Inherited Property & Probate in
Florida
Why do you need an appraisal when
you inherit property. Below is information
pertaining to probate in Florida and how it
affects real property. Your accountant and
attorney are your best source for detailed
information about your situation. We have
included general information as a starting
point. You could suffer eventual tax
repercussions without proof of inheritance
property value. We at Florida Certified
Appraisers will be happy to assist.
Please note that the following is
for informational purposes only and is not to be
relied upon as a sole source of information. It
is recommended that an attorney be consulted for
the most up to date and correct information.
WHY IS AN APPRAISAL IMPORTANT FOR INHERITED
PROPERTY?
A property
appraisal is important for several reasons when
property is inherited.
There can be a
division of ownership and the value must be
ascertained to put a value on each owners
portion. This will help if assets are
traded or bought.
You have just
inherited property that has not been accessed a
value in years, you are going to rent prior to
selling. When you do decide to sell, your
taxable capital gains will be based on the last
value prior to transfer of ownership due to
inheritance and the amount of the sale.
For example:
The inherited
property was last accessed a value in 1945 at
$25,000. You inherit the property in 2008
and there is no appraisal. You sell the
property in 2012 for $160,000. The capital
gains could be $135,000. If you would have
had an appraisal done at the time of probate in
2008 the value would have been much closer to
the sales price. For instance $145,000.
Capital gains would only be $15,000 in this case
and you would have documented proof.
There are other
reasons to have an appraisal done on inherited
property. Speak to your attorney for
valued information on this subject.
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WHAT IS
PROBATE?
Probate generally is a
court-supervised process for identifying and
gathering the decedent's assets, paying taxes,
claims and expenses of administration, and
distributing assets to beneficiaries. The
Florida Probate Code is found in Chapters 731
through 735 of the Florida Statutes.
There are two types of probate administration
under Florida law: formal administration and
summary administration. This document will
primarily discuss formal administration.
There is also a non-court
supervised administration proceeding called
"Disposition of Personal Property Without
Administration." This type of administration
only applies in limited circumstances.
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WHAT ARE PROBATE ASSETS?
Probate administration only applies to probate
assets. Probate assets are those assets that the
decedent owned in his or her sole name at death,
or that were owned by the decedent and one or
more co-owners and lacked a provision for
automatic succession of ownership at death.
For example:
•Real estate titled in the sole
name of the decedent, or in the name of the
decedent and another person as tenants in
common, is a probate asset (unless it is
homestead), but real estate titled in the name
of the decedent and one or more other persons as
joint tenants with rights of survivorship or as
tenants by the entirety is not a probate asset;
•Property owned by husband and wife as tenants
by the entirety is not a probate asset on the
death of the first spouse to die, but goes
automatically to the surviving spouse.
This list is not exclusive, but
is intended to be illustrative.
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WHY IS PROBATE NECESSARY?
Probate is necessary to pass
ownership of the decedent’s probate assets to
the decedent’s beneficiaries. If the decedent
left a valid will, unless the will is admitted
to probate in the Court, it will be ineffective
to pass title to the decedent’s beneficiaries.
If the decedent had no will, probate is
necessary to pass ownership to the decedent’s
assets to those persons who are to receive them
under Florida law.
Probate is also necessary to wind
up the decedent’s financial affairs after his or
her death. Administration of the decedent’s
estate ensures that the decedent’s creditors are
paid if certain procedures are correctly
followed.
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WHAT IS A WILL?
A will is a writing, signed by
the decedent and witnesses, that meets the
requirements of Florida law. In his or her will,
the decedent can name the beneficiaries whom the
decedent wants to receive the decedent’s probate
assets. The decedent can also designate a
personal representative (Florida’s term for an
executor) of his or her choosing to administer
the estate.
If the decedent’s will disposes of all of the
decedent’s probate assets and designates a
personal representative, the will controls over
the default provisions of Florida law. If the
decedent did not have a valid will, or if the
will fails in some respect, the identities of
the persons who will receive the decedent’s
probate assets, and who will be selected as the
personal representative of the decedent’s
probate estate, will be as provided by Florida
law.
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WHAT HAPPENS TO PROBATE ASSETS IF
THERE IS NO WILL?
If someone dies without a valid will, he or she
is “intestate.” Even if the decedent dies
intestate, his or her assets are almost never
turned over to the State of Florida. The State
will take the decedent’s assets only if the
decedent had no heirs. The decedent’s “heirs”
are the persons who are related to the decedent
and described in the Florida statute governing
distribution of the decedent’s probate assets if
he or she died intestate.
If the decedent died intestate, the decedent’s
probate assets will be distributed to the
decedent’s heirs in the following order of
priority:
•If the decedent was survived by
his or spouse but left no living lineal
descendants, the surviving spouse receives all
of the decedent’s estate.
•If the decedent was survived by his or her
spouse and left one or more lineal descendants
(all of whom are the descendants of both the
decedent and his or her spouse), the surviving
spouse receives the first $60,000 of the probate
estate plus one-half of the rest of the probate
estate, and the decedent’s lineal descendants
share the remaining half.
•If the decedent was survived by his or her
spouse and left one or more lineal descendants
(at least one of whom is not also a lineal
descendant of the surviving spouse), the
surviving spouse receives one-half of the
probate assets, and the decedent’s lineal
descendants share the remaining half.
•If the decedent was not married at his or her
death but was survived by one or more of his or
her lineal descendants, those descendants will
receive all of the decedent’s estate. If there
is more than one lineal descendant, the
decedent’s estate will be divided among them in
the manner prescribed by Florida law. The
division will occur at the generational level of
the decedent’s children. So, for example, if one
of the decedent’s children did not survive the
decedent, and if the deceased child was survived
by lineal descendants, the share of the
decedent’s estate which would have been
distributed to the deceased child will instead
be distributed among the lineal descendants of
the decedent’s deceased child.
•If the decedent was not married at his or her
death and had no lineal descendants, the
decedent’s probate assets will pass to the
decedent's surviving parents, if they are
living, otherwise to the decedent's brothers and
sisters.
•Florida’s intestate laws will
pass the decedent’s probate estate to other,
more remote heirs if the decedent is not
survived by any of the close relatives described
above.
The distribution of the decedent’s estate under
Florida’s intestate laws, as discussed above, is
subject to certain exceptions for homestead
property, exempt personal property, and a
statutory allowance to the surviving spouse and
any lineal descendants or ascendants whom the
decedent supported. Assets subject to these
exceptions will pass in a manner different from
that described in the intestate laws. For
example, if the decedent’s homestead was titled
in the decedent's name alone, and if the
decedent was survived by a spouse and lineal
descendants, the surviving spouse will have the
use of the homestead for his or her lifetime
only, with the decedent’s lineal descendants to
receive the decedents’ homestead only after the
surviving spouse dies.
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WHO IS INVOLVED IN THE PROBATE
PROCESS?
Depending upon the facts of the
situation, any of the following may have a role
to play in the probate administration of the
decedent’s estate:
*The Clerk of the Circuit Court
in the county in which the decedent was
domiciled at the time of the decedent’s death;
*The Circuit Court (acting through a Circuit
Court Judge);
*The person or institution serving as the
decedent’s personal representative (or
executor);
*The attorney engaged by the personal
representative to provide him or her with legal
advice throughout the probate process;
*Those filing claims in the probate proceeding
relative to debts incurred by the decedent
during his or her lifetime, such as credit card
issuers and health care providers; and
*The Internal Revenue Service
(IRS), as to any federal income taxes that the
decedent may owe, any income taxes that the
decedent’s estate may owe, and, sometimes as to
federal gift, estate or generation-skipping
transfer tax matters.
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WHERE ARE PROBATE PAPERS FILED?
The decedent’s will, if any, and
certain other documents required in order to
begin the probate proceeding, are filed with the
Clerk of the Circuit Court, usually for the
county in which the decedent lived. A filing fee
must be paid to the Clerk. The Clerk then
assigns a file number, and maintains an ongoing
record of all papers filed with the Clerk for
the administration of the decedent’s estate.
In the interest of protecting the
privacy of the decedent’s beneficiaries, any
documents that contain financial information
pertaining to the decedent’s estate are not
available for public inspection.
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WHO SUPERVISES PROBATE ADMINISTRATION?
A Circuit Court Judge presides over probate
proceedings.
The
Judge will rule on the validity of the
decedent’s will, or if the decedent died
intestate, the Judge will consider evidence to
confirm the identities of the decedent’s heirs
as those who will receive the decedent’s probate
estate.
If the
decedent had a will that nominated a personal
representative, the Judge will also decide
whether the person nominated is qualified to
serve in that position. If the nominated
personal representative meets the statutory
qualifications, the Court will issue "Letters of
Administration," also referred to simply as
"letters”. These
“letters” are important evidence of the personal
representative’s authority to administer the
decedent’s estate.
If any questions or disputes
arise during the course of administering the
decedent’s estate, the Judge will hold a hearing
as necessary to resolve the matter in question.
The Judge’s decision will be set forth in a
written direction called an "Order".
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WHAT ARE THE ESTATE’S OBLIGATIONS TO ESTATE
CREDITORS?
The primary purpose of probate is
to ensure that the decedent’s debts are paid in
an orderly fashion. The personal representative
must use diligent efforts to give actual notice
of the probate proceeding to "known or
reasonably ascertainable" creditors. This gives
the creditors an opportunity to file claims in
the decedent’s estate, if any. Creditors who
receive notice of the probate administration
generally have three months to file a claim with
the Clerk of the Circuit Court. The personal
representative, or any other interested persons,
may file an objection to the statement of claim.
If an objection is filed, the creditor must file
a separate independent lawsuit to pursue the
claim. A claimant who files a claim in the
probate proceeding must be treated fairly as a
person interested in the estate until the claim
has been paid, or until the claim is determined
to be invalid.
The legitimate debts of the
decedent, specifically including proper claims,
taxes and expenses of the administration of the
decedent’s estate, must be paid before making
distributions to the estate beneficiaries. The
Court will require the personal representative
to file a report to advise of any claims filed
in the estate, and will not permit the estate to
be closed unless those claims have been paid or
otherwise disposed of.
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HOW IS THE INTERNAL REVENUE
SERVICE ("IRS") INVOLVED?
The decedent’s death has two
significant tax consequences: It ends the
decedent's last tax year for purposes of filing
the decedent’s federal income tax return, and it
establishes a new tax entity, the "estate."
The personal representative may be required to
file one or more of the following returns,
depending upon the circumstances:
•The decedent’s final Form 1040,
Federal Income Tax Return, reporting the
decedent’s income for the year of the decedent's
death.
•One or more Forms 1041, Federal Income Tax
Returns for the Estate, reporting the estate’s
taxable income.
•Form 709, Federal Gift Tax Return(s), reporting
gifts made by the decedent prior to death.
•Form 706, Federal Estate Tax Return, reporting
the decedent’s gross estate, depending upon the
value of the gross estate.
The estate will not have any tax filing or
payment obligations to the State of Florida;
however, if the decedent owed Florida
intangibles taxes for any year prior to the
repeal of the intangibles tax as of January 1,
2007, the personal representative must pay those
taxes to the Florida Department of Revenue.
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WHAT ARE THE RIGHTS OF THE DECEDENT’S SURVIVING
FAMILY?
The decedent’s surviving spouse
and children may be entitled to receive assets
from the decedent’s estate, even if the
decedent’s will gives them nothing. Florida law
protects the decedent’s surviving spouse and
certain surviving children from total
disinheritance.
For
example, a surviving spouse may have rights in
the decedent’s homestead real property. A
surviving spouse may also have the right to come
forward to claim an “elective share” from the
decedent’s estate. The elective share is,
generally speaking, 30% of all of the decedent’s
assets, including any assets that are
non-probate assets. A surviving spouse and/or
the decedent’s children may also have the right
to a family allowance to provide them with funds
prior to final distribution of the estate
assets, and rights in exempt property that will
be paid to them instead of to creditors in
satisfaction of claims against the estate. It is
important to note that a spouse may waive his or
her rights to an elective share, family
allowance and/or exempt property in a valid pre-
or post-marital agreement.
In
addition, if the decedent married, or had
children, after the date of the decedent’s last
will, and if the decedent neglected to provide
for the new spouse or children, an omitted
family member may nevertheless be entitled to a
share of the decedent’s estate.
The existence and enforcement of
these statutory rights requires knowledge about
the applicable laws and procedures and is best
handled by an attorney.
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WHAT RIGHTS DO OTHER POTENTIAL
BENEFICIARIES HAVE IN THE DECEDENT’S PROBATE
ESTATE?
Except as provided in the
immediately preceding section, a Florida
resident has the right to entirely disinherit
anyone. It is not necessary to give the
disinherited beneficiary a nominal gift of, for
example, $1.00.
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WHAT ALTERNATIVES TO FORMAL ADMINISTRATION ARE
AVAILABLE?
Florida law provides for several
alternate abbreviated procedures other than the
formal administration process.
“Summary Administration” is generally available
only if the value of the estate subject to
probate in Florida (less property which is
exempt from the claims of creditors; for
example, homestead real property in many
circumstances) is not more than $75,000, and if
the decedent’s debts are paid, or the creditors
do not object. Those who receive the estate
assets in a summary administration generally
remain liable for claims against the decedent
for two years after the date of death. Summary
administration is also available if the decedent
has been dead for more than two years and there
has been no prior administration.
Another alternative to the formal administration
process is "Disposition Without Administration."
This is available only if estate assets consist
solely of property classified as exempt from the
claims of the decedent’s creditors by applicable
law and non-exempt personal property, the value
of which does not exceed the total of (1) up to
$6,000 in funeral expenses; and (2) the amount
of all reasonable and necessary medical and
hospital expenses incurred in the last 60 days
of the decedent’s final illness, if any.
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WHAT IF THERE IS A REVOCABLE TRUST?
If the decedent had established what is commonly
referred to as a “Revocable Trust,” a “Living
Trust” or a “Revocable Living Trust,” in certain
circumstances, the trustee may be required to
pay expenses of administration of the decedent's
estate, enforceable claims of the decedent's
creditors and any federal estate taxes payable
from the trust assets.
The trustee of such a trust is always required
to file a "Notice of Trust" with the Clerk of
the Court in the county in which the decedent
resided at the time of the decedent’s death. The
notice of trust gives information concerning the
identity of the decedent as the grantor or
settler of the trust, and the current trustee of
the trust. The purpose of the notice of trust is
to make the decedent’s creditors aware of the
existence of the trust and of their rights to
enforce their claims against the trust assets.
All of the tasks which must be performed by a
personal representative in connection with the
administration of a probate estate must also be
performed by the trustee of a revocable trust,
though the trustee generally will not need to
file the same documents with the Clerk of the
Court. Furthermore, if a probate proceeding is
not commenced, the assets comprising the
decedent’s revocable trust are subject to a
two-year creditor’s claim period, rather than
the three-month non-claim available to a
personal representative.
The assets in the decedent’s revocable trust are
a part of his or her gross estate for purposes
of determining federal estate tax liability.
The material in this document
represents general legal advice. Because the law
is continually changing, some provisions in this
document may be out of date.
It is always best to consult an
attorney about your legal rights and
responsibilities in your particular case.
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[Revised: 08/07 ] |
