Monthly Archives: April 2022

What is a Life Estate in Florida?

In this article, you will find out what is a life estate in Florida. A life estate can be used to avoid probate, but it has significant disadvantages. You will also learn about enhanced life estates, which are often called a Lady Bird Deed. Finally, we will discuss how the various life estates in Florida impact the probate process, and why you might consider using them when doing your estate planning.

What is a life estate?

A life estate is a type of joint ownership of real property. The joint owners are the life estate owner, and the remainder beneficiaries.

Life estates allow someone to live in their home during their lifetime and transfer it to a beneficiary upon their death.

It allows the original owner of a property to continue use of the property during his or her life. When the original owner dies, ownership of the property passes to the named beneficiaries.

The life estate owner, also known as the life tenant, gets to use the property during their lifetime. On the death of the life tenant, the property passes onto the remainder beneficiaries.

The transfer of the remainder interest happens outside the probate process. Therefore, life estates in Florida will work to avoid probate.

How do you create a life estate in Florida?

Any property owner can create a life estate. The owner of the property executes a traditional life estate deed. The deed names the life tenant, and then names the person or persons that will receive the property at the time of the life tenant’s death.

How does a life estate affect property ownership?

Real property is generally owned in fee simple. This means that the current owner of the property owns all interests in the property. This is true, even if there is a mortgage on the property, or if more than one person owns the property.

A quit claim deed or a warranty deed usually conveys property in fee simple.

However, a regular life estate deed splits ownership of the property into two estates. The first is the life estate and the second is the remainder interest.

The owner of the life estate interest gets use of the property during their lifetime. The owner of the remainder interest gets to inherit the property when the life tenant dies.

The problem with a life estate is that use of the property does not equal complete control of the property. The life estate owner cannot sell the property without the remaindermen’s consent. The life estate owner also cannot mortgage the property without the remaindermen’s consent.

The loss of full control of the property is one of the reasons that Florida residents rarely create a traditional life estate.

What is the benefit of a life estate?

A life estate can help a property owner avoid probate, and can help with Medicaid planning.

Avoiding Probate

The main benefit of a life estate is that the property will pass to the beneficiaries by operation of law. There will be no need for probate or probate court.

Say a person’s estate consists mainly of their primary residence, and the person wants their property to pass to their children or grandchildren. In such a situation, a standard life estate deed may be a perfectly good idea. It is cheap and quick.

Upon the death of the life estate holder, the beneficiaries get the property by operation of law.

Medicaid Planning

Since a life estate property passes to the remainder beneficiaries by operation of law, it is not part of the original owner’s probate estate. Therefore, the property subject to life estate will not be available for Medicaid estate recovery.

Therefore, some type of life estate deed may be a good tool for Medicaid planning for non-homestead property.

Please do note that the life estate owner still owns the property during their lifetime. Therefore, a life estate deed will not help a person with Medicaid eligibility.

Medicaid planning is very complicated. If you want to include Medicaid planning as part of your estate plan, then you should consult with a Florida elder law attorney.

What is the problem with a life estate?

Some of the problems with a traditional life estate are loss of control, uncertainty with remainder beneficiaries, and the inability to change beneficiaries.

Loss of control with a life estate

Once an owner executes a Florida life estate deed, the beneficiaries have a type of ownership interest in the property. These remaindermen have the right to expect that they will inherit that property.

This means that the life estate owner no longer has full power to sell the property. If the owner sells the property, then the remainderman have nothing to inherit. Therefore, the life estate tenant no longer has the legal right to sell the property without the consent of the remainderman.

Not only do the remaindermen have a right to inherit the property, but they have a right to inherit the same interest in the property that the original owner had when they executed the life estate deed.

This means that the life tenant cannot mortgage the property without the consent of the remainderman. This might not be a big deal, unless of course the property might need some unexpected, extraordinary repairs. However, if you need a second mortgage to re-roof the house or to re-build the seawall, you will need the remainderman’s consent.

Uncertainty with Remainder Beneficiaries

A life estate deed names the remainder beneficiaries. So an owner might execute a deed where they retain the life estate, and name their two children as the remainder beneficiaries.

But what happens if one of their children dies young, leaving a surviving spouse and some minor children behind? Well in such a case, the owner’s grandchildren would become the remainder beneficiaries.

If the grandchildren are minors, then their surviving parent would effectively receive the property. This may be okay, but few people intend to leave their property to their son or daughter-in-law.

Furthermore, if one of the remainder beneficiaries were to die before the life tenant, then the property would have to go through probate. This would be necessary to ensure that the deceased beneficiary’s interest gets passed down to the rightful heirs. Therefore, one of the main benefits of a life estate, avoiding probate, would be lost.

Inability to Change Remainder Beneficiaries

Perhaps the greatest potential problem of a life estate in Florida, is the inability to change the remainder beneficiaries. A regular life estate deed is irrevocable. You cannot revoke or change it after recording it with the county.

On the surface, this might not be a problem for a person that wants their children to be the remainder beneficiaries. Especially if those children are responsible.

But what if one of the children develops a drug, alcohol, or gambling problem? Do you really want them to inherit a portion of a house, and then blow the proceeds on dope? Probably not.

However, there is an even more unfortunate possible scenario. What if one of the beneficiaries is in an accident, becomes disabled, and gets on Medicaid? When they receive their remainder interest, they will get disqualified from Medicaid. Then they would have to spend all of their inheritance on medical care before they could re-qualify for Medicaid.

What is a Better Solution?

The main benefits of a life estate are avoiding probate and passing your property to beneficiaries quickly and inexpensively. You can also accomplish these goals with a different type of deed, or perhaps a revocable trust.

Florida Enhanced Life Estate Deed or Lady-Bird Deed

A good alternative to a regular life estate deed is a Florida enhanced life estate deed. This type of deed is often called a Lady Bird Deed. It is named after Lady Bird Johnson.

A Lady Bird deed also creates a life estate, but it is an enhanced life estate. The main advantages of a Lady Bird Deed over a regular life estate deed are:

  1. The property passes to the remainder beneficiaries by operation of law
  2. The life tenant does not need anyone’s permission sell, mortgage or give away the property during their lifetime,
  3. The life tenant can change the remainder beneficiaries.

Property Passes By Operation of Law

When the life tenant dies, the remainder beneficiaries receive the property by operation of law. Therefore, there is no probate, no need for probate lawyers or courts.

This is similar to a pay on death, or transfer on death, designation on a bank account. When the account holder dies, then the POD or TOD beneficiary just presents the death certificate, and they receive the funds.

Some states, like Wyoming, allow transfer on death deeds. Florida statutes do not.

Fortunately a Florida enhanced life estate deed works much the same way a TOD deed. Upon the owner’s death, the property transfers directly to the remainder beneficiaries. All you will need is an affidavit and a death certificate.

Grantor (Life Tenant) Retains Full Control Over Property

The main advantage of an enhanced life estate over a regular life estate is that the original property owner retains control.

The grantor of the enhanced life estate has an unrestricted right to sell, convey, give away, mortgage, lease or otherwise dispose of any or all interest in the property, during their lifetime.

The grantor does not need the remainder beneficiary’s permission to do any of this. Furthermore, the grantor does not need to share any of the sale proceeds with the beneficiary.

Grantor Can Change Beneficiary

The grantor of the enhanced life estate can easily change the beneficiary. All he has to do is execute another enhanced life estate deed. The new deed conveys the property to himself, and names new remainder beneficiaries.

Revocable Living Trust vs Enhanced Life Estate Deed

A revocable living trust (RLT) will also transfer property outside of probate. An RLT also allows to property owner to retain full control of the property, and allows the owner to change the beneficiaries at will.

A revocable trust will also allow a property owner to lots of other things with their property. However, it is more expensive to set up, and it requires ongoing attention.

If the bulk of a person’s property consists of real estate, then use of an enhanced life estate deed may a better solution.

Life-estate deeds can be found for free from many legal forms providers. Some government agencies also provide forms. For example the Palm Beach County Clerk has an Enhanced Life Estate – Lady Bird Deed form available to view and download.

Executor vs Administrator: What is the Difference?

There is one main difference between an executor vs an administrator. A person is named executor in someone’s will, while a probate court appoints someone as the estate administrator.

Whether someone is the executor of a will or the administrator of an estate, their duty is the same. They both act as the personal representative of the decedent in shepherding the deceased person’s estate through the probate process.

The Appointment of an Executor vs Administrator

Most persons’ last will and testament names someone as executor. The probate court will almost always appoint the named person as executor. If that person cannot serve, then the court will appoint the alternate executor named in the will.

If neither the person named executor or alternate executor are willing and able to serve, then the probate court cannot appoint anyone as executor of a will.

When a person dies without a valid will, the probate court has to appoint an administrator of the estate. This also the case when a will does not name an executor, or if the named executors cannot serve. Therefore, it is always a good idea to name at least one executor, and one or two alternate executors, in your own will.

Executor vs Administrator: Who can be appointed?

Who can be an executor?

A person can generally name anyone they please as their executor. They can name a family member, or a girlfriend, boyfriend, partner or trusted advisor. Most anyone is eligible to be named as an executor.

Who can be an administrator?

State law governs and restricts the appointment of an administrator. These laws list the preference for administrators. If more than one person wants to be the administrator, the court is likely to follow the preferences. The order of preference is generally as follows:

  1. Surviving spouse,
  2. Children,
  3. Father or Mother,
  4. Brothers or Sisters,
  5. Grandchildren,
  6. Other family members who are intestate heirs, and
  7. Creditors of the decedent, or
  8. Some other interested party.

State probate law also may restrict administrators to residents of the state.

Your preference may be different than the state’s. Maybe you have you have a partner, but the two of you are not married.

Perhaps you would rather have your CPA sister as your personal representative, but she lives out of state.

In those situations you should name an executor of your choice, and a successor executor as well. You do this in your will, as part of your estate planning process.

Key Differences Between Executors vs Administrators

The probate court issues Letters Testamentary to an executor, and appoints an administrator by the grant of Letters of Administration.

An executor distributes the estate assets according to the terms of the will.

An administrator distributes the decedent’s estate according to the laws of intestacy (unless he is an administrator with the will annexed).

Executors can live anywhere, but administrators generally must be residents of the state of the probate proceeding.

Executors can serve without a bond, if the will so specifies. Administrators will generally need to post a fiduciary bond. This is to protect the heirs from a poorly done administrator’s job.

Executors vs Administrators: the Similarities

The role of an executor and the duties of an administrator are similar. They are both charged with the administration of an estate.

Fiduciary duties

They both have a fiduciary duty to the beneficiaries and/or heirs of the deceased individual. This means that everything they do must be done with the best interests of the beneficiaries in mind.

Officers of the Court

Executors and administrators are also officers of the Court. They derive their power from the Court. In order to get this power, and they must file an oath with the Court, promising to carry out their duties according to law.

Same probate process

Executors and administrators have to follow the same estate administration process. They have to:

  • file the decedent’s will with the probate court
  • notify the beneficiaries and heirs of the death
  • give notice to known creditors of the estate
  • publish notice to unknown creditors
  • identify and collect the assets of the estate
  • make an inventory of the estate
  • get an appraisal of the estate’s assets
  • pay the debts of the estate
  • prepare the decedent’s and the estate’s tax returns
  • maintain and perhaps sell the estate’s real estate
  • take care of and/or sell the estate’s personal property
  • distribute the remaining assets to the beneficiaries, and
  • to do all this as quickly as reasonably possible

Both Executors and Administrations have to do other things on behalf of the estate. They have to prepare all the legal documents that are necessary for the administration of the estate.

Simple Estate vs Complex Estate

Some estates are simple, and others can be complex and time consuming.

A simple estate may consist of a vehicle, a couple of bank accounts, and some furnishings.

A complex estate may have a house, a vacation home in another state, an ownership share in a business, a herd of livestock, a collections of classic motorcycles, and a couple of dozen firearms.

The more complex estates may require the help of other professionals, such as accountants, financial advisors, stock brokers, real estate brokers, appraisers, etc.

The probate laws allow executors and administrators to hire such professionals. If the provisions of the will allow, then executors can do this without a court order. Administrators have to ask permission from the court. However, a court will almost always grant permission, as long as the professionals’ fees are commercially reasonable.

Depending on the size and complexity of the estate, an executor or administrator may also choose to hire a law firm to assist him or her. Probate attorneys can provide the legal advice that give most every administrator or executor of an estate quite a bit of peace of mind.

Compensation Executors and Administrators

Finally, both executors and administrators are entitled to reasonable compensation for their services. The compensation is usually in the form of a commission, which is a percentage of the appraised value of the estate.

Executor vs Administrator FAQ

What is the difference between an Executor vs Administrator?

An executor is named in a will, while an administrator is selected by the probate court.

Which is better, Executor vs Administrator?

Neither is better, because they both have to do the same work.

Does an executor or administrator have to accept the appointment?

No. A person named executor of a will can decline the appointment. A person entitled to be an administrator can also decline to act. Finally, both executors and administrators can resign their appointment, if they are no longer willing or able to serve.

Who can be an executor vs who can be an administrator?

Anyone named in a will can be an executor. Only a person approved by the court can be an administrator.

Can I make myself the executor of a family member’s estate?

No. Only a person named in the will can be an executor. However, if a close family member died without a will, you may ask the court to appoint you as the administrator.

Does an executor vs administrator get to distribute the estate as they think is best?

No. An executor distributes the assets according to the terms of a will. An administrator distributes assets according to the state’s laws of intestate succession.

Do executors and administrators get paid?

Yes. Executors and administrators are entitled to compensation. The fees for administrators are set by state law. These fees are the same for executors, unless the will provides otherwise. In either case, the court must approve the fees prior to payment.

Executor vs Administrator: When is neither needed?

Most states have some some simplified probate process when a deceased person’s estate meets certain criteria. These rarely apply to a large estate, because the criteria is generally the value of the estate. Therefore, they may not apply to even a simple estate, if it is valuable enough.

The two more common process are probate by affidavit and probate by summary distribution.

Probate by Affidavit

Probate by affidavit generally only applies when the estate of a decedent contains only personal property. This would be cars, bank accounts, and things like that. Furthermore, the property would have to be valued at less than a certain amount. As an example, in Wyoming, the value of the property must be less than $200,000.00.

A probate by affidavit, or similar procedure, often does not require any court filing or involvement. Therefore, there is no need to appoint an executor or a personal representative

However, when the assets of an estate include real property, some sort court involvement is almost always necessary. This is because every state has a compelling interest in keeping title to real property clear.

Pro Tip – Just because a person owned real property when they died, does not mean that the decedent’s estate includes that property. If the property was owned in joint tenancy, the property would have passed to the other owners by operation of law. In addition, the property could be subject to a Ladybird Deed or a Transfer on Death Deed. Those deeds would also take the property out of a probate estate.

Summary Distribution

If the value of the estate is lower than a certain threshold, than a form of Summary Distribution may be appropriate.

These summary distribution proceedings are not formal probates, and the probate court does not appoint an executor or an administrator. They provide some notice to creditors so that the liabilities of the estate of the deceased can be paid, and then decedent’s assets are distributed according to a court order.

Summary of Executor vs Administrator differences

The biggest difference between the two is that an executor is named in the will of a deceased person, while a court chooses an administrator.

Another important difference is that anyone can named as an executor, but state law controls who is appointed as an administrator.

Otherwise, there is not much difference between an executor vs administrator.

They both have to distribute a deceased person’s estate. Regardless of the size of the estate, they both act under the supervision of special courts, which are called probate courts.

By Steve Harton, an estate planning and probate attorney licensed in Florida, Utah and Wyoming. Steve serves clients in all three states from his office in Rock Springs, Wyoming. If you need some legal advice probate, please schedule a consultation!