For property in Florida, joint ownership is rarely the best solution for passing on real estate to a business partner, spouse or family member. With properly completed estate planning documents from your attorney, real estate can be protected from unnecessary estate taxes, probate fees and unexpected costs through trusts and limited liability companies.
Often we are asked to help change the ownership of real estate from an individual to a joint ownership with full rights of survivorship. To the requesting person this looks to be an easy and inexpensive way to keep real estate out of probate and avoid estate taxes. However, this usually is not the case.
Why Joint Ownership Is Not Advantageous for Property in Florida
If you or a loved one are considering putting Florida real estate under joint ownership with another person as joint tenants with full rights of survivorship, please consider the following disadvantages of such a move.
- Capital Gain Tax — If the former sole owner of the real estate dies and the new joint-owner survives, the new owner will lose the ability to lower or eliminate capital gain tax under certain tax rules if he or she sells the real estate.
- Difficulty in Selling Property — If you decide to sell your property in Florida after the joint ownership arrangement is established and the new owner is unwilling or unable to sign a deed, it will be difficult to sell the property.
- Refinance Difficulty — Credit issues or bankruptcy of the new owner that arise after the joint ownership arrangement is established may affect your ability to refinance.
- Potentially Subject to Divorce Action — If the additional owner becomes involved in a divorce, your property in Florida may become involved in that divorce action.
- Save Our Homes Homestead Tax Exemption May Be Lost — If the new owner is your spouse, or someone who is legally or naturally dependent on you, he or she must apply for the homestead exemption. Your current Save Our Homes cap will not be adjusted. If the new owner is a joint tenant with rights of survivorship and he or she does not apply for the Homestead Exemption, your SOH cap will not be adjusted. If the new owner is a joint tenant with right of survivorship and does apply for the Homestead Exemption, your SOH cap will be adjusted to market value and start anew the following year.
- Gift Tax — When you give something of value to another person (except if the gift is to your spouse) and the value of the gift is in excess of $13,000 per calendar year, a gift tax return must be filed with the IRS. Usually a tax does not have to be paid. However, the amount of the gift that is in excess of $13,000 will reduce the total exemption that is available to your estate for federal estate tax purposes.
- Florida’s Documentary Stamp Tax — If your property has a mortgage, documentary tax must be paid at the time of the transfer to create the joint ownership. If you later decide that you want the person to transfer the interest back to you, and the real estate has a mortgage, documentary stamp tax may, have to be paid again depending on the wording of the mortgage.
For your property in Florida, an attorney with real estate and estate planning background can help execute estate planning documents that provide:
- Better Options,
- More Protection,
- and More Flexibility than joint ownership.
For additional information on protecting property in Florida and drafting the necessary estate planning documents, please contact an attorney with real estate and estate planning background at Stross Law Firm, P.A. You can call our office at 813-852-6500 or 727-787-1088. Our firm provides a Free Initial Consultation with no obligation for all new clients.
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