Non-Probate Transfers
Non-probate transfers are a crucial aspect of estate planning that allow individuals to transfer property outside of the probate process, which means loved ones can usually get the property much faster and without going to court. These types of transfers include joint tenancy with right of survivorship, beneficiary designations on retirement accounts and life insurance policies, and the use of trusts. Non-probate transfers are valuable because they can help avoid the sometimes lengthy and costly probate process, ensuring a smoother and more efficient distribution of assets. By designating beneficiaries or setting up trusts, individuals can help ensure that their intended heirs receive the assets and property they wish to pass on, without the need for court involvement. Non-probate transfers are an important tool in planning for the future and can provide peace of mind for individuals and their families.
Forms of Non-Probate Transfers
Lady Bird Deed (a/k/a Enhanced Life Estate Deed)
A Lady Bird Deed (sometimes called an Enhanced Life Estate Deed) is a deed where a person gives a remainder interest in the property to another and retains a life estate, but with the full ability to sell, gift, or otherwise make use of or dispose of the entire property. If the life estate holder dies while still owning the property, it will automatically pass to the remainder beneficiary, outside of probate. But if the life estate holder sells the property before they die, the remainder beneficiary does not get anything.
Lady Bird Deeds differ from normal life estate deeds because, with the latter, the life estate holder can only dispose of their life estate interest, not the entire property, unless the remainder beneficiary joins in the transaction. In other words, when the life estate holder dies, the remainder beneficiary will receive the property unless the remainder beneficiary agrees otherwise. But with a Lady Bird Deed, the remainder beneficiary is not guaranteed to get anything, regardless of whether they refuse to join in a sale—the life estate holder has the final say.
Lady Bird Deeds can be a useful, inexpensive way to transfer real property outside of probate, especially for smaller estates where a home may be the only substantial asset.
Payable on Death and Transfer on Death Designations
A simple way to transfer bank accounts and brokerage accounts to loved ones is to designate a payable on death (POD; for bank accounts) or transfer on death (TOD; for brokerage accounts) beneficiary. Most institutions have their own paperwork you will need to complete to specify which account you want to be paid out or transfer on your death and to whom you want it to go. You can also usually designate multiple beneficiaries if you want the account split between multiple people and designate contingent beneficiaries if the primary beneficiaries predecease you. Florida permits institutions a lot of discretion in offering these designations if they choose to offer them at all.
If you designate a POD or TOD beneficiary on an account, the account will pass outside of probate so long as the beneficiary survives you. What many people overlook is this means that your will will not dictate how the asset is distributed. So, if you have three children and in your will you divide everything you own equally between them but name one child as the POD beneficiary of the bank account that contains all of your money, the bank account will pass only to that child and the other two will not get anything.
While POD and TOD designations are very useful estate planning tools, it is important to evaluate your entire estate plan with an estate planning attorney who takes the time to address these common issues to ensure your estate and legacy pass as you intend.
Joint Tenancy with Rights of Survivorship and Tenancy By the Entirety
In Florida, joint tenancy with rights of survivorship (JTWROS) and tenancy by the entirety (TBE) are common forms of ownership of real estate and bank accounts. While only a married couple who obtain ownership of property after they are married can own it as tenants by the entirety, anyone can own property with another as joint tenants with rights of survivorship. If property is held as joint tenants with rights of survivorship or as tenants by the entirety, a deceased owner’s interest automatically transfers to the surviving owner(s) upon the deceased owner’s death.
While these forms of ownership can be useful to avoid probate, many people do not understand that because assets owned in these ways do not pass through probate, their will does not determine how the assets are distributed. A common and easily avoided situation is an elderly parent adding an adult child as a joint tenant with rights of survivorship on a bank account rather than just adding the child as an authorized signer to help pay bills. When the parent passes away, the adult child will automatically own the entire account, even if there were other children the parent intended to leave the account to.
Once someone is added as a joint tenant with rights of survivorship, it is not always simple to remove them if they do not consent—some banks require all joint owners to consent to closing an account or further changing ownership, and changing ownership of real estate will require the unintended joint tenant to execute a deed conveying their interest to the initial owner.
If you are considering adding someone to your property as a joint tenant with rights of survivorship or want to own property as tenants by the entirety, consult an estate planning attorney to make sure this properly aligns with your estate plan and you are not unwittingly creating a headache for you and your loved ones.
Business Operating Agreements
A business is often one of the most valuable assets a person can own and can also be one of the most difficult assets to deal with upon an owner’s death. Typically, an owner’s interest would either pass through their probate estate at death or, if the interest was held in trust, via the terms of the trust. However, Florida courts have recently ruled that a business owner’s interest can pass outside of probate via the terms of the business’s operating agreement, so long as the agreement is carefully drafted to direct how the interest transfers upon an owner’s death. This can be a very useful estate planning tool, especially for family businesses, to ensure continued, uninterrupted operation with the added benefit of avoiding probate.
If you own a business, make sure to consult an estate planning attorney to ensure your business transfers smoothly and as you intend.
Schedule a Free Consultation
If you would like help to see how much of your property you can pass to loved ones without going through probate, please reach out to schedule a free consultation.