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Inheriting in Florida

When a loved one dies, whether expectedly or not, we find ourselves facing questions about that person’s final wishes. Outside the obvious funerary preparations, we also find ourselves having to disburse the deceased’s assets. Here at Urban Thier & Federer, we have a great deal of experience in assisting clients both in preparing wills and in helping heirs to inherit.  Inheritance can be a complicated process, but this article should serve to help you through it.

How does inheritance work in Florida?

Inheriting in Florida is a process that can be very simple, or it can be quite complicated. Generally, a probate matter will be opened with the courts by filing the will and a petition for probate with the Circuit Court in the county where the decedent lived. The court will issue Letters Testamentary to the executor of the will who will then file an inventory of the estate’s assets and pay the creditors and taxes associated with the estate. At this point, you will file a petition to close the probate matter and the court will issue an order to distribute the estate’s remaining assets to the beneficiaries.

While that is the process for a great many inheritance matters in Florida, it is not always the case. For that reason, we recommend that you speak with an attorney regarding any inheritance or probate matter with which you may find yourself involved. Your Florida attorney can discuss all the steps involved in an inheritance matter with you, but for your information we will be expounding on some of those steps in this article.

What is probate and how does it work?

Probate is the way in which a decedent’s estate is settled under the supervision of a court. The process is intentionally slow-moving so that the court can be certain that the estate is handled in a just manner. The purpose of probate is to freeze the estate until a decedent’s will can be found to be valid. Additionally, all the people who are relevant to the estate must be notified. The property and assets tied to the estate must be identified and appraised, and the creditors and taxes tied to the estate must be paid. Once all these steps have been completed, the estate can be closed and distributed to the beneficiaries.

In order to make sure that these steps are followed, the court will appoint a person to be the executor or personal representative of the estate. This person can be selected in a couple of different ways. If the decedent has left behind a will dictating their final wishes, an executor is usually designated by that document. If, for whatever reason, the decedent did not prepare a will, then it is common for an attorney to be appointed as personal representative.

Alternatively, a family member can be appointed. In that case, in Florida, the initial right to appointment belongs to the decedent’s spouse. However, the spouse may decline to serve, in which case the heirs must come to a majority opinion on who will serve. The position of executor empowers the selected person with the legal authority necessary to represent the estate through the steps required to complete probate proceedings.

Probate in Florida can be pursued in three difference ways. Disposition without administration occurs when the decedent’s estate is not valuable enough to pay for their final expenses. This type of disposition does not involve any direct participation by the court.

Summary administration occurs when the value of the decedent’s estate is less than $75,000 or the decedent dies more than two years before the beginning of the probate proceedings. In summary administration, the court is petitioned to allow the estate to be given to the decedent’s heirs by the executor listed in the will.

Formal administration occurs in situations when there is a possibility that the will of the decedent is fraudulent. In the opening of these probate proceedings, the court will determine the validity of the will under Florida law and then watch over the disbursement of the estate’s assets to make sure that it is done correctly.

What taxes need to be paid?

One of the steps necessary for completing probate proceedings for an estate in Florida is to pay the decedent’s final taxes. The IRS will require, in nearly all cases, that the decedent’s estate register for an Employer Identification Number. This number will act like a social security number for the estate and will be used in the creation of a bank or brokerage account which will track the interest gained by the estate before it is distributed to the estate’s beneficiaries.

There are three main types of taxes that will need to be filed for the decedent and paid out of the estate’s assets. There are final individual federal income taxes, federal estate income taxes, and federal estate taxes. Florida is one of a few states that does not levy income taxes on individuals or estates.

Final individual federal income taxes are due by April 15th of the year following the decedent’s death. These taxes must be filed if the decedent earned more than the minimum amount of income necessary for filing income taxes in the calendar year of the death. This amount is set by federal and state law. If the decedent was married, their spouse can still file jointly for that year. You will use a Form 1040 to file these taxes.

In some instances, the decedent’s estate, through the executor, will also have to file federal estate income taxes.  This income could come from things like rent, royalties, or interest income from savings account for the estate. The estate is a separate taxpayer than the decedent, so this will be filed using the EIN number for the estate.  These taxes are also due by April 15th.

The final tax that needs to be paid is the estate tax. The federal estate tax is due nine months after the date of the decedent’s death. Estates worth less than the exemption for $10 million are not required to file these federal taxes. Individual states are also capable of levying estate taxes; however, Florida does not impose an estate tax.

How to inherit in Florida

Assets that you may be inheriting in Florida will likely fall into one of a few different categories. Those may be bank accounts, vehicles, real estate, or retirement assets and life insurance policies.

Retirement assets such as IRA or 401(k) accounts are inherited by designated beneficiaries, and this cannot be changed by the details of a will. Once the beneficiary has been identified, they will want to determine whether or not the decedent was old enough to have begun taking out the required annual minimum distribution of the funds in the retirement account as this will determine when the beneficiary must start removing funds from the account. The withdrawal of funds can be done in a few different ways. The funds can be removed altogether immediately. They can be removed within five years of the decedent’s death. They may also be able to be removed over the beneficiary’s life expectancy. When assets are withdrawn from accounts such as these, the beneficiary may have to pay federal income taxes on the assets withdrawn.

Life insurance policies, like retirement asset accounts, are inherited by designated beneficiaries. Life insurance policies are required to have a primary and secondary beneficiary. When the policyholder dies, the death benefit goes to the primary beneficiary. If the primary beneficiary is deceased at the time of the death of the policyholder, the secondary beneficiary will receive the death benefit. If you are unsure whether the decedent had a life insurance policy, we can investigate with insurance companies on your behalf to find out.

Who inherits if there is no will?

When a person dies without a will, their assets pass into something called intestate succession. The rules of intestate succession operate almost like a computer program. The system is based on if/then statements to determine who receives what. Below are a few examples.

  • If a person dies with children but no spouse, then the children inherit everything.
  • If a person dies with a spouse but no descendants, then the spouse inherits everything.
  • If a person dies with a spouse and descendants born from that spouse, then the spouse inherits everything.
  • If a person dies with a spouse and descendants born from that spouse and another person, then half of the estate goes to the spouse and the other half is distributed equally to all the descendants.
  • If a person dies with a spouse and descendants born from that spouse and the spouse has other descendants, then half of the estate goes to the spouse and the other half is distributed equally to all the decedent’s descendants.

As you can see, the process of inheriting in the state of Florida can be an incredibly complex ordeal. At any step of the way if you feel that we at Urban Thier & Federer can be of any assistance to you, please contact us.

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