When a person dies, their assets, be it real estate, bank accounts, stocks, bonds, jewelry, automobiles or whatever else they may own must pass to someone legally entitled to those assets. There are three basic ways property passes on death. Each way depends on how the particular asset is owned or titled at the time of death.
If someone owns an asset in their individual name at the time of death, that asset should pass to the beneficiaries specified in the decedent’s will. If the decedent did not have a will, then the decedent’s property will pass under the laws of intestacy. In other words, the state of Florida decides how your assets will be distributed. This does not mean all of the decedent’s property passes to the state, but rather to individuals based on their relationship to the decedent.
Florida statutes 732.102 and 732.103 set forth the statutory scheme for intestate succession. For example, if an individual dies without a will and is survived by a spouse and children of that marriage, then the surviving spouse is entitled to the first $60,000.00 of assets and anything over that amount is equally divided between the surviving spouse and the children.
When property passes under the terms of a last will and testament or by intestate succession, the process by which this transfer is accomplished is called probate. Probate is a court supervised process whereby a decedent’s property is transferred in an orderly fashion to those legally entitled to the assets.
Some people elect to create a revocable “living” trust during their lifetime. In such a case, certain assets are transferred to the trust and retitled in the name of the trust. The individual creating the trust, called the “Grantor,” has full power to change, modify and revoke the trust during his or her lifetime. After the death of the grantor, these trusts become irrevocable and the trust property is disposed of in accordance with the terms of the trust. This type of trust, called a “Grantor Trust,” often contains language very similar to language used in a last will and testament, which specifies how and to whom the decedent’s property will pass. A trustee named in the trust document would then have the responsibility of distributing the trust assets in accordance with the terms of the trust. Administration of a trust is similar to the probate process but is not subject to court supervision.
Assets governed by contractual provisions pass outside the probate and trust administration process. Instead, these assets pass directly to the recipients designated in the contract governing the asset. The most prevalent type of asset that passes by contract is joint bank accounts. Typically a bank account titled in two or more names will pass to the surviving owners of the account. Other assets governed by contractual provisions include payable on death accounts, and accounts “held in trust for.” Payable on death accounts are frequently referred to as “Totten Trusts.” Other forms of contractual arrangements that pass property directly to a named beneficiary include life insurance policies, retirement accounts and annuities.
Why you should engage in estate planning
While each of these areas are discussed in greater detail in other articles, this basic outline should illustrate how important it is to make sure that you understand how your assets are titled and how they will pass on death. The unintended consequences of improperly titling your assets could have a devastating effect on your estate plan. For those with substantial wealth, estate planning from a tax perspective can save on income and estate taxes.
This blog is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Because the law is continually changing, some provisions in this blog may be out of date. It is always best to consult an attorney about your legal rights and responsibilities in your particular case.