Foundations of Estate Administration
A. Probate Assets vs. Non-Probate Assets
The first question in any probate administration necessarily involves an inquiry into the nature of assets owned by the Decedent at the time of his or her death. The examination of the nature of the property is done with a view toward determining whether the property is subject to the payment of the debts of the decedent?
The Florida Probate Code, Fla.Stat. § 731.201(12) defines property of the estate as "property of a decedent that is the subject of administration." Ordinarily, except for exempt homestead real property, all personal and real property owned by a resident decedent on the date of death are probate assets of the estate. An exception to this rule, however, exists in the Probate Code:
(2) If property that reasonably appears to the personal representative to be protected homestead is not occupied by a person who appears to have an interest in the property, the personal representative is authorized, but not required, to take possession of that property for the limited purpose of preserving, insuring, and protecting it for the person having an interest in the property, pending a determination of its homestead status. If the personal representative takes possession of that property, any rents and revenues may be collected by the personal representative for the account of the heir or devisee, but the personal representative shall have no duty to rent or otherwise make the property productive. Fla.Stat. § 733.608(2).
Typically, one of the first questions involving the determination of whether an asset is probate vs. non-probate involves some form of life insurance benefits. This issue is governed by Fla. Stat. §222.13(1), which provides that: " [w]henever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise. Notwithstanding the foregoing, whenever the insurance, by designation or otherwise, is payable to the insured or to the insured's estate or to his or her executors, administrators, or assigns, the insurance proceeds shall become a part of the insured's estate for all purposes and shall be administered by the personal representative of the estate of the insured in accordance with the probate laws of the state in like manner as other assets of the insured's estate."
Jointly owned assets is another common issue arising in determining whether an asset is probate or non-probate. The critical feature of the joint asset is whether there exists survivorship language expressed in the title. This is ordinarily located on the signature cards and account applications and agreements with financial institutions. Fla.Stat. § 655.79 provides:
Unless otherwise expressly provided in a contract, agreement, or signature card executed in connection with the opening or maintenance of an account, including a certificate of deposit, a deposit account in the names of two or more persons shall be presumed to have been intended by such persons to provide that, upon the death of any one of them, all rights, title, interest, and claim in, to, and in respect of such deposit account, less all proper setoffs and charges in favor of the institution, vest in the surviving person or persons.
Often, a decedent dies with accounts or certificates of deposit held as a "pay on death." This type of account is common in Florida, and is governed by Fla.Stat. § 655.82. Under the right circumstances, where a survivorship interest exist without lifetime access during the life of the Decedent, these accounts are considered non-probate assets.
Another common issue arises in the context of assets belonging to revocable trust. Generally, those assets belonging to a valid revocable inter vivos trust are non-probate assets; however, Fla.Stat. § 733.3054 allows the use of those assets to the extent it is necessary for the payment of expenses and administration obligations of the probate estate.
The easiest categories to determine as probate assets are those that are apparent on the face: the furniture and personal property, including cash and bonds owned by the Decedent. Also, the Decedent's interest in jointly owned property where there is no apparent survivorship interest expressed.
Finally, an entire chapter could be written about claims for wrongful death; however, special rules apply (See, Fla. Stat. § 768.16 et seq.) and that is beyond the scope of this presentation. As a general rule, claims that survive the Decedent's death and that can be brought by the Personal Representative (e.g., promissory notes, judgments, contract claims) are probate assets and should be listed on the inventory.
B. Understanding the Various Forms of Administration
When a decedent dies and leaves assets in a state other than that where he has his or her domicile, there are many legal issues that arise. Because no court in one state may decide property rights in another state, and because probate administration does not fall within the Full Faith and Credit Clause of the United States Constitution, the law provides for ancillary administration. The purpose of ancillary administration is to marshal property of a foreign decedent and transmit those assets, or the proceeds from the sale of those assets, to the proper probate administration in the state of the decedent's domicile.
Ancillary administration is governed by Florida Statute § 734.102 and the Florida Probate Rules. Florida Statute §734.102 provides that ancillary personal representatives shall have the same rights, powers and authority as other personal representatives in Florida to manage and settle estates; to sell, lease, or mortgage local properties; and to raise funds for the payment of debts, claims and devises in the domiciliary jurisdiction. No property shall be sold, leased, or mortgaged to pay a debt or claim that is barred by any statute of limitation or of non-claim of this state.
Florida Probate Rule 5.470(b) requires that prior to the issuance of ancillary letters of administration, formal notice must be given to: (1) all known persons qualified to act as ancillary personal representative and to whose entitlement to preference of appointment is equal to or greater than petitioner's and who have not waived notice or joined in the petition; and (2) all domiciliary personal representatives who have not waived notice or joined in the petition.
When commencing the ancillary administration, the fiduciary handling the estate should secure an authenticated copy of the Will (presumably filed in the foreign/domiciliary probate proceeding) and submit it to the court, which will then determine whether the Will complies with Florida law. Under Florida Probate Rule 5.470(c), the court will admit the Will to probate ancillary administration if it complies with Florida law. Under Florida Statute -§ 734.1021 and Florida Probate Rule 5.470(b), the domiciliary personal representative should secure a waiver of notice. (Practitioners can use Florida Bar probate form No. 3-3.0190.) Further, the domiciliary personal representative can give notice of the ancillary administration pursuant to Florida Probate Rule 5.065(b), 5.470(a) (Use Florida Bar probate form No. 4-3.0700.) As for the ancillary letters of administration, these are provided by rule and statute at Florida Statute § 731.201(22); 734.102; Florida Probate Rule 5.235(b). (Use Florida Bar probate form No. 3-3.0720.)
The ancillary personal representative shall give bond, as do personal representatives generally. All proceedings for appointment and administration of the estate shall be similar to those in original administrations as possible. Florida Statute § 734.1024.
The most common situation for the probate administration practitioner in Florida arises when a non-resident decedent dies with real property located in the state of Florida. Under these circumstances, the practitioner may be asked to seek the appointment of an ancillary estate. Florida Statute § 733.6131 provides that when a personal representative of an intestate estate, or his testator, has not conferred a power of sale; or his testator has granted a power of sale but the power is so limited by the Will or by operation of law that it can not be conveniently exercised, shall consider that it is for the best interest of the estate, and if those interested in it agree that real property be sold, the personal representative may sell it at public or private sale. No title shall pass until the court authorizing or confirms the sale. No bona fide purchaser shall be required to examine any proceedings until further order of sale. Florida Statute § 733.6131. Therefore, ancillary administration is generally a good idea in Florida in order for the sale to be valid in the probate estate of the domiciliary decedent.
Another common situation is where a non-resident dies with personal property located in Florida. This situation is governed by Florida Statute § 734.1014 which provides that all persons indebted to the estate of decedent or having possession of personal property belonging to the estate, who have received no written demand from a personal representative or curator appointed in this state for payment of the debt or the delivery of the property are authorized to pay the debt or deliver the personal property to the foreign personal representative after the expiration of 60 days from the date of appointment of the foreign personal representative. Therefore, the statute provides a mechanism by which a decedent's personal property in Florida can be delivered to a foreign personal representative without the necessity of seeking the appointment of an ancillary personal representative. Florida Statute § 733.6071 and Florida Statute § 734.1027 provide that an ancillary personal representative appointed in Florida after issuance of Letters of Ancillary Administration may take possession of personal property at the time of appointment.
Another practical issue that often arises involves the prospect of ancillary administration where a non-resident decedent's testate estate has property not exceeding $50,000 in Florida. Under Florida Statute § 734.1025, when a non-resident decedent dies testate and leaves property subject to administration in Florida, the gross value of which does not exceed $50,000 at the date of death, the foreign personal representative of the estate before the expiration of two years after the decedent's death may file in the circuit court of the county where any property is located, an authenticated transcript of so much of the foreign proceedings as will show the Will and beneficiaries of the estate, as provided in the Florida Probate Rules. As a practical matter, this statute allows for summary procedure; however, beware that a Notice to Creditors must be served, and if a claim is filed, under Florida Statute § 734.10252, the case then becomes a formal ancillary administration.
An alternative proceeding is set forth under Florida Statute § 734.104 addressing the admission to record of foreign Wills and the effect on property title. Under this statute an authenticated copy of the Will of a non-resident that devises real property in the state of Florida, or any right, title, or interest in the property, may be admitted to record in any county of this state where the property is located at any time after two years from the death of the decedent or at any time after the domiciliary personal representative has been discharged if there has been no proceeding to administer the estate of the decedent in this state. When admitted to record, the foreign Will shall be as valid and effectual to pass title to real property and any right, title, or interest therein as if the Will had been admitted to probate in Florida. Fla. Stat.§ 734.1044.
C. Considerations for the Small Estate
As discussed above, summary administration is available for a non-resident decedent's estate. It is also available for administration of a resident decedent's estate under Florida Statute § 735.201. Summary administration may be had when it appears that the value of the entire estate subject to administration (less the value of property exempt from the claims of predators) is: (1) less than $75,000; or (2) the decedent has been dead for more than two years.
Ordinarily, questions arise as to whether or not an estate qualifies for summary administration due to the categorization of the classification of the nature of the assets as we discussed in the foregoing section (e.g., probate versus non-probate assets). According to Florida Statute § 735.201, non-probate assets are not considered in determining whether or not the value of the estate exceeds the statutory threshold of $75,000. (See Ford v. Ford, 581 So. 2d 203 (Fla. 5th DCA 1991; this opinion is instructive as to the calculation of probate versus non-probate assets in determining whether summary administration is appropriate where the decedent in an inter-vivos conveyance of his real property into trust with his spouse as the sole beneficiary in an effort to achieve qualification for summary administration.)
Another consideration for determination of whether or not the estate may qualify for summary administration is the fact that Florida Statute § 735.201 also does not include exempt property when decedent is survived by either a spouse or a child. Florida Statute § 732.4021. Exempt property consists of: (1) household furniture, furnishings and appliances in the decedent's usual place of abode up to a net value of $10,000 as of the date of death (Florida Statute § 732.402(2)(a) [)]; (2) all automobiles held in the decedent's name and regularly used by the decedent or members of the decedent's immediate family as their personal automobiles. [, ]Florida Statute § 732.402(2)(b); (3) Florida Pre-paid College Program contracts purchased in Florida; (4) College Savings Agreements established under part 4 of Chapter 1009, Florida Statute § 732.402(2)(c); (5) any death benefits paid to teachers and school administrators pursuant to Florida Statute § 112.1915; and (6) all personal property valued up to $1,000 pursuant to Article X, Section 4(a)(2), of the Florida Constitution. The Petition for Summary Administration of the testate estate is a standard form that is available by the Florida Bar at Florida Bar Probate Form No. P-200200 and Form P-2.0205. The Petition for Summary Administration of an intestate estate can be found at Florida Bar Probate Form No. P-2.0210.
Sometimes an issue arises as to whether an estate that had been originally filed as formal administration may be converted to summary administration. Florida Statute § 735.2055 provides that a Petition for Summary Administration may be filed at any stage of the administration of the estate if it appears that at the time of filing the estate would qualify. Other helpful forms are the Order for Summary Administration of a testate estate (Florida Bar Probate Form No. P-2.0300); Order for Summary Administration of an intestate estate (Florida Bar Probate Form No. P-2.0310); Order Admitting Will to Probate (Florida Bar Probate Form No. P-2.0600); and Order Admitting Will to Probate - Self-proved Will (Florida Bar Probate Form No. P-2.0610).
The expected practical effect of filing a Petition for Summary Administration is that the court will enter the Order for Summary Administration thereby allowing immediate distribution of the assets to the distributees. There is a statutory scheme setting the effect and order under a summary administration and that is set forth in Florida Statutes -§ 735.2064(a-d).
Another practical and common issue involving small estates is the question of whether a motor vehicle title, in the name of the decedent, can be transferred without commencing formal probate proceedings. Pursuant to Florida Statute -§ 319.281(b), if the titled vehicle belonged to a decedent who died without a Will any heir may apply for transfer of the title without the need of commencing formal probate proceedings. If the decedent owner died with a Will and the Will has been admitted to probate, a certified copy of the Will and an affidavit stating that the estate is not indebted to a lien-holder can accompany the application for the certificate. Pursuant to Florida Statute § 319.211(c) a decedent's surviving spouse may transfer the automobile to any third party.
One of the advantages of summary administration is the lack of formality and the fact that the court may enter an order of summary administration allowing immediate distribution of the assets to the persons entitled to them pursuant to Florida Statute § 735.2062. One disadvantage is that when an Order of Summary Administration is issued by the Court, and distributions are made, the recipients of those distributions become personally liable for a pro-rata share of all lawful claims against the estate of the decedent, but only to the extent of the value of the estate of the decedent actually received by each recipient, exclusive of the property exempt from claims of creditors under the constitution and statutes of Florida. See Florida Statute § 735.206(4)(e). If you are advising a recipient distributee under the estate subject to formal probate administration, you might want to advise them to publish a notice to creditors (in conformity with the requirements of Florida Statute § 733.2121) therein stating the value of the estate and the identification of those to whom it has been assigned. The filing of proof of publication of this notice to creditors has the effect of forever barring any claims filed after three months following the notice. See Florida Statute § 735.2063(2).
D. Knowing the Advantages and Disadvantages of Informal Administration and Complying with the Procedures.
Florida Statute § 735.3011 provides that no administration shall be required or formal proceedings instituted upon the estate of a decedent leaving only personal property exempt under the provisions of § 732.402. Personal property is exempt from the claims of creditors under the Constitution of Florida and non-exempt personal property, the value of which does not exceed the sum of the amount of preferred funeral expenses and reasonable and necessary medical and hospital expenses of the last 60 days of the last illness. Florida Probate Rule 5.420(a) provides that an interested person may request a disposition of the decedent's personal property without administration. The application signed by the applicant shall set forth: (1) the description and value of the exempt property; (2) the description and value of the other assets of the decedent; (3) the amount of preferred funeral expenses and reasonable and necessary medical hospital expenses for the last 60 days of the last illness together with accompanying statements for payment; receipts; and for each requested payment or distribution of personal property. Florida Probate Rule 5.420(c) provides that, if requested, the clerk shall assist the applicant in the preparation of the required writing.
Florida Statute § 735.3012 provides that upon formal application by affidavit, letter, or otherwise by an interested party, the court, by letter or other writing under the seal of the court, may authorize the payment, transfer, or disposition of the personal property, tangible or intangible, belonging to the decedent to those persons entitled. Any person, firm, or corporation paying, delivering, or transferring property under the authorization shall be forever discharged from liability thereon. Florida Statute § 735.3013.
Under Florida Statute § 735.3021, if the decedent has overpaid federal income tax, as determined by the United States Treasury Department, and if the refund is not more than $2500, the Florida Probate Code provides that the refund may be paid directly to the surviving spouse upon her verified application or if no surviving spouse, to one of the decedent's children who is designated in a verified application executed by all the decedent's children over the age of 14 years.
