One of the biggest misconceptions about estate planning is the belief that having a Last Will & Testament avoids probate. To be clear, Wills do not avoid probate; rather, having a Will allows you to choose who will inherit your property at death instead of relying on Florida’s default statutory rules known as “intestate succession.” When someone dies without a Will, their estate administration is called “intestate,” whereas when someone dies with a Will, their estate administration is called “testate.” These concepts are discussed in more detail, below, in the context of different forms of property ownership that may avoid probate at death – if used correctly with proper safeguards.

If Wills Do Not Avoid Probate, Then What Techniques Do Avoid Probate?

Here are the most common forms of property ownership that can avoid the need for costly and time-consuming probate proceedings:

Joint Ownership with Right of Survivorship (JTROS)

Property owned as “joint tenants with right of survivorship” (JTROS) will pass to the surviving co-owner when the first co-owner dies, automatically (by operation of law) without the need for probate court proceedings. For example, Rick and Marty own their house as joint tenants with right of survivorship. If Rick dies first, Marty will continue to own the entire property automatically, without the need for probate. All Marty has to do to complete the chain of title is record Rick’s death certificate in the county where the property is located. For a couple like Rick and Marty who own the majority of their property JTROS, the real concern is how to avoid probate when both spouses have passed away (and thus there are no remaining joint owners). Contrast JTROS with owning property as “tenants in common” (TIC), which has a different legal effect when the first co-owner dies. For example, suppose Rick and Marty own their house together as TIC and not as JTROS. When Rick dies, Marty will not own the entire property automatically; rather, he will only own his undivided one-half (50%) interest in the property, and Rick’s one-half (50%) interest will need to be probated. If Rick has a Will that devises his interest in the property to Marty, then Marty will inherit Rick’s 50% through probate administration. However, if Rick does not have a Will, then his 50% interest in the property will pass according to Florida’s intestacy rules via probate administration. What would this mean for Marty?

• If Rick and Marty never married, then Marty will not inherit Rick’s 50% interest in the property by intestacy; rather, Florida law provides that Rick’s estate will pass to his family members in the following order: children and descendants, and if none, then to parents, and if none, then to siblings, and if none, then to more remote next of kin. The transfer of ownership of Rick’s property to his heirs at law would happen in the probate court.
• If Rick and Marty are married and neither ever had any children, then Marty will inherit Rick’s 50% interest in the property as Rick’s surviving spouse according to Florida’s intestacy rules via probate administration.
• If Rick and Marty are married but Rick has children from a prior relationship, Marty will not inherit 100% of the property, but he has some lesser options. First, Marty can take a “life estate” in Rick’s 50% of the property, meaning Marty can live there for his lifetime, but ultimately the property will pass to Rick’s children when Marty dies. Alternatively, Marty can elect to split Rick’s 50% property interest with Rick’s children, so that ultimately Marty owns 75% of the property (his 50% plus 25% inherited from Rick’s estate) and Rick’s children own the remaining 25% of the property. In these situations, it would be best for Marty to buy out Rick’s children’s 25% interest in the property so that he can continue to live there without interference from Rick’s children and sell the property when he pleases, without having to deal with Rick’s children as co-owners.

Because joint ownership only avoids probate when the first co-owner dies, it is of limited use to avoid probate in Florida. For this reason, clients who choose to rely on joint ownership as a component of their estate plan should also have at least simple Wills stating who should inherit the joint property when the last co-owner dies.

Beneficiary Designations

Most financial accounts allow you to name one or more “pay-on-death” (POD) or “transfer-on-death” (TOD) beneficiaries to receive any funds remaining in your accounts upon death. As long as your named beneficiaries survive you, this method avoids probate. Essentially, the financial institution will pay the funds to the named beneficiaries without the need to look at your Will or notify the probate court. For example, suppose Marty owns a $1 million life insurance policy on his own life and names Rick as beneficiary. When Marty dies, Rick will provide the insurance company with a copy of Marty’s death certificate. Then the company will send Rick beneficiary claim paperwork to claim the $1 million death proceeds without the need for any type of court proceeding.

What If There Is No Beneficiary Designated on a Life Insurance Policy?

But what if Rick dies before Marty and there was no contingent beneficiary listed on the life insurance policy? When there is no beneficiary designated on a life insurance policy, or when there is a beneficiary named but the named beneficiary predeceases the insured, then the death proceeds will be payable to the insured’s estate. If the insured has a Will, then the proceeds will pass to the beneficiaries named in the Will through the probate administration process. If the insured does not have a Will, then the proceeds will pass to the insured’s heirs at law via intestate succession through the probate administration process. As noted in the prior example, above, under Florida law if you die without a Will (intestate), your default heirs at law generally are:

• If you do not have any descendants: 100% your spouse.
• If you have descendants who are also your spouse’s descendants: 100% your spouse.
• If you have descendants from prior relationships: 50% your spouse and 50% your descendants.
• If you are unmarried with descendants: 100% to your descendants.
• If you are unmarried with no descendants:
  • 100% your parents; or if none, then:
  • 100% your siblings; or if none, then:
  • 100% more remote next of kin.

If you choose to rely on beneficiary designations as a major component of your estate plan, then it is of the utmost importance that you confirm your beneficiaries on an annual basis and update them as needed. You also should have at least a simple Will as a “just-in-case” measure to cover the contingency that some or all of your beneficiaries could die before you. It is also important to note that minor beneficiaries (under 18), beneficiaries with special needs (such as development disabilities), and beneficiaries with spendthrift or addiction issues should never be named as POD or TOD beneficiaries, because these beneficiaries require special planning. Please click here to read Part 2 of The 4 Most Common Estate Planning Myths: Myth #1: Wills Avoid Probate.