I Want to Sign an Electronic Will

This is a reprint of my article published in the June 2009 issue of ALI-ABA The Practical Lawyer. It is being republished in this blog because the 2017 Florida Legislature passed HB277 allowing electronic wills as of July 1, 2017, and sent it to the Governor for signature. It has not yet become a law as of today, June 17, 2017.

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The time has come to sign my electronic will. Everything else I do is electronic: paying bills, reviewing files, researching Westlaw, talking to my children. Why not my will?  But does Florida presently recognize electronic wills? Wills that appear only on my computer screen and not on paper?  I think it does. Here’s why:

Wills Must Be In “Writing”

Let’s start with the  good only Florida Probate Code. It says that every will must be in “writing” (F.S. §732.502).  Does that mean it must be written on paper?  Not in Florida.  Florida has granted blanket approval to electronic writings in the very first section of the Florida Statutes:

The word “writing” includes handwriting, printing, typewriting, and all other methods and means of forming letters and characters upon paper, stone, wood, or other materials. The word “writing” also includes information which is created or stored in any electronic medium and is retrievable in perceivable form. F.S. §1.01(4)

So, anything that I can call up on my computer screen is a writing under Florida law. It does not matter what kind of electronic file it is, if I can retrieve it and perceive it, it is a writing. It can be a PDF, TIFF image, or Word file, and I think it satisfies the definition of a writing in Florida.

Testator and Witnesses Must “Sign”

But we hit a bump in the electronic wills road when we go to the next step: signing the will.  The Florida Probate Code requires that wills be signed by the testator and also by witnesses. How do you sign an electronic file?  You can’t sign the computer screen (though I remember from law school that a check can be written upon the back of a cow). What did the Legislature have in mind for signing these electronic writings?

The first section of the Florida Statutes does not define electronic signatures, and the Florida Uniform Electronic Transaction Act (F.S. § 668.50) states that it does not apply to a transaction “to the extent the transaction is governed by a provision of law governing the creation and execution of wills, codicils, or testamentary trusts.” But, back in 1996 the Legislature adopted the Florida Electronic Signature Act which says:

668.004  Force and effect of electronic signature.—Unless otherwise provided by law, an electronic signature may be used to sign a writing and shall have the same force and effect as a written signature.

668.003  Definitions.—As used in this act:
(4)  “Electronic signature” means any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing. A writing is electronically signed if an electronic signature is logically associated with such writing.

Notice that the statute does not require a digital signature, only an electronic signature. A digital signature must be obtained from Verisign or other companies and is more complicated than an electronic signature.  Here is what the Digital Signature Guidelines Tutorial of the ABA Section of Science and Technology Information Security Committee says about digital signatures:

Digital signatures are created and verified by cryptography, the branch of applied mathematics that concerns itself with transforming messages into seemingly unintelligible forms and back again. Digital signatures use what is known as public key cryptography, which employs an algorithm using two different but mathematically related keys…Computer equipment and software utilizing two such keys are often collectively termed an asymmetric cryptosystem.

Much less is required in Florida for an electronic signature: any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing.  So, it could just be typing your name.  If you ever filed online articles of incorporation or annual reports with the Florida Division of Corporations, you “signed” it by typing in your name.  That was you electronic signature.  You did not have to purchase a digital (crypto) signature from Verisign. You just typed in your name as your signature.

This somewhat informal means of signing is consistent with Florida common law.  In allowing testators to sign wills with marks rather than writing out their full names, the Florida Supreme Court held in 1966 that:

Rather, we hold, as do most jurisdictions, that a testator may sign his will by making a mark. It is a matter of fact to be proved in proper proceedings whether the testator made the mark with the intention that it evidence his assent to the document.

Estate of Williams, 182 So.2d 10 (Fla. 1966).

Scuttlebutt on Electronic Wills 

The commentators have been talking about electronic wills for years. Back in 1991, Professor Miller said:

Given contemporary advances in technology there is substantial ground for arguing that electronic or videotaped wills can serve all the functions of a written will and possibly even improve the intent-verifying and authenticating aspects of the traditional attested will.

Will Formality, Judicial Formalism, and Legislative Reform: An Examination of the new Uniform Probate Code “Harmless Error” Rule and the Movement Toward Amorphism, 43 Fla. L. Rev. 599 (Sept. 1991).

More recently, a Colorado commentator again questioned whether it is time for electronic wills and said:

Electronic signatures are becoming more frequent in “e-business” transactions. The use of this technology raises important questions for will drafters and probate courts in the twenty-first century. Could an electronic signature act as valid authentication for a will that exists only in electronic form and is stored on disk? Would an electronic will be more vulnerable to fraud and forgery than a written will? What issues are involved in the permanence and storage of electronic wills? Not surprisingly, recorded cases have [not] yet involved the validity of a will that exists only in electronic form.

Tucker, Swank & Hill, Holographic and Nonconforming Wills: Dispensing with Formalities, 32 Colo. Lawyer 53 (Jan. 2003).

And the discussion is not limited to Florida and the U.S.  In a recent article entitled A Critique of India’s Information Technology Act and Recommendations for Improvement, 34 Syracuse J. Int’l L. & Com. 1 (Fall 2006), Steven Blythe said:

Contract law worldwide has traditionally required the parties to affix their signatures to a document. With the onset of the electronic age, the electronic signature made its appearance. It has been defined as “any letters, characters, or symbols manifested by electronic or similar means and executed or adopted by a party with an intent to authenticate a writing,” or as “data in electronic form which are attached to or logically associated with other electronic data and which serve as a method of authentication.” An electronic signature may take a number of forms: a digital signature, a digitized fingerprint, a retinal scan, a pin number, a digitized image of a handwritten signature that is attached to an electronic message, or merely a name typed at the end of an e-mail message.

There is evidence that the aversion to electronic wills is beginning to dissipate. In 2005, Tennessee became the first American jurisdiction to recognize the legal validity of a will that is executed with an electronic signature. See Chad Michael Ross, Comment, Taylor v. Holt: The Tennessee Court of Appeals Allows a Computer Generated Signature to Validate a Testamentary Will, 35 U. Mem. L. Rev. 603 (2005).

Tennessee Upholds Electronic Wills

What? I had to read an article about technology law in India to find out that Tennessee has already upheld the validity of an electronic will.  So, how did the Tennessee testator sign his will?  In his comment, Chad Ross gave this account:

In January 2002, Steve Godfrey prepared a document “purporting to be his last will and testament.” Godfrey prepared the one page document on his computer and asked two neighbors to serve as witnesses to the will.  In the presence of both witnesses, Godfrey affixed a computer-generated signature using stylized font to the document. The witnesses then signed and dated the document in the presence of each other and Godfrey.

The expected litigation ensued between the will beneficiary and the intestate heir, with the heir claiming the will was not properly signed, but the comment reports that the Tennessee appellate court held that :a computer-generated signature made by a testator comes within the description of any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, and, if affixed before two or more attesting witnesses, satisfies the requirements for a testator to execute a will.”  The comment also reports that the court found that the testator “did make a mark by using his computer to generate his signature in the presence of attesting witnesses and intended this generation to serve as his signature” and that “this computer-generation, according to the court, was only a substitute for the use of an ink pen to affix the signature.”

In admitting an electronic will to probate, the Tennessee court did not require passage of a new probate law by the state legislature.  It relied only upon Tennessee’s existing probate code and the Tennessee statutory definition of a signature:

“Signature” or “signed” includes a mark, the name being written near the mark and witnessed, or any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, regardless of being witnessed. Tenn. Code §  1-3-105.

Tennessee’s statutory definition of “signature” is very similar to the Florida Electronic Signature Act of 1996: “Electronic signature” means any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing.”

As a reporter, Mr. Ross includes a detailed account of the history of signing wills in his University of Memphis Law Review article, which is highly recommended to the reader.  As a commentator, he concludes:

With the continuing changes in technology, the typical way of signing a legal document using an ink pen is no longer the only feasible option. … With its holding in Taylor, the Tennessee Court of Appeals becomes the first in the nation to rule on the validity of a testator’s computer-generated signature. …[T]he court has issued a well-founded opinion that proves that the statute of wills can accommodate the advances of technology without sacrificing the goals that underlie the statute. At least in this area of probate law, Tennessee now leads the way, and other states are likely to follow.

Let Florida be next.  I want to sign an electronic will.

Some Steps to Take When Someone Dies in Florida

When someone dies in Florida, here are some first steps to take for legal matters:

1. Find Original Will. Find the original, signed last will and testament, then give it to your lawyer. The Florida Probate Code requires that it be filed with the Court within 10 days after learning of the death.

2. Secure Home. The deceased person’s home should be locked and secured by the person named in the will as personal representative. That person should verify that there is a current homeowner’s insurance policy. No mail should be discarded. In fact, nothing in the house should be taken or discarded because the court has not yet decided who is entitled to it.

3. Secure Vehicles. The decedent’s motor vehicles should be parked and locked. Florida law holds the probate estate liable for any accidents that occur with the vehicle so vehicles should not be driven by anyone. The person named as personal representative in the will should verify that there is a current automobile insurance policy on each vehicle.

4. Engage a Probate Lawyer. The person named in the will as personal representative (PR) should engage a Florida probate attorney as soon as possible. In Florida, the attorney works for the PR and not for the estate or its beneficiaries or creditors. Therefore, it is wise for each beneficiary and each creditor of a deceased Florida resident to engage a Floridaprobate lawyer too.

5. Petition for Appointment as Personal Representative. Generally, the person named as personal representative in the last will and testament has no power to act until a court order is entered appointing the personal representative. The lawyer will prepare the petition and other documents needed by the Pinellas County probate court before an order can be entered.

These are just some of the first steps that should be taken when someone dies.

What is Summary Administration in Florida Probate?

If a Florida resident dies owning less than $75,000 in assets, then it might be possible for have a shortened form of probate proceeding called summary administration.

In a summary administration, the probate court can admit a will to probate, but instead of appointing a personal representative the court order can list the assets owned by the decedent and declare them to be owned by the beneficiaries. Because no personal representative is appointed, there is no ongoing probate proceeding, no inventory or accountings to file, and no discharge order to be entered.

However, a notice to creditors should still be published and served on all possible creditors in order to limit their time to file a claim. If this is not done, then creditors might have up to two years after death to file a claim.

The beneficiary of a Florida resident whose estate can be subject of a summary administration should engage a Florida probate lawyer to represent the beneficiary and prepare the legal documents for the summary administration.

What Happens When a Florida Resident Dies Without a Will?

When a Florida resident dies without a will, they are said to die intestate. When a Florida resident dies with a will, they are said to be testate. A will names beneficiaries who receive the estate assets after payment of expenses, taxes and claims and names a personal representative (PR) to collect the assets, pay the bills, and distribute the estate. So when someone dies in Florida without a will who gets the assets and who acts as PR?

The answer is in the Florida Probate Code. If the Florida resident left a spouse and children, then they are the beneficiaries. If not, then it passes to the resident’s parents. If they are deceased, then it passes to siblings and descendants of deceased siblings.

The PR of an intestate estate is generally the spouse, but if none then the children and on down in the order of beneficiaries.

So, it’s always best to make a will while you’re alive and well so that the beneficiaries and PR are the persons you want them to be.

How Many Kinds of Deeds Are There in Florida?

When you buy real estate in Florida and when you sell real estate in Florida, it’s important to think about the kind of deed to convey real property.  There are many kinds of deeds in Florida. Here are a few of them:

If you are the buyer, you want the seller to sign a statutory warranty deed because it means the seller gives various warranties to you, such as a warranty of title. If the title fails, then you could sue the seller for breach of warranty. This is the type of deed that is usually prepared by lawyers and title insurance agents for closings in Florida. It is the type of deed specified in the form contracts issued by the Florida Association of Realtors and The Florida Bar. But, there is no law that says it must be used.

If you are the seller, you want to sign a fee simple deed because it contains no warranties but it still purports to convey fee simple title. If the contract or buyer require a warranty deed instead of a fee simple deed, then the seller can try to negotiate to sign a special warranty deed which gives the warranties only for the period of time that the seller owned the property.

If you are a trustee, personal representative or guardian, then you want to sign a special type of deed for that capacity, which is similar to a fee simple deed and gives no warranties because it would obligate the trust, estate or guardianship beyond the term of your office.

If you are not sure whether you really own the property, then you want to sign a quit claim deed. Nonlawyers sometimes mistakenly call this a quick claim deed but the correct name is quit claim deed. Doing this means you quit claim your interest to the grantee, meaning that you only convey to the grantee whatever interest you have in the property, and if you have no interest in the property then you are conveying nothing.

Of course, it’s very important to have your own attorney review any deed before you sign it. And it’s imperative that a title search and title insurance be obtained from a licensed title insurance company before you sign a deed, too.

Joint Property and Probate in Florida

Florida recognizes three types of joint property: tenancy in common, joint with full rights of survivorship, and tenancy by the entirety. Only the last two avoid probate. Here’s the background.

When two people own property as tenants in common, each owns an undivided interest in the whole.  If one dies, then probate is required to deal with title to the property of the one who died.

When two people own property as joint tenants with full rights of survivorship, then each still owns an undivided interest in the whole, but when one dies his or her title automatically passes by operation of law to the surviving owner without probate. (There is controversy in Florida now whether creditors of the decedent can reach the joint property even though it does not pass through probate.)

When two people own property as tenants by the entirety, you know they are married because that form of ownership is reserved for married couples. The concept dates back to jolly old England hundreds of years ago when the property owned by husband and wife as tenants by the entirety was considered a “moiety” of title which could only be broken by voluntary act of both spouses. Thus, creditors of just one spouse could not reach tenancy by the entirety property. That rule still applies in Florida, which makes tenancy by the entirety a popular way for married couples here to hold title. In fact, Florida recognizes tenancy by the entirety in both real property like houses and in personal property like bank accounts and investments. And, of course, it avoids probate at each because tenancy by the entirety property passes automatically by operation of law to the surviving spouse.

Let’s apply the above concepts to a typical factual situation. A husband and wife in Florida own investment real estate as tenants by the entirety. One dies, and the property automatically becomes solely owned by the surviving spouse without probate.  Should he or she then add the children to the deed as joint owners with full rights of survivorship in order to avoid probate at her death?

Let’s suppose she did and then suppose that one of the children later has a nasty divorce proceeding and another child later has problems with credit card debt.  Can the children’s spouse and creditors reach the children’s interest in the joint property?  Yes, they can. This is a huge risk for anyone who adds someone else as a joint owner to their property for the purpose of avoiding probate.  While it might avoid probate at their death, it places the property at risk of being reached by the new joint owners’ present and future spouses and creditors.

Conclusion: It is simple to put property into joint names in Florida, but the effect is not so simple. Probate might be avoided, but at the risk of loss of the property before then to creditors of the new joint owners. There are other ways to deal with this problem. Ask your Florida lawyer.

Which State’s Laws Apply When Someone Dies Owning Real Property in More Than One State?

Many Florida residents own real property in other states. So, a frequent question is: which state law applies when a decedent owns assets in more than one state?

The answer depends on two things:

1.  Domicile of Decedent. The first question is where was the decedent’s domicile at date of death? Domicile generally means the place where someone intends to permanently reside. It is complicated because domicile is not always the same as residence. There are many factors involved in determining domicile: sleeping place, working place, driver license, voter ID, auto registration, mailing address, tax return address, phone, number of days at each place, etc. For some people, all of these are the same place. But for other people, their driver license is from Florida but they have a second home in another state.

2. Type of Asset. Generally, Florida law applies to land, buildings and other real property located in Florida no matter where the decedent was domiciled at death. Similarly, if a Florida resident owned real property in another state, then the law of that state would apply to that real property. But, for all bank accounts, stocks, bonds, mutual funds, and other personal property, the law of Florida generally applies as to Florida residents.

This means that if a Florida resident dies, then his or her will should be filed first in Florida as the domicile state, and the probate proceeding here is called the domiciliary probate proceeding. Then an exemplified copy of the will and court documents are sent to the other state where real property is located and an ancillary probate proceeding is filed there.

Does the Buyer of Florida Real Estate Need a Lawyer?

Whether you are buying a home, vacant land or an office building, the real estate buyer needs a lawyer.  Why?  Because the buyer’s goal is to get what is paid for.  But real estate is complicated and there are many pitfalls.  There is usually no one else to watch out for the buyer’s interest if the buyer does not hire a lawyer.  The brokers are paid by the seller, and the title insurance agency handles the closing paperwork without representing either side.  The lawyer’s job is to help the buyer prepare and negotiate a purchase contract, help the buyer through the buyer’s due diligence inspection period, and then review deed, title insurance commitment and other closing documents on behalf of the buyer.  The real estate buyer’s lawyer can do the following:

1. Due Diligence Period. The lawyer can assist in preparing and negotiating a contract for purchase of the real property that includes a due diligence inspection period with broad wording to allow the buyer to check for obvious (patent) and non-obvious (latent) defects.  These might be in the building, land, air or water.  They could be environmental, structural, mechanical, electrical, or otherwise. The buyer might remember the Latin saying, Caveat Emptor, which means “Let the buyer beware.”  This meant that the seller was not obligated to tell the buyer about defects known by the seller.  While this ancient rule of law has changed with regard to residential real estate, it still applies in Florida to commercial real estate, so it is even more important for commercial real property buyers to do their due diligence inspections.  However, it is still important for residential buyers to inspect because sellers are not obligated to tell about defects they are not aware of so the buyer might discover something unknown to the seller.  In addition, if the residential seller fails to disclose a known defect and is liable to the buyer for not doing so, the seller might not have enough money left to pay the buyer damages for the nondisclosure. If the buyer does not discover the defect until after the closing, then it is too late to back out of the transaction without expensive litigation.

2.  Clear Contract.  The lawyer can assist in drafting a clear contract that gives the buyer what the buyer expects to buy in the transaction.  Sometimes this is done with a standard form such as the FAR/Bar form issued by the Florida Bar and Florida Association of Realtors or the FAR forms issued by the Florida Association of Realtors. The lawyer often prepares addenda to these standard forms to clarify aspects of the transaction.  Sometimes, however, the lawyer prepares a form specifically for the particular transaction rather than using a standard form that has many provisions that are not applicable to the particular case.  Unlike real estate brokers, lawyers are trained in the art and use of words and the drafting and interpretation of contracts.

3. Deadline Follow-up. All contracts for the purchase of real property should include deadlines for such matters as inspections, financing, title insurance, surveys, closing, etc.  To avoid breaching the contract, it is important to comply with these deadlines.  The lawyer can assist the buyer in scheduling contract deadlines.

4. Review Closing Documents and Include Protections. Legal documents can be written to include representations and warranties that are binding upon sellers after the closing in a way that may obligate them to pay damages to the buyer even years after the closing, but sellers try to avoid this wording so that any discovered defects are buyer’s sole problems, if the buyer does not have an attorney the buyer may not have the benefit of including this wording in the contract, deed and other documents.  Since the seller’s only goals are to get paid (and stay paid) and avoid litigation (see companion article on this website), it is important to include seller’s representations and warranties in contracts and deeds. Lawyers know which warranties and representations are standard and which are not, which can be negotiated in and which are more difficult to include.

5. Cost-Benefit of Legal Advice. The benefits of having a lawyer come at a cost: legal fees. Buyers who do not have lawyers do not pay legal fees; at least, not unless or until a breach or defect is discovered. Legal fees in litigation are expensive because it is fueled by opposing parties with opposing claims and positions.  Legal fees paid to a buyer’s lawyer to advise the buyer before signing a contract to purchase and before closing on the contract are much less than legal fees in litigation. There is no crystal ball to determine in advance whether a particular deal will result in litigation so it is best to hire a lawyer to assist in assessing and minimizing the risks of the purchase transaction to the extent possible.

Therefore, the buyer of Florida real estate, whether it is residential or commercial, should always engage a Florida lawyer to assist in the transaction. Otherwise, there is really no one legally on the buyer’s side.

Does the Seller of Florida Real Estate Need a Lawyer?

Whether you are selling a home or an office building, the real estate seller needs a lawyer.  Why?  Because the seller has two goals: get paid and avoid litigation. The lawyer’s job is to help the seller get paid by preparing and negotiating a sales contract, helping the seller through the buyer’s due diligence inspection period, and then either preparing closing documents and handling the closing or reviewing closing documents and providing advice or attending the closing.  The real estate seller’s lawyer can do the following:

1. Clear Contract. Litigation is less likely with a clear contract, so the lawyer can assist in preparing and negotiating a clear contract for sale of the real property.  Sometimes this is done with a standard form, such as the FAR/Bar form issued by the Florida Bar and Florida Association of Realtors or the FAR forms issued by the Florida Association of Realtors. The lawyer often prepares addenda to these standard forms to clarify aspects of the transaction.  Sometimes, however, the lawyer prepares a form specifically for the particular transaction rather than using a standard form that has many provisions that are not applicable to the particular case or that are more favorable to the buyer.  Unlike others parts of the real estate sales team, lawyers are trained in the art and use of words and the drafting and interpretation of contracts.

2. Deadline Follow-up. All contracts for the sale of real property should include deadlines for such matters as inspections, financing, title insurance, surveys, closing, etc.  To avoid litigation, it is important to comply with these deadlines.  The lawyer can assist the seller in scheduling contract deadlines in order to achieve the goals of getting paid and avoiding litigation.

3. Limit Liability in Contract, Deed and Closing Documents. Legal documents often contain representations and warranties that are binding upon sellers after the closing in a way that may obligate the seller to pay damages to the buyer even years after the closing.  Since the seller’s only goals are to get paid (and stay paid) and avoid litigation, it is often important to limit the seller’s representations and warranties in contracts. Lawyers know which warranties and representations are standard and which are not, which can be negotiated out and which must stay.

4. Cashier’s Check or Wire Transfer at Closing. The seller must accept only a cashier’s check or a wire transfer of net proceeds at the closing. If the seller accepts a title agency’s escrow check, then the seller accepts the risk if the check fails.  While most title agencies are reputable, there is no way to tell whether its escrow check will be honored by your bank.  If it is not, the seller loses and the buyer gets to keep the deed. (There is a Florida case directly on point that so holds.) So, it is essential that the seller only accept a cashier’s check or wire transfer at closing.

Therefore, the seller of Florida real estate, whether it is residential, industrial, or commercial, should always engage a Florida lawyer to assist in the transaction.

Florida Wills, Trusts and Probate Questions and Answers

This article is not intended as legal advice but is provided for general information.

What is a will? A last will and testament is a writing that specifies who is to receive the assets of a deceased person (the decedent).  Of all the legal documents prepared by lawyers, wills still require the most formality in signing. Wills not signed in accordance with the requirements of Florida law are void. Florida residents must sign wills at the end of the document in the presence of at least two witnesses who are both present at the same time and place with the testator (person making the will). Wills are usually signed in the presence of a notary public in addition to the witnesses so that the will is self-proving in case of death. Self-proving wills can be admitted to probate after the death of the testator without having the witnesses come to the courthouse.

The testator should keep the original will in a safe place because it must be presented to the court at the time of death. A copy of the will may not be admitted to probate (except in unusual circumstances). Florida has no provision for pre-filing wills prior to death so the testator should keep the will in a safe deposit box at a bank or another safe place.

What is a personal representative or trustee? The personal representative is the person or company appointed to administer the affairs of a decedent’s estate.  The antiquated terms administrator and executor are no longer used in Florida. The court appoints a “personal representative” whether the decedent died with a will or without one.

The trustee is the person or company named to administer a trust.  The will and trust should name a bank, trust company, or trusted Florida resident as personal representative and trustee, and it should list several alternates to serve in case any of those named predeceases the testator.

The will may name a nonresident as a personal representative only if he or she is the testator’s parent or lineal ascendant, child or lineal descendant, spouse, brother, sister, uncle, aunt, nephew, or niece, or the spouse, lineal ascendant or lineal descendant of any of the foregoing.

While this list seems long, there are many relatives who cannot serve as personal representatives in Florida unless they are Florida residents.  For example, if a married couple names the husband’s nonresident brother as personal representative of both their wills, Florida law allows the brother to serve as personal representative for the husband’s estate but not for the wife’s. Very few states still have this restriction, so there have been comments by lawyers suggesting that this law be changed. This restriction does not apply to trusts:  a nonresident may serve as trustee of a trust in Florida.

What is probate? Florida law requires a probate proceeding upon the death of an individual if the individual owns any assets.  The probate proceeding is the law’s way of assembling the decedent’s assets, paying debts and taxes, and passing title to the decedent’s beneficiaries.

Many of the disadvantages of probate have been eliminated in Florida. For example, the inventory of assets owned by the decedent and the accounting of financial transactions are now sealed from public view, and probate proceedings for most estates must generally be completed within one year and are often completed within six months.  Nevertheless, probate avoidance is still desirable in many cases and can be accomplished in a number of ways.

What is a testate estate? If a Florida resident dies with a will, he or she has died testate. The will names the personal representative and beneficiaries of the estate. Making a will is the means by which an individual determines the beneficiaries who will inherit his or her property at death and the personal representative who will be responsible for collecting the assets, paying claims and expenses, and distributing the assets.

To be effective, a will must be filed with the court after the individual dies and an order admitting the will to probate must be entered by the court. Thus, the estates of persons who die with wills must be probated just the same as the estates of persons who die without wills. The only difference is that those with a will have the ability to name the beneficiaries who will receive their property at their death and to name who they prefer to be the personal representative.

What is an intestate estate? If a Florida resident dies without a will, he or she has died intestate. Because there is no will, the law specifies who will receive the decedent’s assets, instead of the decedent’s will specifying this.

Generally speaking, the law of intestacy in Florida says that the following persons are entitled to receive the residuary (what is left after payment of claims, debts, taxes and expenses) of the probate assets of a Florida resident who dies without a will:

–If the decedent leaves a surviving spouse but no descendant (child, grandchild, etc.), then the surviving spouse is entitled to receive the residue.

–If the decedent leaves at least one descendant but no surviving spouse, then the descendants are entitled to receive the residue.

–If the decedent dies before 10/1/11 and leaves a surviving spouse and one or more descendants, all of whom are descendants of both spouses, then the surviving spouse is entitled to the first $60,000 and one-half of the remaining residue, and the descendants share the other half.

–If the decedent dies on or after 10/1/11 and leaves a surviving spouse and one or more descendants, all of whom are descendants of both spouses, and if the surviving spouse has no other descendant, then the surviving spouse is entitled to receive all of the residue.

–If the decedent leaves a surviving spouse and one or more descendants, one or more of whom are not descendants of both spouses, then the spouse is entitled to one-half of the residue and the descendants are entitled to the other half.

Florida law provides that the surviving spouse is entitled to preference in being appointed the personal representative of an intestate estate. If there is no spouse, then a majority of the heirs may select the person entitled to preference. In any case, the court makes the final decision.

Florida intestate estates commence with the heirs or creditors filing a petition for administration with the court asking for appointment of a personal representative.

What is a revocable living trust and how does it avoid probate? A revocable living trust is a writing that creates a form of ownership in which assets originally owned by the grantor of the trust are legally re-titled in the name of a trustee who manages the assets for the benefit of the trust’s beneficiaries named in the writing.

Creating a revocable living trust, also called an “inter vivos trust” or just a “living trust”, is the most effective means of avoiding probate and guardianship with respect to the trust’s assets. It is safer than using joint ownership to avoid probate because the trustee named by the grantor does not personally own the assets of the trust, as is the case with joint property.

Frequently, the living trust names the grantor as the initial trustee and initial beneficiary. This means that the grantor both manages the trust assets as trustee and is entitled to the benefit of the assets as beneficiary for life. However, instead of naming the grantor as the initial trustee, a grantor may name a bank, trust company or trusted individual as the initial trustee.

The trust also lists the beneficiaries entitled to receive the assets when the grantor dies. This part of the trust is similar to a will’s dispositive provisions (the paragraphs of a will that say who gets what). The trust also names who will be the successor trustee after the initial trustee dies or becomes incapacitated.

A trust is created by signing a written trust agreement. After the trust is created, assets of the grantor must be transferred to the trust. The trust avoids probate as to the assets placed in the trust because upon the grantor’s death or incapacity the assets of the trust are owned by the trust and not by the grantor. Of course, assets which have not been transferred to the trust and which remain titled in the grantor’s name at death are subject to probate after the grantor’s death the same as they would be without a trust.  Therefore, most assets should be placed in trust if probate and guardianship avoidance is the primary goal.

However, special attention needs to be given to assets such as homestead, life insurance, annuities, IRAs, retirement accounts, and other assets that avoid probate on their own through valid death beneficiary designations or that may be exempt from claims of creditors or that may have adverse tax consequences if placed in trust. Therefore, legal and tax advice is necessary when funding a trust.

In the early 1990’s, Florida law governing trusts changed so that after the grantor dies the trustee named in the trust must file a notice of the existence of the trust (but not the terms of the trust) with the probate court. Creditors have two years to file claims, but this can be reduced to three month by filing a probate proceeding and publishing and serving notice to creditors. For that reason, it is advisable to open a probate proceeding for the purpose of administering the claims process upon the grantor’s death, even when there is a living trust.

What are joint tenancies? Joint tenancies are any form of ownership involving more than one owner, such as joint tenancy with full rights of survivorship, tenancy in common, and tenants by the entirety.  Joint tenancies may be held in many types of assets, including real estate, bank accounts, stocks, etc.

Assets held jointly with full rights of survivorship pass automatically by operation of law to the surviving joint owners and do not require probate. Bank accounts, stocks, and mutual funds are frequently held as joint tenants with full rights of survivorship.

It should be noted that joint assets held as tenants in common do not avoid probate. Assets in which an individual’s name appears as a tenant in common must be probated.

Assets held by a husband and wife as tenants by the entirety pass automatically by operation of law to the surviving spouse and do not require probate on the first death. In addition to probate avoidance, separate creditors of just one spouse cannot reach tenancy by the entirety property in Florida.

One disadvantage of jointly-held property is that probate is not avoided when the last joint owner dies. Probate will be required upon the death of the last surviving joint owner.

Another disadvantage of joint ownership is that it constitutes true ownership. This means that any joint owner can withdraw, sell or convey his or her interest in the asset without approval of the original owner and creditors of a joint owner can reach the joint owner’s interest in the property (except for tenancies by the entirety in real property).

Adding a child’s name to a bank account as joint owner can constitute a gift to the child and can be problematic because the child’s creditors could reach the asset. Similarly, the child’s spouse could claim an interest in the assets jointly held with a child if the child divorces.

Another disadvantage of joint ownership is that it does not avoid a guardianship. For example, if a married couple owns a home and one of them becomes incapacitated, necessitating the sale of the home to pay medical bills, a guardianship may be required since one spouse alone cannot sign a deed conveying the home.

These disadvantages of joint ownership have led Florida residents to create living trusts to avoid probate and to avoid the disadvantages of joint ownership.

What is a bank account held “in trust for”? Bank accounts that are set up “in trust for” named beneficiaries to whom the balance in the account shall be paid at death are called Totten trusts and do not require probate. A Totten trust account owner is allowed to make withdrawals from the account during his or her lifetime, which makes this trust different from other types of trusts. One disadvantage of a Totten trust is that if the beneficiary dies before the account owner dies, then probate will be required. Another disadvantage is that a Totten trust may avoid probate, but it will not avoid a guardianship and it is not a substitute for a power of attorney. The beneficiary cannot have any access to the account while the account owner is alive, even if the account owner is incapacitated and needs the beneficiary’s assistance in withdrawing funds to pay medical bills. A guardianship or power of attorney would be required in that case.

Do life insurance proceeds avoid probate? Life insurance proceeds payable by valid death beneficiary designation to someone other than the insured’s estate need not be probated. This does not mean that the proceeds avoid estate taxation. It just means that the proceeds are paid directly by the insurance company to the beneficiary without going through probate.

Do IRA, 401(k), Pension, Profit Sharing and other retirement account proceeds avoid probate? The owner of an individual retirement arrangement (IRA), 401(k), pension, profit sharing and other retirement accounts may designate the beneficiary entitled to receive the account at his or her death by signing a written beneficiary designation. The proceeds of the retirement account would then be paid directly to the beneficiary without going through probate.  They are usually still subject to estate tax, and often income tax as well, so taxes might greatly dilute the value of these assets upon the owner’s death.

What is disinheritance? Florida law does not require an individual to leave any property to anyone other than the surviving spouse. Thus, an individual can cause children and other relatives not to inherit anything (disinherit) by making a will that omits them. But, there are a few exceptions to this.

What is elective share? Florida law provides that the surviving spouse is entitled to take an elective share in an amount equal to 30% of the elective estate. The determination of what is meant by “elective estate” is a legal question best left to an attorney.

How does homestead pass upon death? Florida law provides that the decedent’s homestead cannot be passed by will to anyone if the decedent is survived by a spouse or minor child, except that it can be passed to the spouse if there is no minor child. If the decedent leaves no will and is survived by a spouse and lineal descendants, the spouse receives a life estate and the lineal descendants receive the remainder.

What is a pretermitted spouse or child? If a Florida resident marries after making a will and the will does not provide for the spouse, the spouse is generally entitled to a share of the estate as a pretermitted spouse. This share is equal in value to the share the spouse would have received if the resident had died without a will. Thus, it is important to make a new will after getting married.

Similarly, if a child is born to or adopted by a Florida resident after making a will and the will does not provide for the child, the child may be entitled to a share of the estate as a pretermitted child. This share is equal in value to the share that the child would have received if the resident had died without a will. Thus, it is important to make a new will after a child is born.

What is exempt property of a decedent? The following exempt property of a deceased Florida resident is exempt from the claims of his or her creditors (except for persons having liens on these items):  household furniture, furnishings and appliances in his or her usual place of abode up to a net value of $20,000, two motor vehicles held in the decedent’s name and regularly used by the decedent or his or her immediate family as their personal vehicles, and certain other property. Unless the decedent’s will leaves the exempt property to others, the surviving spouse is entitled to the exempt property. If there is no surviving spouse, the decedent’s children are entitled to it.

What is a guardianship? Guardianship is to the living what probate is to the deceased — a court proceeding to oversee the rights and property of an individual who is unable to manage on his or her own. The court may appoint a guardian for a minor (someone under the age of 18 years). The minor’s parents are often appointed guardians. The court will also appoint a guardian for a person who has been found to be incapacitated. Florida no longer uses the term incompetent to describe those who are unable, through mental or physical disability, to care for themselves or their property.

Guardians must file many papers with the court and must follow many rules. The guardian must file annual accountings with the court, and the court must audit the accountings. These requirements are intended to protect the ward (minor or incapacitated person), but the expense and public nature of a guardianship can be counter-productive to the ward. For this reason, guardianship avoidance through the use of more effective estate planning techniques, such as living trusts, have become popular.

What is a durable power of attorney? One person (the principal) may give another person (the agent or attorney in fact) the power to sign documents, write checks and do other acts for him or her by signing a written power of attorney. Most powers of attorney cease to be effective when the principal becomes incapacitated. However, a durable power of attorney remains effective when the principal is incapacitated so the agent can continue to sign documents, write checks and do other acts for the principal. Thus, a durable power of attorney may avoid a guardianship. However, all powers of attorney cease when the principal dies, so a power of attorney will not avoid probate.

What is a declaration of preneed guardian? Florida law allows an individual to sign a declaration naming the persons, banks or trust companies the individual would prefer to act as guardian of the person and property in case the individual is determined to be incapacitated. Such a declaration of preneed guardian must be signed and filed with the Clerk of Court before becoming incapacitated. The law also allows a parent to name a guardian for his or her minor children by filing a declaration of preneed guardian for minor.

What are estate taxes? It is important to remember that probate avoidance does not mean estate tax avoidance. A federal estate tax return must generally be filed for anyone who dies after 2010 owning a total of more than about $5,000,000 in assets, including such things as joint accounts, IRAs, 401(k)s, pension and profit sharing plans, real estate, bank accounts, stocks, bonds, mutual funds, and life insurance. The first $5,000,000 is generally not taxable because the unified credit for estate taxes offsets the tax on about $5,000,000 in assets.

Florida has no state estate tax and no inheritance tax so only the federal estate tax is applicable to Florida residents.  (Florida has no state income tax for individuals, either.)  Of course, if a Florida resident owns property in other states or countries, then the estate or inheritance taxes of that jurisdiction may apply.

No estate tax is payable upon assets left to the surviving spouse outright or in a trust qualifying for the marital deduction. Therefore, no matter what the value of the estate, it is possible to leave the entire estate to the surviving spouse without incurring estate taxes on the first spouse’s death.

What is a health care surrogate or proxy? Florida allows an individual to name a health care surrogate to make health care decisions for the individual in case the individual is unable to make or communicate a choice regarding a particular health care decision. The law also allows a health care proxy to do this if no health care surrogate is named.

What is a living will? Florida recognizes a statutory form of living will which can be signed by a person to state whether or not his or her life should be artificially prolonged if he or she is incapacitated and has a terminal condition or end-stage condition or is in a persistent vegetative state and his or her physicians determine there is no reasonable medical probability of recovery. Many individuals state that they would not want life sustained in this situation so they sign a living will.

Sometimes a living will is confused with a living trust.  They are quite different legal documents.  A living trust has to do with property; a living will has to do with health care.

How should motor vehicles be titled in Florida? Motor vehicles should be titled in the name of the principal driver only.  In Florida, everyone whose name appears on a vehicle title is legally responsible for the negligent acts of the driver. This is called the dangerous instrumentality doctrine.  A husband should own his car, and a wife should own hers. Their cars should not be jointly owned. Children should own the cars they drive if they are over the age of eighteen (18) years.

What is a personal liability umbrella insurance policy? Most auto insurance and homeowner liability policies limit their coverage to less than a million dollars, but claims exceeding that amount are not unusual today. Liability claims in excess of the policy limits must be paid by the insured. A personal liability umbrella insurance policy can be obtained from one’s insurance agent to raise the coverage to a higher limit. In addition, one should ask his or her agent to include uninsured/underinsured motorist coverage as part of the umbrella policy to increase the insured’s own protection from uninsured and underinsured drivers.

How should life insurance be owned? The person whose life is insured should be the owner of the life insurance policy, and the policy should name a beneficiary other than the estate of the insured, in order to avoid creditors claiming life insurance cash value and proceeds for payment of the insured decedent’s bills.  In Florida, cash value of life insurance owned by the insured is exempt from the claims of the insured’s creditors. In addition, creditors of an insured cannot reach the proceeds of life insurance on the insured if someone other than the insured’s estate is named as beneficiary. However, cash value of life insurance owned by an individual’s spouse or anyone other than the insured is not exempt from claims of that owner’s creditors and, therefore, can be reached by creditors of the spouse or other owner of the life insurance. In addition, the proceeds of life insurance that are paid to an individual’s estate may be reached by the creditors of the individual.

How much title insurance should I have on my real estate? Title insurance should be maintained equal to the fair market value of the real estate.  Most people remember to increase homeowner’s insurance coverage when they receive their annual premium statements, but title insurance premiums are paid only when the policy is issued (usually when the real estate is purchased) so most people forget to increase title insurance coverage. This means that the coverage on their home for defects in title is limited to the amount stated on the policy when they bought their home.

2017.01.15

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