the killer barred from inheriting as her surviving spouse.

The court found that the personal representative met her burden of proof that Coleman Smith killed his wife intentionally. Here, the evidence of Coleman’s insanity did bar him from a criminal trial and conviction; however, the appellate court found that Coleman also acted unlawfully and would be barred from inheriting from his victim’s estate.

Key here: no evidence that Coleman could not distinguish between right and wrong at the time of the killing, and evidence to the contrary, including the fact that he told the 911 operator he was “sorry” for what he had done, and later told another person that he felt “guilty” about what he had done.

Questions Regarding Barring an Inheritance Under Florida Law?

If you or a loved one are involved with a Florida estate and the distribution of the assets of the decedent, then you may have questions or concerns regarding whether or not someone can be, or should be, legally barred from being an heir and getting an inheritance that is otherwise valid under the law.

An experienced Florida probate lawyer can be very helpful in resolving these matters and negotiating disputes between beneficiaries, heirs, and the Personal Representative regarding inheritance matters and how the Probate Code applies to the situation.

Many may be surprised at how much less it costs to get that attorney’s help — some of these questions may be answered in a single telephone conference. Others, however, may need more legal steps; some may require intervention in the form of a hearing before the probate judge.

A good piece of advice if you are faced with an inheritance issue, is to at least talk with a Florida probate lawyer to learn about your rights. Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.
 
 
 
 
 
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Twists in Intestate Succession Under Florida Law

Posted By on June 22, 2016

If a resident of Florida dies in our State without leaving a valid Last Will and Testament, then Florida’s probate law will decide how the decedent’s property is to be distributed to heirs. Florida’s intestacy statute controls in this scenario, which is something we have discussed in earlier posts (like this article about dying without a Will).

You can read the Florida intestacy law here: Chapter 732 of the Florida Probate Code.

If you don’t have a Last Will and Testament upon your death, then these laws decide who inherits your Florida real estate and other personal property, as well as how your creditors are to be paid (like credit card debt, mortgages, funeral expenses, etc.).
 
Scale of justice gold

 

Statutory Structure and Complicated Situations

This law is meant to keep things straightforward and prevent confusion after someone dies without a will.  It generally works well.

However, things are not always simple. Sometimes, when a probate court is left to distribute a deceased person’s real estate and personal property according to this statutory structure, there are peculiar situations that arise that aren’t that easy to reconcile under the law.

Surprising results under Florida intestacy laws happen more often than you think.  Here are a few examples of twists that can result from application of the Florida intestacy statutes.

1. Application of the Laws of Another Country: International Probate

Here in South Florida, you can find people who come here from all over the world. Many are tourists on vacation, enjoying the restaurants of Miami or the beaches of Palm Beach. Others live here, at least part of the year, and are considered residents of the state. Sometimes the laws of their country of origin can complicate a Florida probate matter.

For instance, under Florida’s intestacy laws, the “surviving spouse” is allowed to inherit. However, when the couple was married in another country, things can become interesting. Florida law demands that the widow or widower be confirmed as a “spouse” under the laws of the nation where the marriage took place.

Was it a valid marriage? Were the two considered to be a married couple, husband and wife, at the time of death?

Florida probate courts may see experts on marital law in other lands giving legal opinions on the marital status of the person claiming to be a “surviving spouse.” And that person may or may not end up inheriting property from the decedent’s estate under Florida’s intestacy laws. It will not be Florida’s laws but the laws of that foreign country that make this determination.

Angelika, Jurgen, and Their German Marriage

For example, several years ago a German woman named Angelika Salathe died, leaving property she owned here in Florida as part of her estate. Her husband, Jurgen Salathe, came before the Florida probate court asking for his inheritance of that property as her “surviving spouse” under the Florida intestacy scheme.

The representatives of her estate in Germany, appointed in the German courts, appeared here in Florida and argued that Jurgen should get nothing. It went against her wishes.

It was shown that the couple had been married in Germany, and it was not a happy union. While in Germany, they obtained a “separation agreement” under German law. This document stated that the marriage ended in July 1992 and if the couple were to reconcile, then they would need to draft a formal writing that attested to that fact. It never happened.

Afterward, the wife stayed in Germany, raising their only child in that country until she passed away. Jurgen came to Florida and lived in the house that Angelika owned in Manatee County, Florida. He tried to get a divorce under Florida law but his case was dismissed. It was held that he needed to get a divorce in a German court because the marriage was under German law.

Before she died, Angelika wrote a will by hand in Germany that stated Jurgen was to inherit nothing from her. She gave detailed reasons for her decision in the will. She left all she owned to her only child.

After her death, Jurgen filed his petition for administering her Florida estate, asserting he was her surviving spouse and that the handwritten will, presented by the German representatives of her estate, was invalid under Florida law.

The Florida probate court agreed that the handwritten will was not recognized by Florida law. Florida intestacy laws would apply regarding the Manatee County property.

However, whether or not Jurgen would be recognized as the “surviving spouse” would be determined under German law. Not Florida law.

This was because (1) the parties’ entire marriage and separation took place in Germany; (2) the decedent continued to live with their minor child in Germany until her death; (3) the separation agreement was executed in Germany; (4) every connection between the parties concerning their marriage arose in Germany; and (5) the German nexus had already prevented Jurgen Salathe from obtaining a Florida divorce from the decedent in Florida.

Under German law, the couple had separated but had never formally divorced. The laws of the Federal Republic of Germany state that parties are not legally divorced absent a valid, judicially rendered final judgment. There was no final divorce judgment entered in Germany for this couple.

Therefore, the Florida court held that under German law, Jurgen was still her legal husband . He would be recognized as her “surviving spouse” for purposes of distributing the real estate she owned in Florida.

Read the case here: In re Estate of Salathe, 703 So. 2d 1167 (Fla. Dist. Ct. App. 1997).

2. Complicated Family Trees

Under the Florida intestacy laws, “heirs” are those individuals who inherit the intestate property; they are sometimes called “heirs at law.” (The term “beneficiaries” is used for those who stand to inherit under a valid Last Will and Testament.) They are also known as the decedent’s “next of kin.” Grant v. Odom, 76 So. 2d 287 (Fla. 1954).

Only those appointed by law to inherit under the Florida intestacy statutes are considered to be the deceased person’s heirs. If there is not a connection between the statutory language and the person claiming an inheritance, then they are not legally an “heir” and will not inherit under Florida law.

This can be confusing and upsetting in some family situations. For instance, when there are nieces and nephews who are survive their uncle as well as his widow, then they are not considered to be “heirs at law” under the Florida intestacy laws, and his surviving spouse inherits the property they assumed they were entitled to receive. In re Knight’s Estate, 155 Fla. 869, 22 So. 2d 249 (1945).

However, someone who is no blood relation whatsoever may inherit when evidence establishes their “virtual adoption” by the decedent.

Can a Foster Child Inherit Even Though Never Officially Adopted?

When Clarence Williams died, he left no will. His two sons were named as personal representatives of his estate. Clarence also had a foster daughter named Beth Angel Dorrell, who came to live with him and his wife when she was a five week old infant. Williams v. Dorrell, 714 So.2d 574, 575 (Fla. 3d DCA 1998).

The couple raised Beth Angel as their own. She lived with them until Clarence passed away, and Beth Angel took care of Clarence and nursed him in his last illness. She was 27 years old at the time of her foster father’s death. Many times over the years, Clarence had told Beth Angel (and others) that he had every intention of officially adopting her as his child.

Since Beth Angel had never been officially adopted by Clarence Williams, his sons argued to the Florida probate court that she could not inherit under the Florida intestacy laws. She was not his daughter, so she should get nothing.

The Florida probate courts disagreed. It was held that an equitable doctrine called “virtual adoption” applied to Beth Angel’s situation. Under Florida law, “virtual adoption” does not create a parent-child relationship legally, but it does work to prevent injustice when parents fail to take the needed legal steps to formalize their intent. See, Tarver v. Evergreen Sod Farms, Inc., 533 So.2d 765, 766 (Fla.1988); Laney v. Roberts, 409 So.2d 201, 203 (Fla. 3d DCA 1982).

Moreover, Beth Angel provided the needed evidence to establish the doctrine of virtual adoption:

1. an agreement between the natural and adoptive parents;
2. performance by the natural parents of the child in giving up custody;
3. performance by the child by living in the home of the adoptive parents;
4. partial performance by the foster parents in taking the child into the home and treating the child as their child; and
5. intestacy of the foster parents.

See, Williams v. Dorrell, 714 So.2d 574, 575 (Fla. 3d DCA 1998).

Who is a Descendant or Next of Kin?

Under the Florida intestacy laws, “next of kin” is a legal term. It means those people who are related by blood to the decedent, and who legally inherit under the intestacy statutes. Usually, it’s easy enough to figure out who are the “next of kin.”

They will be the nearest blood relations to the person who has passed away. However, some families are shocked to learn how the Florida probate laws divide up family relationships in defining “next of kin.”

Under Florida law, “next of kin” does not include:

  • a brother’s wife,
  • nephews and nieces, or
  • children of a deceased brother, where there are surviving brothers.

Meanwhile, “next of kin” will include relatives of the half blood as well as the whole blood. And, as described above regarding “virtual adoption,” there will be times when someone with no blood relation will inherit.

For example, a stepson has been found to be “next of kin,” Grant v. Odom, 76 So. 2d 287 (Fla. 1954) and where a person died without a will leaving only his grandmother and an aunt, the grandmother was legally held to be his “next of kin” for purposes of inheriting under the intestacy laws, not the aunt. Smith v. Croom, 7 Fla. 81, 1857 WL 1527 (1857).

Why? Blood lines are valued in Florida.

Here, “descendants” under the Florida Probate Code refer to those people who are related by blood to a common ancestor. In re Hewett’s Estate, 153 Fla. 137, 13 So. 2d 904 (1943); In re Levy’s Estate, 141 So. 2d 803 (Fla. Dist. Ct. App. 2d Dist. 1962).

If a person dies, and his aunt survives him then her children are considered his “descendants” because they are all blood related. If that aunt has a son who adopted a daughter, she is not a “descendant” of the aunt because she is not related by blood. Unless virtual adoption applies, she will not be considered a descendant.

Furthermore, a husband is not related by blood to his wife. He is not her “descendant.” However, widowers (and widows) are given special protections as “surviving spouses” under Florida’s intestacy laws.

Florida Intestate Succession

In Florida, our Probate Code sets up a structure to define how property is to be distributed to those who survive the death of the property owner. This is called “succession.” While the intent of the Florida intestacy laws is to organize and streamline “succession” when the property owner dies without a will, there are occasions where things get complex because of the particular situation of the case.

Having a Florida probate lawyer to help plan in advance by preparing an estate plan (even if it’s just a Will) is important. It avoids the application of the legislative scheme on the estate and avoids the foregoing complications. Unfortunately, there will be people who pass without a valid will, and in these situations it can be critical for family members to enlist the aid of a Florida probate lawyer to insure that their inheritance is recognized and protected.

A good piece of advice if you are faced with a Florida estate with no valid Will, is to at least talk with a Florida probate lawyer to learn about your rights. Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.
 
 
 
 
 
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Who are “Interested Persons” and Can They Be Disinherited or Blocked from Challenging a Will?

Posted By on May 18, 2016

In Florida, probate estates are created when someone passes away. At that time, and after a petition is filed, a “Personal Representative” is appointed by the Florida probate judge to oversee distribution of the property held by the estate to the heirs and beneficiaries after the creditors have been paid.

Anyone who has a reasonable expectation that they will be impacted by the administration of a decedent’s estate is considered to be an “interested person” of that estate. They have rights that they can pursue – including the right to file a will contest or to sue the personal representative for breach of his or her fiduciary duty.

 

Webster County, Nebraska courthouse courtroom 1

Interested Persons Have Standing To Challenge a Florida Will in Probate Court

Legal Definition of Interested Person in Florida Statute

Florida Statute § 731.201(23) defines an “interested person” as: “… any person who may reasonably be expected to be affected by the outcome of the particular proceeding involved.”

It is a definition that is intentionally broad. Why? It is written to cover more than the named beneficiaries or the surviving spouse. For instance, the personal representative of the estate as well as a trustee of a trust are also considered to be an interested person. See, Florida Statute § 731.201(23).

So who else is covered by this legal term?

It is not a cut and dry determination. When determining who is an interested person in a Florida Estate the answer depends upon the purpose of the proceedings involved and the subject matter that is at issue.

How Do You Know If You Are An Interested Person in a Florida Estate?

Beneficiaries to an estate usually learn they have been named in the decedent’s Last Will and Testament from a Notice of Administration that they receive from the estate’s personal representative. Under Florida Statute 733.212, the personal representative is legally required to find the people named in the will and give them notice that they are beneficiaries of the estate. The surviving spouse is also legally required to receive a Notice of Administration, as are all other interested persons.

So, the easy answer to this question is, you will know if you are an interested person to a Florida Estate because you will receive a Notice of Administration letting you know that the personal representative considers you to be one.

Is Notice The Final Answer?

However, if you are not given an official Notice of Administration by the Personal Representative, this does not mean that you are not an interested person to the estate. It means that the personal representative has failed to consider you as interested, or has made a determination that you are not qualified to be one.

This does not mean that this is true. The Personal Representative can be wrong.

Filing a Petition with the Probate Court

If you believe that you are an interested person to a Florida Estate but you did not receive a Notice of Administration, then you may need to hire a probate lawyer and file your own proceeding in the probate court to assert your claim and your rights.

For instance, under Florida Statute 733.105(1)(b), you can file for a determination of “the beneficiaries or their shares” when there is “doubt about” the “shares and amounts that any person is entitled to receive” as an “interested person.” This is a lawsuit that is filed in the probate court as part of the estate’s administration.

Can an Interested Person Be Blocked From Challenging a Will or Be Disinherited by the Decedent?

Just because someone believes that they meets the definition of “interested person” does not mean that they are guaranteed to receive property in the distribution of the estate’s assets. An otherwise valid “interested person” can be disinherited, for example, and be legally barred from getting anything from the estate.

The Case of the Disinherited Son Who Wasn’t An Interested Party

In the case of Newman v. Newman, 766 So. 2d 1091 (Fla. Dist. Ct. App. 5th Dist. 2000), the decedent died after finalizing two different wills. The first will left his son only one dollar; the second will left him nothing. When the son tried to establish his standing in the probate matter as an “interested person,” so he could file a will contest regarding the newer will, he failed. The court held that he was not able to be considered an “interested person” because the first will had never been shown to be invalid and in that will, he was cut out of an inheritance by his father.

Here’s what happened.

Arthur M. Newman, Jr. (”AM”) was married to his second wife, Ethel, when he died. They didn’t have any children together, but AM did have a son from a previous marriage, Arthur M. Newman III (”Arthur”). AM died in June 1997, and his widow Ethel (91 years old at the time) filed his will for probate.

This was his second will, dated August 1962, It named Ethel as his personal representative and left all of his estate to her, as his wife. This will also provided that if Ethel should have died before AM, then his estate would be distributed 50% to his wife’s children and 50% to his son Arthur.

This second will, leaving all to Ethel, was admitted to probate. Arthur filed a will contest challenging the will, arguing that it was a forgery. Ethel defended the will against Arthur’s challenge.

Sadly, Ethel passed away in the midst of this litigation. Her successor personal representative filed a summary judgment motion with the probate court, arguing that Arthur had no evidence that there was a forgery here. All Arthur had was an opinion given by a handwriting expert he had hired. Meanwhile, Ethel had filed the attorney’s affidavit who had prepared the contested will, swearing that it conformed to AM’s wishes.

Arthur countered not only by filing affidavits of his son (Arthur IV) and his grandson (Arthur V) but AM’s brother, all giving their opinion that the will didn’t represent AM’s wishes and that the signature wasn’t his.

Arthur also filed a Motion to Determine Beneficiaries, arguing that he was an interested person in the estate, and that because Ethel had died before the estate had been distributed, Arthur along with Arthur IV and Arthur V should be considered interested persons and beneficiaries of the estate.

The probate court did not agree with Arthur. Neither did the reviewing court when he appealed that decision.  According to the court,

1. It was found that Arthur had intentionally and without good cause delayed the estate’s distribution until Ethel died. The trial court judge ruled that Arthur had “delayed matters for almost two years in the hopes that his step-mother, Ethel Newman, who was 91 years of age when her husband, the decedent, died would not survive the will contest and the petitioner then could claim one-half of the estate under the terms of the 1962 will if Ethel Newman died prior to the distribution of said estate.”

2. The court also found that Arthur lacked standing to come before the probate court in the first place because he was not an interested person as that is defined in Florida law. Arthur never challenged his father’s first will, and he acknowledged it as being genuine as he was discrediting the second will as a forgery. While “any interested person” may bring a will contest in Florida, Arthur didn’t meet this definition.

Why not? His father had disinherited him in that first will. AM left his son a single dollar in that first will. This is considered a means of disinheritance in Florida law, to leave someone only a “de minimis interest.”

Since Arthur failed to meet his burden to show that his father’s first will, which disinherited him, was invalid he wasn’t an interested person in the subsequent will. (If he had won a will contest and had the subsequent will thrown out, that first will would have gone into effect and under its terms, he would only get one dollar.)

The Case of the Contesting Son Who Was an Interested Party

Just because one son in one probate controversy would not be considered an interested party to that probate proceeding because he wasn’t a direct beneficiary named in the will doesn’t mean that this will be true in a similar situation. Each case must be considered based upon its own circumstances in order to determine if the “interested person” definition applies.

For instance, if a father sets up his will so that two testamentary trusts are created, then places his wife in the position of personal representative and the person who holds a life estate interest in his property, then his son is not named as a direct beneficiary. The estate has been designed so the property isn’t broken apart and distributed at the father’s death. The widow is protected.

This son isn’t named in the will just like Arthur wasn’t named in the will. That doesn’t mean that Arthur’s case controls.

The Watkins Will Contest

In the case of In re Estate of Watkins, 572 So. 2d 1014 (Fla. Dist. Ct. App. 1991), there was another nasty and acrimonious family fight in the probate courts. Here, a son challenged his mother who was acting as the personal representative of her dead husband’s estate, in accordance with the directive in his Last Will and Testament.

The son claimed his mother committed fraud and stole money out of the trust principal (of the trust set up by the will). According to the son, his mother had unduly influenced his father in order to get the Last Will and Testament that favored her. Under this will, she got income for life and when she died the trust principal and income would be distributed to her descendants, of which this son and contestant was one.

After his father’s death, the son argued that she had spent so much money that she had exceed the income payments and dipped into the trust principal. Oh, and the son also argued that she had breached her fiduciary duty as personal representative of the estate, too.

The mother fought back.

Her first argument was that her son was not an “interested person” with standing to get the will revoked. Why? The will had a lapse provision in it, and her son’s interest was merely a contingent interest in the property since she owned the life estate.

The appellate court did not agree with her. It agreed with the son.

According to the reviewing court, the son is an “interested party” to the probate and can challenge the actions of the personal representative. Even though the son did have a contingent interest in the trusts, and his interest might never “vest in possession or enjoyment,” as the mother had argued, the son’s contingent interest was “vested” legally.

The son did have a legal interest in the property which was reasonably expected to be impacted by improper administration of the estate by the personal representative. The legal definition of “interested person” as provided in the Florida Probate Code had been met by the son.

Questions or Concerns About Inheritance in a Florida Estate?

If you or a loved one are concerned that you may have rights to property being administered in a Florida probate proceeding, then you need to investigate whether or not you have a legal right to challenge the estate’s administration as well as to inherit from the estate. Every fact pattern is different requiring independent consideration of the issues.

You may or may not be considered an interested party by the personal representative and may or may not receive a Notice of Administration. That fact alone is not determinative of your status.  You may need to seek the help of the Florida Probate Court to answer that question.

A good piece of advice if you are faced with these issues, is to at least talk with a Florida probate lawyer to learn about your rights. Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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Can Florida Personal Representative Directly Transfer Securities (Stocks, Bonds) to the Beneficiaries?

Posted By on April 20, 2016

A Personal Representative of a Florida Estate has legal possession and control of all the property owned by the person who has passed away (the “decedent”). This power is usually given to the P.R. both under the terms of the Last Will and Testament as well as the Florida Probate code. The P.R.’s duties will include things like making sure all the assets are safeguarded and everything has been collected and inventoried so the estate’s debts can be paid and the inheritance distributed to the beneficiaries.

Some of these assets will be tangible things like cars and clothing and jewelry; however, most Florida estates also hold financial assets like stocks and bonds. It’s one thing to hand over the keys to a vehicle, but how does the Personal Representative handle the transfer of securities to the beneficiaries? That’s not always an easy question to answer.

What are Securities?

Florida estate can hold all sorts of assets that can be categorized as “securities.” A security is defined as a financial instrument that represents one of the following:

1. Ownership in a publicly-traded corporation (stock);
2. Creditor to a government or corporation (bond);
3. Rights to Ownership (option).

Any of these types of securities are real assets recognized by state and federal law. They can be negotiated, i.e., bought and sold. They can be given a specific value in dollars and cents. And, they are issued either by governmental entities or corporate entities to individuals: the company or governmental entity that gives them out is called their “issuer.”

There are different classes of securities. First are the “certificated securities.” These are held in actual paper documents. Second are the “direct registration” securities, where they are recorded by a transfer agent on behalf of the issuer without the need for printing out a physical certificate. The rights of the issuer and of the owner are the same in either class.

Third, there are “bearer securities,” which are transferred directly between investors by endorsing them and handing them over. These are rare.

Finally, there are “registered securities,” which have the name of the holder on them, but the issuer maintains a register of necessary details pertaining to the securities. Transfers are made through “amendments” to this register. There can be registered debt securities and secondary market shares.

 

Allied Paper Corporation Stock Certificate 1964

Stock Certificate for Allied Paper Corporation

 

Step One: Securities Placed Into the Estate

As part of the Personal Representative’s duties to the estate, all stocks and financial securities that are held in the name of the decedent must be placed into the name of the decedent’s estate in preparation for legal transfer of ownership. This must be done no matter how the securities are held (paper, electronically).

As a general rule, their ownership will be referenced as “ [name of Personal Representative], Personal Representative FBO Estate of [name of decedent].” The tax identification number for the estate will be noted on each security along with this new owner name.

A good practice is for a new brokerage account to be opened in this ownership name, as well, so any dividends and interest that are generated before the ultimate transfer of ownership to the beneficiaries can be collected by the estate. This is something that brokerages are accustomed to doing, so they can be helpful and instructive. Often, they will require (1) certified copy of the letters of administration; (2) affidavit of decedent’s domicile as Florida domiciliary; and (3) certified copy of the death certificate.

Does this have to be done? Yes. This is a temporary and necessary leap-frog in ownership. The stocks must be moved into the estate’s ownership in order for there to be a proper legal change in ownership. The decedent can no longer transfer legal title. That is now the duty of his Personal Representative.

Accordingly, in order for there to be a transfer of any financial asset, stock or bond, to a beneficiary, the legal ownership must be changed to reflect the decedent’s estate. Then, the Personal Representative will have the legal ability to transfer them.

Step Two: Transfer of Securities to Beneficiaries by Personal Representative

 

1. Florida Probate Code

First of all, before any change in ownership to the beneficiaries can be undertaken, the Florida Probate Code must be reviewed and followed. Under Florida Statute 733.612, the legal authority of the Personal Representative is outlined and must be followed unless there is a specific court order and will provision that provides an alternative. Florida Statute 733.805 is another law that must be checked, because it gives the Personal Representative guidance in how she is to prioritize her work for the estate.

Florida Statute 733.603 provides: “A personal representative shall proceed expeditiously with the settlement and distribution of a decedent’s estate and, except as otherwise specified by this code or ordered by the court, shall do so without adjudication, order, or direction of the court.”

Thus, Florida probate law, as a general rule will allow a Personal Representative, without court order, to take possession and control of the stocks and bonds held by the decedent. The probate statutes will also allow the Personal Representative to transfer these assets to the beneficiaries if otherwise allowed in an “expeditious” manner.

Which may mean that transferring the estate’s securities may be one of the first asset transfers that the Personal Representative undertakes. (For more, read our prior posts on interim distributions.)

2. Last Will and Testament

Secondly, the language of the decedent’s Last Will and Testament must be read. What provisions speak to these assets? The wishes expressed in the will must guide the Personal Representative here. For example, if the stocks owned by the decedent are to be sold in order to pay off the student loans of his grandchildren, then this must be done. The Personal Representative will have a legal duty to follow this directive even if the beneficiaries would prefer that the stocks be transferred to them.

3. Security Document Language

Third, each security must be examined. Not all security instruments are the same. The procedure for transferring ownership in securities will vary depending, for example, upon on whether the asset is a stock or bond and whether it is a publicly traded security or it is a private security.

A. Street Name

Stocks and other securities may be held in a “street name.” This is sometimes call being held as a “book entry.” Here, there are no actual stock certificates that can be held in one’s hand, they are held electronically by the broker. The Personal Representative completes a form provided by the broker that allows him to transfer ownership via the broker.

The form identifies the name, address, and Social Security Number of the beneficiary as new owner. There must be a Medallion-guaranteed signature (more on that below) by the Personal Representative. The beneficiary will also be required to complete a Federal Income Tax W-9 Form so future revenue generated by the securities for its new owner can be reported to the U.S. Treasury Department.

B. Paper Certificates or Electronic Form with Depositor Trust Company

When there are actual paper certificates involved, they can be transferred once again with the help of a brokerage house like Charles Schwab, Edward Jones, or MerrillLynch. Here, the Personal Representative must send her official letter of authorization provided by the probate court to the brokerage, notifying them of the decedent’s passing and the Personal Representative’s legal authority over the estate’s assets.

Upon receipt of the Personal Representative’s notification, the brokerage sends both the stock certificates held in their care and their preferred transfer of ownership form to the Personal Representative.

The Personal Representative then takes all these documents to a bank, or to a member firm of the New York Stock Exchange, where a “Medallion Signature Guarantee” is placed on the certificates for the Personal Representative to sign as required by the Securities and Exchange Commission. This is a federal mandate to protect against fraud and theft and maintain the integrity of the securities markets.

For more on the requirements of a Medallion Signature Guarantee, read the SEC directive, “Signature Guarantees: Preventing the Unauthorized Transfer of Securities.”

Once the certificates have been given their official Medallion Guarantees, the stocks are returned to the brokerage. At this point, the brokerage can re-issue the stocks in the names of the appropriate beneficiaries.

C. Guidelines and Procedures

The procedure for actually transferring each security will be covered by security guidelines. Personal Representatives, as well as beneficiaries, can determine how each security held by the estate should be transferred by checking first with the Securities Transfer Association (STA) Guidelines (latest revision 2015). (These can be downloaded in pdf form here.)

These guidelines cover any security, as defined by Section 8-102 of the Uniform Commercial Code (”UCC”), including certificated limited partnership interests, stock purchase warrants and options, notes, bonds, debentures and voting trust certificates, as well as “uncertificated securities.”

Additionally, each transfer agent will have its own forms and documents that will be needed to complete the transfer. Checking with their website may provide the necessary information here. And, there’s always the option of placing a phone call or writing a letter asking in advance for what documentation will be required for that particular security transfer.

D. Affidavits

There may also be a requirement that a sworn statement, or affidavit, be provided by the Personal Representative before the transfer can be made. These affidavits are required in order to evidence that the decedent’s taxes and debts have been paid, as well as the residence and domicile of the decedent at time of death.

Statements may also include that no transfer tax applies to the transaction, and that the transfer is being made to a beneficiary in accordance with the provision of the owner’s Last Will and Testament.

E. Joint Tenancy With Right of Survivorship

When a security is held in joint tenancy with right of survivorship, then the surviving tenant becomes sole owner of the security. It does not come into the ownership of the estate and the Personal Representative has no control over it. Here, the surviving tenant will be responsible for contacting the brokerage house and taking the necessary steps to complete the procedures required to remove the decedent’s name from the certificate.

F. Lost Securities

What about securities that are known to exist but cannot be located? The Personal Representative will have a legal duty to replace these certificates so they may be legally transferred to the beneficiaries. This will be governed by the provisions of UCC Section 8-405(a), which requires any claim that a security certificate has been lost, destroyed, or wrongfully taken, follow all “reasonable requirements” of the issuer of that security before a new stock is issued to the estate, including but not limited to a sufficient indemnity bond.

Questions or Concerns About a Stock or Bond Owned by a Florida Estate?

If you or a loved one are aware of security certificates owned by a decedent in an estate in which you are an heir or beneficiary, or maybe it’s part of an estate that you are owed money as a creditor, then you may need to learn more about those stocks or bonds and if they are available for transfer to you before the conclusion of the estate.

An experienced probate lawyer can help you here. And the cost of having a Florida probate attorney go over these things with you can be much less in time and money than many folk assume.

A good piece of advice if a loved one has passed away and there may be an issue with their securities, is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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How Does A Personal Representative Deal With Special Assets In A Florida Estate?

Posted By on March 16, 2016

While it is true that you can’t take your assets with you, you certainly can control how your affairs are handled after your death. The provisions of a Last Will and Testament can not only control the distribution of assets, but it can also direct how assets are to be cared for or disposed of to protect other assets of the estate. Rest assured, Florida probate judges want a decedent’s Will provisions followed.

Accordingly, a Personal Representative for a Florida Estate has a legal duty to follow the provisions of a Will as written;  a personal representative can not administrate an estate according to what is easiest for them to do. A Personal Representative must follow the directions in a Will, without consideration of their own self-interests.

This rule is true even if though not all assets are the same.  Some assets may need special attention, liked being stored in an air condition controlled facility. Meaning, a personal representative may have to make some decisions that can cause controversy between beneficiaries, creditors, and the Personal Representative (like selling some assets to preserve others). These decisions can even lead to allegations of breach fiduciary duty against the Personal Representative — fortunately, past case precedent as well as the Florida Probate Code and rules provides guidance for Personal Representatives on how estates should be administered no matter how strange or special estate assets may be.

 

Wine bottles in a rack

What about the wine collection?

Dealing With Special Assets

Once a Personal Representative accepts the task of overseeing an estate and making sure the decedent’s wishes are carried out, as written in the Last Will and Testament, that person will soon discover that the decedent owned all sorts of things. Most people do.

For instance, homestead property as well as investment properties, like rental houses or commercial property, are common assets here in Florida. Cars, trucks, and other motor vehicles as well as recreational vehicles (e.g., motor homes, travel trailers) and boats are also likely to be included on an inventory of a Florida estate.

However, many people own different and unique kinds of property that may need special care and treatment. By their very nature, these assets will need attention and care from the Personal Representative that other kinds of assets will not demand. And, because of their particular characteristics, there may be times when the Personal Representative’s duties may require a tough call in deciding how best to handle those assets.

Unique Assets May Mean Tough Calls for the Personal Representative

Sometimes, the Personal Representative will have a hard decision to make: follow the black letter of the Last Will and Testament regarding the special needs of some assets versus other assets, in order to protect the overall value of the estate and, ultimately, the inheritance of the beneficiaries and the debts owed to creditors.

When can this happen — what kinds of assets create these kinds of problems? These strange or special assets can come in several forms, such as Wasting Assets; Perishable Property; Under-productive Assets; and Non-productive assets.

1. Perishable Assets

Assets that can perish if left without attention of some sort are considered to be “perishable property” of the estate. Immediately upon discovering that the estate owns perishable property, the Personal Representative needs to take action.

First of all, perishable assets must be located and secured. Then, steps must be taken to keep the perishable assets safe from harm.

Perishable assets can include fine wines and other assets that are vulnerable to losing their usefulness or their value if left unattended. In Florida’s climate and weather conditions, the heat and humidity (particularly in the summer months) may harm or destroy assets, including fine fabrics, pieces of artwork, metalwork, and other valuables. Assets may be considered perishable property here that might not be perishable and vulnerable in other states or in other environments.

What if the cost of securing and storing these perishable assets is expensive relative to other assets of the estate?  What happens if there is little or no liquidity in the estate to pay for these costs? These type of issues are examples of problems a Personal Representative can face when dealing with special estate assets.

The personal representative will have to decide whether to spend money to store and protect the perishable assets, or to sell the perishable property quickly in order to cut storage costs for the Estate. If the Personal Representative decides the best course is to sell the perishable property, then he or she can do so without seeking a court order approving the sale (if the Letters of Administration are not restricted – meaning, the Court hasn’t stamped the Letters with language stating that all asset sales must be approved by the Court). See, Florida Statute 733.603. However, many Personal Representatives may find it the more prudent course to go ahead and bring the matter up before the Florida probate court, and have the protection of the judge’s approval before they sell the perishable asset.

2. Wasting Assets

Wasting assets are property that lose value over time, or will lose their value as they are used. Examples include cars and trucks owned by the decedent.

Wasting assets are drains on the estate’s bottom line; therefore, the prudent thing for a Personal Representative to do is sell the wasting assets or otherwise dispose of them as soon as possible to minimize the loss to the estate that holding onto them would incur.

However, what happens if these are specifically mentioned in the Last Will and Testament? Or, what if these wasting assets produce income, or they have other financial consequences?  There may also be tax considerations of holding onto assets versus disposing of them.

If an asset produces enough income to cover its upkeep, then maybe it shouldn’t be sold right away. What kind of asset might that be? A patent owned by the decedent might be an example here. Other wasting assets include any rights in natural resources like oil and gas, or other mineral rights (e.g., natural gas or timber), that diminish in value because of removal or depletion; others include securities-related assets like call options (or puts) that will expire on a certain date and time.

3. Non-Productive or Under-Productive Assets Owned by a Florida Estate

When a Florida Personal Representative is evaluating all of the estate’s assets, he or she should be evaluating the assets with an eye towards what is in the best interests of the estate (and its interested parties, the beneficiaries and creditors). This is the essence of the Personal Representative’s fiduciary duty to the estate (the breach of which makes her personally liable to the beneficiaries and interested parties; for more on these duties, see our earlier post).

Which means that when the Personal Representative discovers an asset that is not productive or that is under-productive, then he or she needs to make some decisions regarding that piece of property. These kinds of assets include stocks and bonds, and other financial instruments, as well as property that may have an expense accompanying it (such as a piece of artwork that is being insured).

Under Florida Statute 733.612 (l), a personal representative may “… [r]etain assets owned by the decedent, pending distribution or liquidation, including those in which the personal representative is personally interested or that are otherwise improper for fiduciary investments.” So, if the Personal Representative decides that keeping the asset for distribution is the best decision in the circumstances, then by law, he or she need not sell it even if it is non-productive or it is under-productive.

There are times when sentimental value must be considered, even if it does not impact the bottom line. The landscape painting that the decedent displayed over the mantle may no longer be in vogue, but the decedent’s granddaughter has fond memories of it and considers it to be priceless.

Additionally, under Florida Statute 518.11 (”the prudent investor rule”), there are times when the Personal Representative can legally hold onto under-productive assets when doing so makes good financial sense. Acting as a prudent investor on behalf of the estate, the Personal Representative must exercise reasonable care to oversee the estate’s entire investment portfolio as a whole. If there are some stocks or bonds or other financial instruments within that portfolio that are under-productive, taken by themselves, then they may be considered “under-productive assets” of the estate.

Still, if the Personal Representative has a reasonable basis for considering the asset to be valuable to the investment portfolio as a whole, given the facts and circumstances prevailing at the time, then the Personal Representative may keep that asset within the estate despite its questionable performance. The key here is considering the entire portfolio and its performance, not each asset independently of the other.

Another situation: securities in closely held business entity. Here, the problem may be solved because they may be tied to a redemption agreement between the decedent and the company; often, there will be life insurance policies on the decedent with the company as beneficiary to pay for the liquidation of the interest. However, if the decedent was actively managing or operating this business at the time of his death, then the Personal Representative may have more to do than just seeking to liquidate the interest.

Here, these securities have to be evaluated for their productivity. If they are non-productive or under-productive to the estate, then the Personal Representative must evaluate what is best for the interested parties. It may be that the heirs want to continue with the business, operating it themselves. If so, then the securities should be retained. Otherwise, it may be best to sell the securities for the benefit of the estate, or to dissolve the entity itself and then sell off its assets.

Questions Or Concerns About A Special Asset Owned By A Florida Estate?

If you or a loved one are aware of an unusual or special asset owned by a decedent in an estate in which you are an heir or beneficiary, or maybe it’s part of an estate that you are owed money as a creditor, then you may need to learn more about that asset and whether or not the Personal Representative is taking the proper action regarding that asset. It is possible that you may need to seek the help of the Florida Probate Judge in objecting to what is being done by the Personal Representative and stopping the asset from being sold or disposed of in other ways.

An experienced probate lawyer can help you here. And the cost of having a Florida probate attorney go over these things with you can be much less in time and money than many people assume to be the case.

A good piece of advice if a loved one has passed away and there may be an issue with their assets, is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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Florida Personal Representatives And Marshaling The Estate Assets

Posted By on February 17, 2016

In Florida there are well-established probate laws that place a high burden upon the person who undertakes the job of administering the estate of someone who has passed away. The estate administrator, or “personal representative” (which you may recognize as the “executor” or “executrix”) acts as a “fiduciary” to the decedent’s beneficiaries and creditors. Under Florida law, there is no higher level of responsibility than to act as a fiduciary for someone else or their estate.

What does this mean? All personal representatives, must act with the utmost integrity. They are in a position of trust and must act accordingly. Meaning, they must act in the best interest of the person or estate they are representing.  Undertaking the job of a personal representative comes with knowing that their work will be reviewed and questioned, and that’s the best case scenario.

The worst case? Personal representatives can be sued and held liable for financial damages they may cause to the estate and its interested parties, if they are held to have breached their fiduciary duty.

What is Marshaling the Assets?

In Florida, and within 60 days of the issuance of the Letters of Administration, each personal representative is required to prepare and file with the probate court an inventory of all the assets, and their date of death value, owned by the decedent at the time of their death. If a Personal Representative fails to locate a piece of personal property, or track down all the real estate owned by the person who has died, then they can be held personally responsible for that failure. Consequently, most Personal Representatives are careful to make sure that they’ve made every effort to find and collect (and, in some cases, had appraised) all of the decedent’s assets.

It’s in the best interests of the beneficiaries and creditors that they do so. It’s also in the best interests of the Personal Representative, personally.

The process of collecting all of the assets, and preparing the estate’s inventory, is called “marshaling the assets.” And it can be confusing, complicated, and messy.

 

General Picture

Marshaling the assets of an Estate is much more than collecting and organizing it for a garage sale.


 

Finding The Paperwork

Once the Personal Representative has been appointed by the probate judge and is issued the “letters of administration”(the official document that acknowledges the right for the personal representative to administer the estate), one of the first steps is to gather all of the documentation that he or she can find regarding the decedent’s property holdings (real and personal), as well as documentation about any debts (credit card, medical, or otherwise) and other business matters. The Personal Representative has the legal right to search not only the decedent’s residence but also their boat, office, storage room, gym locker, and place of business. The Personal Representative may have a duty to talk with the decedent’s lawyer, accountant and stock broker, as well, in order to track down asset information.

All sorts of documentation may be collected in this process, including things like:

Pension plans
IRAs
Income tax returns for the past few years
Marriage certificates
Trust agreements
Life insurance policies
Divorce documents
Car titles
Bank statements
Insurance policies (health, life, car, long-term care, funeral plan, etc.)
Partnership agreements
Stocks and bonds
Corporate documents
Deeds of trust
Real estate titles
Leases
Certificates of Deposit.

The Safety Deposit Box

As part of gathering all this paperwork, the Personal Representative will often find documents referencing a safety deposit box at a local bank or credit union. Often, there will be more than one name listed with the bank has having the legal right to access that safe deposit box: both the decedent and another person (or several people). Husbands and wives are both listed as having joint access, for example, in many situations. Parents and their children, likewise, may all have legal access to the same safe deposit box.

The bank is legally required to allow anyone to access that safe deposit box at any time; if one of the people listed as having access dies, even the one paying for it, that won’t matter. Two things are important here for the Personal Representative.

  • First, it’s important for the Personal Representative to work with bank officials to gain fast access to the box in order to check for any burial plot deeds or funeral instructions — or even another will. This can be done by working with the financial institution officers, who can open the safe deposit box for the Personal Representative in order to remove a will as long as there is an agreement allowing the person to have access or an order from the court.
  • Second, the Personal Representative will need to check to make sure that everything in that safe deposit box is collected and inventoried for the estate. If someone has accessed the safe deposit box after the passing of the decedent, or in the months prior to their impeding death, then an investigation into the possibility that valuables belonging to the estate need to be retrieved from that person may be warranted.

Only Probate Assets Should be Marshaled for the Estate

Not everything that is owned by the decedent is part of their estate. There are certain kinds of property that legally are NOT “probate assets.” The Personal Representative cannot marshal these assets for the estate; they are not assets to be inventoried because they are excluded under the law from the probate process.

What are non-probate assets? As a general rule, they are based upon contracts that by the terms of the agreement keep the asset out of probate. Here are three common examples of assets that are NOT to be marshaled by the Probate Representative:

1. Life Insurance Policies

Life insurance policies, by definition, are contracts between the insurance company and its policy-holder to pay a certain amount of money to the selected recipient (beneficiary) upon the death of the policy-holder. The decedent’s passing creates a contractual duty upon the insurance carrier to pay money to the listed beneficiary. This money is never an asset of the estate, unless the estate is a named beneficiary or there is no beneficiary listed on the policy.

2. Jointly Owned Bank Accounts

Many checking accounts are held in the names of more than one person. A married couple may have a joint bank account. A parent and their college-age child may have a joint checking account, used primarily by the student for college expenses. Elderly parents and care-taking relations, likewise, may find a joint checking account to be a great convenience.

The contract between the bank and its account holders will define the rights that they have to the account. If all the signatories to a bank account are listed with the bank as joint owners, then the passing of one of them doesn’t impact the right of ownership held by the other(s) under that contract. They own what’s in the account both before and after the date of death, according to the contract with the bank. The amount held in that account never becomes a part of the estate. These are known as “Joint Tenancy with Right of Survivorship” accounts.

3. Retirement Accounts

Often a retirement account or pension plan is based upon a contract whose language clarifies that ownership passes to named beneficiaries if the retiree (or pensioner) passes away. This is similar to the legal provisions of a life insurance policy: by the contractual terms, the monies are to be paid to the person designated to receive them, and the estate is never involved.

However, just because these kinds of non-probate assets were owned by the decedent, doesn’t mean that the Personal Representative can quickly mark them off his or her list of tasks. It is important that the Personal Representative make sure that they really ARE non-probate assets. For instance, not every bank account with multiple signatures is a JTWROS account — and if it’s not, then that account may be an estate asset even if more than one name appears on the checking account.

Difficulty Finding the Estate Assets?

The Personal Representative’s job of finding and collecting estate assets can be complicated and overwhelming at times. Different kinds of assets mean different tasks to perform and some institutions don’t make it easy to gather assets.  Most financial institutions act as if they are in the business of just collecting assets and not in the business of giving them back.

A lot of times, the easy job for the Personal Representative will be to secure property (like storing the car in a garage or other safe location). Another relatively simply task: finding the decedent’s wallet and safeguarding it along with the decedent’s drivers license, passport, voter’s registration card and credit cards.

However, if the decedent ran a business or owned a partnership interest in a going concern, then the job of marshaling estate assets can become very complex. Sometimes, the Personal Representative may even have to take on the role of manager, running that business until things can be sorted out.

Why? The Personal Representative has the job of protecting the value of these estate assets. Part of that job means making sure that the business keeps turning a profit, or that the operations don’t go idle because the decedent isn’t there to run things.

It is in these more complex situations of marshaling the assets that an experienced probate lawyer can be of great help to the Personal Representative. Not only can a probate attorney assist the Personal Representative in protecting these complicated estate assets, the lawyer can work fast to block any attempts by others who may be interfering or attempting to influence the business operations during the administration process.

A good piece of advice if a loved one has passed away and there may be an issue with their assets, is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

If you found this information helpful, please share this article and bookmark it for your future reference.

Collecting Debts Owed To The Decedent

Posted By on February 3, 2016

When someone passes away in Florida, our probate laws work to protect that person’s property on behalf of their heirs, beneficiaries, and creditors. An “estate” is created and overseen by an administrator approved by a Probate Judge.

This administrator, or the “Personal Representative” (which most people recognize as an ‘executor’), has the job of making sure that every single asset is collected, protected, and inventoried.  It doesn’t matter how big or how small: the decedent’s assets must all be located and protected for their distribution to the beneficiaries who are in line to inherit – or to creditors who are in line to be paid.

Some of these assets are easy to locate and transfer to the heirs. The cars, the furniture, the TVs, the real estate: these are easy to locate and list on the inventory.

 

 

However, for many probate estates, things can be tricky — they may have accounts receivable or debts owed to them. These are assets, too. And it’s the job of the Personal Representative to determine everything that is owed to the estate and make sure those debts are collected by the estate.

1. Variety of Debts Are Owed To A Decedent

Any debt owed to the decedent is an asset of his or her estate. If there is a handwritten I.O.U., then it’s an asset of the estate no matter how informal it might be. Written on a napkin, jotted down on a piece of notebook paper — if the Personal Representative determines it’s a valid debt, it’s included in the estate.

Other kinds of debts that may be owned by the estate include notes and accounts receivable. If the decedent ran an Etsy store, for instance, or worked for themselves refurbishing furniture or repairing cars, then they would have accounts receivable that the Personal Representative is required to inventory and collect. If there is a note for a car that the decedent sold to his nephew, then that counts as a debt to be collected by the Personal Representative, too.

2. Calculating The Exact Amount Owed to the Estate

The first step for the Personal Representative related to these debts is to determine the amount owed to the decedent at the time of the death (meaning, are there any outstanding payments due?). After reviewing the debt instrument, the Personal Representative calculates the amount due and owing and determines if there is a single amount due, or if there are periodic payments to be paid. If there is a payment schedule attached to the debt instrument, then the Personal Representative needs to keep track of that information.

Additionally, if there are any past due amounts, those have to be calculated along with any late charges that might apply. Some people may assume that if the person has passed away, then their debt has been canceled and they may stop making payments on their debt. However, a legally binding debt is not automatically “paid in full” when the debtor dies in most instances (meaning the debt survives the death of the note holder) which means the money still needs to be paid.

3. Notification to the Debtors

After the Personal Representative determines all of the outstanding debts owed to the decedent, then he or she must notify each of these debtors that the estate will be the new party responsible for collecting the payments. The name and current mailing address of each debtor will be collected and a formal written notice will be sent to each debtor informing them of the name of the new creditor to whom they should be making their payment.

Included with this notice should be confirmation of the decedent’s passing, and the date of death, as well as the formal demand by the estate that the debt be paid. The name and address of the Personal Representative should be included, as well as the Personal Representative’s itemization of the debt (amount owed, dates of payment, etc.).

4. Past Due Amounts at Time of Death

If there were debtors who were already behind in paying their debts to the decedent at the time of death, then the Personal Representative may have a duty to commence collection efforts. As a fiduciary to the beneficiaries as well as the estate’s creditors, the Personal Representative has the obligation to collect all monies due and owing the estate.

5. Accounting Principles Must Be Used for Debts Owed to the Estate

When the Personal Representative has completed all of his or her tasks in administering the estate, except for distributing the assets, then it’s time for the Final Accounting to be filed with the Probate Court. In the Final Accounting, the Personal Representative will list all the debts owed to the estate and how the payments made on those debts were tallied. The allocation of receivables may be either “principal” or “income.”

There are certain accounting principles that the Personal Representative must follow here. The failure of the Personal Representative to adhere to these accounting principles may be argued as a breach of her fiduciary duty; therefore, a prudent Personal Representative will work with an accountant or CPA (certified public accountant) to make sure that all their I’s are dotted and the T’s are crossed.

These allocation principles include:

1. If they were due, but not received or paid, before the death of the decedent they are to be considered as principal of the estate. Florida Statute 738.302(l).

2. If they didn’t have a due date, then they accrue from day to day before and after death. The amount accruing before the date of death is principal; after the date of death is income. Florida Statute 738.302(2).

3. If they were due after the date of death and they were paid, they are not prorated and are determined under normal principal and income accounting rules.

4. Any payments made on income-producing assets of the estate are considered income.

5. Net profit of any business that the decedent operated (sole proprietor or partnership) is considered income to the estate.

6. Corporate dividends payable before the date of death are principal; those payable after the date of death are income.

Obviously, the task of overseeing, collecting, and properly distributing the debts owed to the decedent at the time of death can be complicated for the Personal Representative. Moreover, how those debts are valued and accounted for in the estate may make a difference in the amount of inheritance received by a beneficiary; the answer a lot of times depends upon the language of the Last Will and Testament, the Trust Agreement or other governing documents, as well as the applicable probate laws.

Questions Regarding Debts Owed to Florida Estate

There can be many questions regarding what is owed and how it is collected and accounted for after someone passes away in Florida. A debtor should not assume that they get a windfall just because the person to whom they owe money has died. Who receives the payment stream and where the payments are to be sent can be confusing.

Debtors may need help in determining their legal rights in these situations, including confirming how much they owe, or don’t owe, and who they should pay when dealing with a creditor who has died.

Beneficiaries may also have concerns over debts owed to the estate, particularly if the decedent is holding a mortgage on an income-producing property (are taxes and insurance being paid) or held a Note related to an income-producing business.  They may have concerns and questions, such as:

  • If there was a corporation, partnership or other legal entity, then what happens?
  • Is the Personal Representative doing what should be done regarding the debt?
  • Who inherits the debt?
  • Who shares in the income stream from that debt?

An experienced Florida probate lawyer can be very helpful in resolving disputes between beneficiaries, heirs, debtors, and the Personal Representative regarding money owed to the estate. Many may be surprised at how reasonable it may cost to get that attorney’s help — some of these questions may be answered in a single telephone conference. Others, however, may need more legal steps; some may require intervention in the form of a hearing before the probate judge.

A good piece of advice is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

If you found this information helpful, please share this article and bookmark it for your future reference.

What Is An Interim Accounting By The Personal Representative?

Posted By on January 27, 2016

When someone passes away in Florida, laws come immediately into play, creating an “estate” which then owns all that person’s property until it can be safely distributed to the heirs and beneficiaries. A Florida Probate Judge will approve an individual (or sometimes a bank or trust company) to act as “Personal Representative” of that estate. This person may be named as executor in the Last Will and Testament, or it may be someone appointed by the court; either way, they get official documents called “letters” and the probate process begins.

The Personal Representative has lots of power and lots of responsibility. In fact, they are held to the highest legal standard in how they administrate the estate on behalf of beneficiaries and creditors and their actions are often reviewed for impropriety.

Florida Personal Representatives Act Under the Highest Standard of Care: They Have A Fiduciary Duty

Under Florida Statute 733.602, Florida law makers have explained this heavy and strict legal standard of operation as follows:

(1) A personal representative is a fiduciary who shall observe the standards of care applicable to trustees. A personal representative is under a duty to settle and distribute the estate of the decedent in accordance with the terms of the decedent’s will and this code as expeditiously and efficiently as is consistent with the best interests of the estate. A personal representative shall use the authority conferred by this code, the authority in the will, if any, and the authority of any order of the court, for the best interests of interested persons, including creditors.
(2) A personal representative shall not be liable for any act of administration or distribution if the act was authorized at the time. Subject to other obligations of administration, a probated will is authority to administer and distribute the estate according to its terms. An order of appointment of a personal representative is authority to distribute apparently intestate assets to the heirs of the decedent if, at the time of distribution, the personal representative is not aware of a proceeding challenging intestacy or a proceeding questioning the appointment or fitness to continue. Nothing in this section affects the duty of the personal representative to administer and distribute the estate in accordance with the rights of interested persons.

What does this mean, really?

Fiduciaries are to act with the utmost honesty and trustworthiness. As the Florida Supreme Court has explained, quoting the SCOTUS case Meinhard v. Salmon, it is stricter than the morals of the marketplace, and the “punctilio of an honor the most sensitive.See, Donahue v. Davis, 68 So.2d 163, 169 (Fla.1953).

It doesn’t get higher that this. The “fiduciary duty” is the gold standard; it means acting to protect another party’s interest. And every single Personal Representative takes the job with the understanding that they have to meet this requirement.

For more on all the responsibilities that the Personal Representatives must undertake while abiding by this standard of care, read our blog post, “21 Duties of a Florida Personal Representative According to Florida Law.”

 

 

Interim Accountings and the Personal Representative

At the conclusion of the probate administration, the Personal Representative must present a “final accounting” (unless the beneficiaries waive their right to receive a final accounting). This document will detail all the assets, debts, and transactions that he or she has undertaken on behalf of the estate.

However, there’s no rule that says everything must wait until the end of the road for the Personal Representative to report what he or she is doing. The Personal Representative has the opportunity under Florida law to provide an “interim accounting,” too.

Given that high standard of care that all Personal Representatives must meet, there are times when the Personal Representative will think it prudent and reasonable to prepare and file an Interim Accounting of the Estate. This can be months or years before a Final Accounting is necessary.

What is an Interim Accounting?

An Interim Accounting is a voluntary accounting prepared by the Personal Representative. Sometimes, but not very often, the probate judge will ask that an Interim Accounting be performed. As an accounting of the estate, the interim accounting must comply with Florida Probate Rule 5.346 just like a Final Accounting.

10 Things That Must Be Included in an Interim Accounting

Florida Probate Rule 5.346 requires all accountings to be done in a specific way. This includes making sure that they comply with the following requirements:

1. They must be written in a way that someone who isn’t savvy on accounting terms or procedures can still understand it;
2. They have to include a summary of everything at the start, so everyone gets an overview;
3. They have to give an explanation at the top, telling why the accounting is a good idea according to the Personal Representative;
4. Details must be given so that every person interested in the estate (heirs, creditors, etc.) has an understanding of the big transactions that have taken place;
5. A list of all the estate assets must be included;
6. All the assets must have either their acquisition value (if they were bought by the estate) or carrying value (if they were owned by the decedent at the time of death);
7. All the assets must also have their current fair market value listed, no matter how small it might be;
8. All the gains made on the assets must be shown;
9. All the losses incurred by the estate must be shown; and
10. Any big transactions made by the Personal Representative that didn’t impact the value of things or the bottom line also has to be included.

Why do an Interim Accounting?

There’s no probate law or statute that demands this accounting be performed. Only the Final Accounting has to be prepared under Florida law (unless the beneficiaries waive their right to receive the document). However, interim accountings are sometimes a good idea. And they can be done at any time that the Personal Representative decides it’s a good idea to stop and create the document.

This might be a pretty fast job, or it might be a complex task. The only real difference between an Interim Accounting and a Final Accounting is that the Interim Accounting does not have to explain how specific assets are to be distributed, including the real estate owned by the decedent, and all the documentation that supports it (the “substantiating papers”) doesn’t have to be filed with the court.

Because this can be a cumbersome and costly thing to do, the Personal Representative has to notify all interested persons that he or she intends to do an Interim Accounting, and give the reasons why it’s a good thing. The persons receiving the document have 30 days to file their objections, and if there are parties objecting to have an Interim Accounting done, then the probate judge will decide on it at a hearing.

Normally, Interim Accountings are prepared when the estate is complex. Usually, that means the estate has lots of assets. However, a complex estate can also have a few assets but the assets are volatile in value or otherwise unique. An estate may own a few pieces of artwork, for instance, or sets of foreign currency, that need special care and attention because their market values fluctuate.

Interim Accountings can also help when it’s time to prepare tax returns. Sometimes, they can help in maintaining income records of estate assets when the estate owns lots of income-producing property.

Are Interim Accountings Prepared For The Protection Of The Personal Representative?

Insofar as challenging the actions of the Personal Representative in how he or she is handling the estate, filing an Interim Accounting doesn’t serve as a shield for the Personal Representative down the road. He or she won’t be able to argue that an interested party can’t sue for breach of fiduciary duty because they failed to object to the Interim Accounting, for instance. See, Sheffield v. Dallas, 417 So. 2d 796 (Fla. Dist. Ct. App. 1982).

Questions or Concerns About an Interim Accounting?

If you or a loved one has been notified of an Interim Accounting being performed for an estate in which you are an heir or beneficiary, or maybe an estate that you are owed money as a creditor, then you need to take legal steps not only to review that notice but to decide if you need to object to it. If you have an Interim Accounting in hand, then it may give rise to legal issues that are best addressed now — while the estate is being probated — instead of down the road when the creditors are being paid and the assets are being distributed to the beneficiaries.

An experienced probate lawyer can help you here. And the cost of having a Florida probate attorney go over these things with you can be much less in time and money than many folk assume.

A good piece of advice is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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