Probate is the court-supervised process to distribute the estate of a deceased person to the rightful heirs and beneficiaries. Depending on the size and complexity of the decedent’s estate, it may result in a stressful and costly experience.
Is it possible to use a limited liability company (LLC) to avoid probate in Florida? Read on to find out.
Can an LLC in Florida Avoid Probate? – The Verdict
Limited liability companies (LLCs) have specific characteristics that allow Florida residents to rely on them for estate planning purposes. It is possible to use an LLC to avoid probate, but it is not simple as transferring assets to the entity’s name.
When someone dies owning an interest share of a Florida LLC, the decedent’s interest in the business is considered a probate asset. Accordingly, the decedent’s beneficiaries or heirs can only receive their fair share after probate administration is complete.
There are two ways to avoid probate through an LLC, which are:
- Transferring one’s interest share in the LLC to a trust, or
- Tailor the entity’s operating agreement for estate planning purposes
The first step is to decide whether to form a single-member LLC or a multi-member LLC. It is crucial to rely on the guidance of an expert estate planning attorney throughout the process to assess each decision and anticipate the legal and tax consequences involved.
If the LLC was not formed yet, one has the option to structure the terms and clauses exclusively for estate planning purposes. If the LLC already exists, it is still possible to amend the operating agreement to include probate-avoidance language.
Estate Planning LLC vs. Trust Florida – In Detail
No trust can own an interest share in a Florida LLC, but the trust maker (also referred to as “trustor” or “settlor”) can make the trust a member of the LLC. Hence, the trust “replaces” the member of an LLC.
Florida law changed its viewpoint on probate avoidance through LLC in 2015. Until 2015, moving an LLC into a trust was the only strategy available for LLC members to avoid probate. However, the “Blechman v. Estate of Blechman, 160 So. 3d 152” case changed the rules.
In April 2015, Florida’s Fourth District Court of Appeal decided an LLC’s operating agreement with specific language instructing immediate transfer of the decedent’s interest was enough to avoid probate.
The court’s decision is based on the fact that an LLC’s operating agreement is a binding contract, which established a precedent for subsequent cases that a well-drafted operating agreement is sufficient to transfer a member’s interest outside of probate court.
The larger an estate is, the more time and money probate administration tend to require. Using an LLC to transfer one’s interest shares is an excellent way to save money on administration expenses and ensure a quicker distribution of the assets – all without court involvement.
During probate, all the decedent’s creditors must be notified and properly paid before the estate can be distributed. Transferring assets outside of probate means no exposure to creditors’ claims.
Do You Want to Avoid Probate in Florida? – Immediately Contact Jurado & Associates, P.A.
If you want to avoid probate, work with a well-versed estate planning attorney from Jurado & Associates, P.A. to find a strategy tailored to your needs. Call us today at (305) 921-0976 or email Romy@juradolawfirm.com to schedule a consultation.