Part II “The 4 Most Common Estate Planning Myths”

A common misconception about probate in Florida is that if you die without a Will, your property will go to the government or to the State of Florida. This misconception is rooted in Florida Statute §732.107, which states, “When a person dies leaving an estate without being survived by any person entitled to a part of it, that part shall escheat to the state.” In reality, it is quite rare for a deceased person’s assets to “escheat” to the State of Florida by virtue of this rule. Importantly, this rule is only triggered when a person dies and is not survived by “any person” entitled to a part of his or her estate. Thus, the relevant question is:

Who Is Entitled to Your Estate Assets When You Die?

Who is entitled to a particular asset at death depends on several factors, including how the asset is titled and whether the asset has any designated beneficiaries. For example, most people are familiar with the ability to name beneficiaries on a life insurance policy: when the insured person dies, the life insurance company will pay the death proceeds to the beneficiaries named on the policy. But what if the answer is not so obvious? To determine who will inherit your assets at death, you can use this simple 6-step guide:

Step 1: Does the Asset Have Any Surviving Co-Owners?

The first step is to ask whether the asset has any co-owners who survived the deceased person. If the answer is yes, then you need to know more about the form of co-ownership. There are two main types of co-ownership in Florida: (1) joint tenants with right of survivorship (JTROS), and (2) tenancy in common (TIC). If the co-ownership is JTROS, then the deceased person’s share of the asset will be inherited by the surviving co-owner, automatically, and there is no need to go to Step 2. This form of joint ownership trumps the Will (assuming there is one) and Florida’s intestacy statutes (if there is no Will). If the co-ownership is TIC, then the surviving co-owner will not inherit the deceased person’s share of the asset automatically. Most joint bank accounts are owned as JTROS by default (and not as TIC), meaning that when the first co-owner on the account dies, the surviving co-owner simply continues to own the account automatically. Similarly, most assets titled “husband and wife” are owned JTROS by default. However, for real estate, if the deed does not specify JTROS, the default may be TIC. If you determine that the form of co-ownership is TIC, or if there are no surviving co-owners, then go to Step 2.

Step 2: Does the Asset Have Any Designated Beneficiaries?

The second step is to ask whether the asset has any designated beneficiaries. Here are some common synonyms for designated beneficiaries:

• “pay-on-death” or “POD” beneficiaries
• “transfer-on-death” or “TOD” beneficiaries
• “in trust for” or “ITF” beneficiaries
• remaindermen

If the deceased person owned the asset in his or her sole name but named one or more designated beneficiaries, the asset will pass to the named beneficiaries who survive the deceased person. Similarly, if the deceased person owned the asset with another person as “tenants in common” (TIC) but named one or more designated beneficiaries, the deceased person’s share of the asset will pass to the named beneficiaries who survive the deceased person. In these examples, the beneficiary designation trumps the Will (assuming there is one) and Florida’s intestacy statutes (if there is no Will); thus there is no need to go to Step 3. What happens if the deceased person named a beneficiary who does not survive him or her? In this scenario, the asset will be payable to the deceased person’s estate. If this is the case, or if the deceased person did not name any designated beneficiaries to begin with, go to Step 3.

Step 3: Does the Deceased Person Have a Will?

If the deceased person owned the asset in his or her sole name (or as tenants in common) but did not designate any beneficiaries, then the asset is part of the deceased person’s probate estate. If the deceased person has a valid Last Will & Testament, then the asset will pass according to the terms of the Will through the probate process. If the deceased person did not have a Will, then go to Step 4.

Step 4: If the Deceased Person Does Not Have a Will, Then Who Are His or Her Intestate Heirs?

If the deceased person does not have a Will, then the asset will pass according to Florida’s intestacy statutes through the probate process. Florida’s intestacy statutes are like default rules for people who die without a Will. Generally, the order of intestate succession is:

• First, your spouse;
• Second, your descendants;
• Third, your parents;
• Fourth, your siblings; and
• Fifth, your more remote next of kin (e.g., nieces, nephews, and cousins).

The relatives who inherit your estate if you die without a Will are called your “heirs.” The intestacy rules become more complicated than as described above if you have children with someone other than your current spouse. Thus it is especially important for people who are married but have children from prior relationships to have a detailed Last Will & Testament or Revocable Trust setting forth how assets will be divided in this type of blended family scenario, which is very common. If you cannot locate any of the relatives identified above, or if you believe that all of the deceased person’s relatives are no longer living, then go to Step 5.

Step 5: Locate the Intestate Heirs.

Having practiced for more than a decade and counseled clients through thousands of probate proceedings, I have only encountered two situations where I thought the deceased person’s probate assets might be payable to the State of Florida. In both scenarios, however, we were able to locate very distant relatives by tracing the deceased person’s ancestry up through the mother’s and father’s respective family trees and then back down and out to collateral heirs. For example, in one such case, we discovered distant relatives such as second and third cousins twice removed to inherit. In one of these cases, the primary heir was a distant relative in Finland. If needed, there are heir search companies that specialize in finding distant relatives. If you cannot locate any living heirs, even with the help of an heir search company, then go to Step 6. Click here for an easy to read Table of Consanguinity showing degrees of relationships of immediate and distant relatives.

Step 6: Escheat to the State of Florida.

Florida law provides that a deceased person’s property “escheats” to the state only if all of the following are true:

1. There are no surviving joint owners (JTROS); and
2. There are no surviving designated beneficiaries; and
3. If there is a Will, none of the people named in the Will survive the person; and
4. If there is no Will, or if all of the people named in the Will fail to survive the deceased person, none of such person’s distanced relatives, no matter how remote, can be located.

What is the best way to avoid escheat to the State of Florida? Establish a Last Will & Testament or Revocable Trust that names your intended beneficiaries and covers the contingency that your beneficiaries could die before you. Even if all of your close relatives have died before you (or even if you don’t want to leave anything to your relatives in the first place), you can name non-family members in your estate plan to inherit your assets at death. For example, you can name friends or even charities to inherit your assets upon your demise. In fact, many of my clients name default or “wipeout” beneficiaries such as charities to inherit their assets if all of their family members die before them. This is a trusted technique to ensure that your assets pass according to your wishes and not to the government or to the State of Florida upon your demise.