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Inherited Property & Probate in Florida

Why do you need an appraisal when you inherit property.  Below is information pertaining to probate in Florida and how it affects real property.  Your accountant and attorney are your best source for detailed information about your situation.  We have included general information as a starting point.  You could suffer eventual tax repercussions without proof of inheritance property value.  We at Florida Certified Appraisers will be happy to assist.

Please note that the following is for informational purposes only and is not to be relied upon as a sole source of information. It is recommended that an attorney be consulted for the most up to date and correct information.


WHY IS AN APPRAISAL IMPORTANT FOR INHERITED PROPERTY?

A property appraisal is important for several reasons when property is inherited. 

There can be a division of ownership and the value must be ascertained to put a value on each owners portion.  This will help if assets are traded or bought.

You have just inherited property that has not been accessed a value in years, you are going to rent prior to selling.  When you do decide to sell, your taxable capital gains will be based on the last value prior to transfer of ownership due to inheritance and the amount of the sale.  For example:

The inherited property was last accessed a value in 1945 at $25,000.  You inherit the property in 2008 and there is no appraisal.  You sell the property in 2012 for $160,000.  The capital gains could be $135,000.  If you would have had an appraisal done at the time of probate in 2008 the value would have been much closer to the sales price.  For instance $145,000.  Capital gains would only be $15,000 in this case and you would have documented proof.

There are other reasons to have an appraisal done on inherited property.  Speak to your attorney for valued information on this subject.

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WHAT IS PROBATE?

Probate generally is a court-supervised process for identifying and gathering the decedent's assets, paying taxes, claims and expenses of administration, and distributing assets to beneficiaries. The Florida Probate Code is found in Chapters 731 through 735 of the Florida Statutes.

There are two types of probate administration under Florida law: formal administration and summary administration. This document will primarily discuss formal administration.

There is also a non-court supervised administration proceeding called "Disposition of Personal Property Without Administration." This type of administration only applies in limited circumstances.

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WHAT ARE PROBATE ASSETS?

Probate administration only applies to probate assets. Probate assets are those assets that the decedent owned in his or her sole name at death, or that were owned by the decedent and one or more co-owners and lacked a provision for automatic succession of ownership at death.


For example:

ēReal estate titled in the sole name of the decedent, or in the name of the decedent and another person as tenants in common, is a probate asset (unless it is homestead), but real estate titled in the name of the decedent and one or more other persons as joint tenants with rights of survivorship or as tenants by the entirety is not a probate asset;

ēProperty owned by husband and wife as tenants by the entirety is not a probate asset on the death of the first spouse to die, but goes automatically to the surviving spouse.

This list is not exclusive, but is intended to be illustrative.

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WHY IS PROBATE NECESSARY?

Probate is necessary to pass ownership of the decedentís probate assets to the decedentís beneficiaries. If the decedent left a valid will, unless the will is admitted to probate in the Court, it will be ineffective to pass title to the decedentís beneficiaries. If the decedent had no will, probate is necessary to pass ownership to the decedentís assets to those persons who are to receive them under Florida law.

Probate is also necessary to wind up the decedentís financial affairs after his or her death. Administration of the decedentís estate ensures that the decedentís creditors are paid if certain procedures are correctly followed.

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WHAT IS A WILL?

A will is a writing, signed by the decedent and witnesses, that meets the requirements of Florida law. In his or her will, the decedent can name the beneficiaries whom the decedent wants to receive the decedentís probate assets. The decedent can also designate a personal representative (Floridaís term for an executor) of his or her choosing to administer the estate.

If the decedentís will disposes of all of the decedentís probate assets and designates a personal representative, the will controls over the default provisions of Florida law. If the decedent did not have a valid will, or if the will fails in some respect, the identities of the persons who will receive the decedentís probate assets, and who will be selected as the personal representative of the decedentís probate estate, will be as provided by Florida law.

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WHAT HAPPENS TO PROBATE ASSETS IF THERE IS NO WILL?

If someone dies without a valid will, he or she is ďintestate.Ē Even if the decedent dies intestate, his or her assets are almost never turned over to the State of Florida. The State will take the decedentís assets only if the decedent had no heirs. The decedentís ďheirsĒ are the persons who are related to the decedent and described in the Florida statute governing distribution of the decedentís probate assets if he or she died intestate.

If the decedent died intestate, the decedentís probate assets will be distributed to the decedentís heirs in the following order of priority:

ēIf the decedent was survived by his or spouse but left no living lineal descendants, the surviving spouse receives all of the decedentís estate.

ēIf the decedent was survived by his or her spouse and left one or more lineal descendants (all of whom are the descendants of both the decedent and his or her spouse), the surviving spouse receives the first $60,000 of the probate estate plus one-half of the rest of the probate estate, and the decedentís lineal descendants share the remaining half.


ēIf the decedent was survived by his or her spouse and left one or more lineal descendants (at least one of whom is not also a lineal descendant of the surviving spouse), the surviving spouse receives one-half of the probate assets, and the decedentís lineal descendants share the remaining half.


ēIf the decedent was not married at his or her death but was survived by one or more of his or her lineal descendants, those descendants will receive all of the decedentís estate. If there is more than one lineal descendant, the decedentís estate will be divided among them in the manner prescribed by Florida law. The division will occur at the generational level of the decedentís children. So, for example, if one of the decedentís children did not survive the decedent, and if the deceased child was survived by lineal descendants, the share of the decedentís estate which would have been distributed to the deceased child will instead be distributed among the lineal descendants of the decedentís deceased child.

ēIf the decedent was not married at his or her death and had no lineal descendants, the decedentís probate assets will pass to the decedent's surviving parents, if they are living, otherwise to the decedent's brothers and sisters.


ēFloridaís intestate laws will pass the decedentís probate estate to other, more remote heirs if the decedent is not survived by any of the close relatives described above.


The distribution of the decedentís estate under Floridaís intestate laws, as discussed above, is subject to certain exceptions for homestead property, exempt personal property, and a statutory allowance to the surviving spouse and any lineal descendants or ascendants whom the decedent supported. Assets subject to these exceptions will pass in a manner different from that described in the intestate laws. For example, if the decedentís homestead was titled in the decedent's name alone, and if the decedent was survived by a spouse and lineal descendants, the surviving spouse will have the use of the homestead for his or her lifetime only, with the decedentís lineal descendants to receive the decedentsí homestead only after the surviving spouse dies.

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WHO IS INVOLVED IN THE PROBATE PROCESS?

Depending upon the facts of the situation, any of the following may have a role to play in the probate administration of the decedentís estate:

*The Clerk of the Circuit Court in the county in which the decedent was domiciled at the time of the decedentís death;

*The Circuit Court (acting through a Circuit Court Judge);

*The person or institution serving as the decedentís personal representative (or executor);

*The attorney engaged by the personal representative to provide him or her with legal advice throughout the probate process;

*Those filing claims in the probate proceeding relative to debts incurred by the decedent during his or her lifetime, such as credit card issuers and health care providers; and

*The Internal Revenue Service (IRS), as to any federal income taxes that the decedent may owe, any income taxes that the decedentís estate may owe, and, sometimes as to federal gift, estate or generation-skipping transfer tax matters.

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WHERE ARE PROBATE PAPERS FILED?

The decedentís will, if any, and certain other documents required in order to begin the probate proceeding, are filed with the Clerk of the Circuit Court, usually for the county in which the decedent lived. A filing fee must be paid to the Clerk. The Clerk then assigns a file number, and maintains an ongoing record of all papers filed with the Clerk for the administration of the decedentís estate.


In the interest of protecting the privacy of the decedentís beneficiaries, any documents that contain financial information pertaining to the decedentís estate are not available for public inspection.

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WHO SUPERVISES PROBATE ADMINISTRATION?

A Circuit Court Judge presides over probate proceedings.


The Judge will rule on the validity of the decedentís will, or if the decedent died intestate, the Judge will consider evidence to confirm the identities of the decedentís heirs as those who will receive the decedentís probate estate.

If the decedent had a will that nominated a personal representative, the Judge will also decide whether the person nominated is qualified to serve in that position. If the nominated personal representative meets the statutory qualifications, the Court will issue "Letters of Administration," also referred to simply as "lettersĒ. These ďlettersĒ are important evidence of the personal representativeís authority to administer the decedentís estate.

If any questions or disputes arise during the course of administering the decedentís estate, the Judge will hold a hearing as necessary to resolve the matter in question. The Judgeís decision will be set forth in a written direction called an "Order".

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WHAT ARE THE ESTATEíS OBLIGATIONS TO ESTATE CREDITORS?

The primary purpose of probate is to ensure that the decedentís debts are paid in an orderly fashion. The personal representative must use diligent efforts to give actual notice of the probate proceeding to "known or reasonably ascertainable" creditors. This gives the creditors an opportunity to file claims in the decedentís estate, if any. Creditors who receive notice of the probate administration generally have three months to file a claim with the Clerk of the Circuit Court. The personal representative, or any other interested persons, may file an objection to the statement of claim. If an objection is filed, the creditor must file a separate independent lawsuit to pursue the claim. A claimant who files a claim in the probate proceeding must be treated fairly as a person interested in the estate until the claim has been paid, or until the claim is determined to be invalid.


The legitimate debts of the decedent, specifically including proper claims, taxes and expenses of the administration of the decedentís estate, must be paid before making distributions to the estate beneficiaries. The Court will require the personal representative to file a report to advise of any claims filed in the estate, and will not permit the estate to be closed unless those claims have been paid or otherwise disposed of.

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HOW IS THE INTERNAL REVENUE SERVICE ("IRS") INVOLVED?

The decedentís death has two significant tax consequences: It ends the decedent's last tax year for purposes of filing the decedentís federal income tax return, and it establishes a new tax entity, the "estate."


The personal representative may be required to file one or more of the following returns, depending upon the circumstances:

ēThe decedentís final Form 1040, Federal Income Tax Return, reporting the decedentís income for the year of the decedent's death.

ēOne or more Forms 1041, Federal Income Tax Returns for the Estate, reporting the estateís taxable income.


ēForm 709, Federal Gift Tax Return(s), reporting gifts made by the decedent prior to death.


ēForm 706, Federal Estate Tax Return, reporting the decedentís gross estate, depending upon the value of the gross estate.

The estate will not have any tax filing or payment obligations to the State of Florida; however, if the decedent owed Florida intangibles taxes for any year prior to the repeal of the intangibles tax as of January 1, 2007, the personal representative must pay those taxes to the Florida Department of Revenue.

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WHAT ARE THE RIGHTS OF THE DECEDENTíS SURVIVING FAMILY?

The decedentís surviving spouse and children may be entitled to receive assets from the decedentís estate, even if the decedentís will gives them nothing. Florida law protects the decedentís surviving spouse and certain surviving children from total disinheritance.


For example, a surviving spouse may have rights in the decedentís homestead real property. A surviving spouse may also have the right to come forward to claim an ďelective shareĒ from the decedentís estate. The elective share is, generally speaking, 30% of all of the decedentís assets, including any assets that are non-probate assets. A surviving spouse and/or the decedentís children may also have the right to a family allowance to provide them with funds prior to final distribution of the estate assets, and rights in exempt property that will be paid to them instead of to creditors in satisfaction of claims against the estate. It is important to note that a spouse may waive his or her rights to an elective share, family allowance and/or exempt property in a valid pre- or post-marital agreement.

In addition, if the decedent married, or had children, after the date of the decedentís last will, and if the decedent neglected to provide for the new spouse or children, an omitted family member may nevertheless be entitled to a share of the decedentís estate.

The existence and enforcement of these statutory rights requires knowledge about the applicable laws and procedures and is best handled by an attorney.

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WHAT RIGHTS DO OTHER POTENTIAL BENEFICIARIES HAVE IN THE DECEDENTíS PROBATE ESTATE?

Except as provided in the immediately preceding section, a Florida resident has the right to entirely disinherit anyone. It is not necessary to give the disinherited beneficiary a nominal gift of, for example, $1.00.

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WHAT ALTERNATIVES TO FORMAL ADMINISTRATION ARE AVAILABLE?

Florida law provides for several alternate abbreviated procedures other than the formal administration process.


ďSummary AdministrationĒ is generally available only if the value of the estate subject to probate in Florida (less property which is exempt from the claims of creditors; for example, homestead real property in many circumstances) is not more than $75,000, and if the decedentís debts are paid, or the creditors do not object. Those who receive the estate assets in a summary administration generally remain liable for claims against the decedent for two years after the date of death. Summary administration is also available if the decedent has been dead for more than two years and there has been no prior administration.


Another alternative to the formal administration process is "Disposition Without Administration." This is available only if estate assets consist solely of property classified as exempt from the claims of the decedentís creditors by applicable law and non-exempt personal property, the value of which does not exceed the total of (1) up to $6,000 in funeral expenses; and (2) the amount of all reasonable and necessary medical and hospital expenses incurred in the last 60 days of the decedentís final illness, if any.

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WHAT IF THERE IS A REVOCABLE TRUST?

If the decedent had established what is commonly referred to as a ďRevocable Trust,Ē a ďLiving TrustĒ or a ďRevocable Living Trust,Ē in certain circumstances, the trustee may be required to pay expenses of administration of the decedent's estate, enforceable claims of the decedent's creditors and any federal estate taxes payable from the trust assets.


The trustee of such a trust is always required to file a "Notice of Trust" with the Clerk of the Court in the county in which the decedent resided at the time of the decedentís death. The notice of trust gives information concerning the identity of the decedent as the grantor or settler of the trust, and the current trustee of the trust. The purpose of the notice of trust is to make the decedentís creditors aware of the existence of the trust and of their rights to enforce their claims against the trust assets.

All of the tasks which must be performed by a personal representative in connection with the administration of a probate estate must also be performed by the trustee of a revocable trust, though the trustee generally will not need to file the same documents with the Clerk of the Court. Furthermore, if a probate proceeding is not commenced, the assets comprising the decedentís revocable trust are subject to a two-year creditorís claim period, rather than the three-month non-claim available to a personal representative.

The assets in the decedentís revocable trust are a part of his or her gross estate for purposes of determining federal estate tax liability.

The material in this document represents general legal advice. Because the law is continually changing, some provisions in this document may be out of date. It is always best to consult an attorney about your legal rights and responsibilities in your particular case.

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[Revised: 08/07 ]