The Importance of Earning Interest During Probate in Florida
Probate in Florida can take years, and it often involves millions of dollars in assets. Did you ever stop to wonder how much interest those assets could generate while you wait for probate to conclude? This passive income could prove seriously rewarding for you and your family members, so how do you approach this subject? Contact an experienced probate lawyer in Tampa to learn more about the possibilities.
The Prudent Investor Rule in Florida
Florida Statute 518.11 is known as the “Prudent Investor Rule.” Under this statute, the personal representative is legally responsible for safeguarding assets in ways that serve the best interests of the beneficiaries. In some situations, this means the personal representative must invest certain assets in a way that makes them “productive.” Like all prudent investors, personal representatives must carefully balance risk and returns when considering certain opportunities.
Suppose a decedent passes away with a bank account balance of $1,000,000. Because the probate process can take years in Florida, that cash might sit in a bank account for years before beneficiaries finally inherit it. During this period, the personal representative may have a fiduciary responsibility to make this cash as productive as possible.
Some investment opportunities are so easy to implement that probate courts might consider it a breach of duty not to take advantage of them. For example, banks in Florida offer investment opportunities called Certificates of Deposit (CDs). As of this writing, annual yields of 4 percent are quite common.
A bank balance of $1,000,000 would generate over $80,000 over the two-year probate process when invested in a straightforward CD with a 4 percent yield. In contrast, the bank balance would actually lose value due to inflation if it sits in a normal account with no interest returns. This could represent a fiduciary breach of duty in the eyes of the probate court.
$80,000 might not seem like a lot of money for a multi-million-dollar estate, but it’s enough to help beneficiaries in many ways. It might represent the cost of college tuition for a grandson, or it might wipe out credit debt for an overwhelmed senior family member. Remember, the calculations are based on a balance of “only” $1,000,000. If the estate has tens of millions of dollars in cash, interest could be far more lucrative over a couple of years.
Although personal representatives may be wary of the risks involved with certain types of investments, leaving money idle and unproductive can also be risky from a legal perspective. In some cases, it can even lead to lawsuits for breach of fiduciary duty.
Can a Probate Lawyer in Seminole Help Me?
In many respects, earning interest isn’t just beneficial during probate in New Port Richey; it’s also mandatory. Probate lawyers and personal representatives may have a fiduciary duty to safeguard your funds and protect them against inflation during probate. That being said, it makes sense to choose low-risk options when generating interest on certain probate assets. Learn more by contacting Knudsen Law at 727.398.3600.
Source:
leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0500-0599/0518/Sections/0518.11.html
