Jointly Owned Real Estate – “The Rest of the Story” (part 2)

Whether it concerns one’s estate plan or their real estate, it seems there is hardly a week that doesn’t go by without someone requesting that we prepare a deed to change the ownership of property from individual to multiple owners.  In our last post, there is a discussion about property law. The post included items to read and consider before deciding to change ownership of one’s property from one individual to a joint ownership arrangement with another person or persons, typically children or grandchildren.

Below are the remaining items to conclude the discussion of the six most serious reasons why one must be very careful about giving up a partial ownership interest in one’s property as a Florida probate avoidance strategy. Below we begin with the 4^th reason to consider before deciding to establish joint ownership with one’s property, particularly real estate.

4.  Save Our “House In Florida”. The Homestead Tax Exemption May Be Lost

• Good news: If the new additional owner(s) 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 (SOH) cap will not be changed.
• 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 changed.
• If the additional owner is a joint tenant with full rights of survivorship and does apply for the Florida homestead tax exemption, your SOH cap will be adjusted to market value and start anew the following year.

5.  Gift Tax Planning – When one gives something of value to a person, (except if the gift is to your spouse), such as adding another owner of your property, a gift has been made.  If the gift’s value is more than $13,000 in a calendar year, one must file a gift tax return with the IRS.  Usually a tax does not have to be paid; BUT, the amount of the gift that is more than $13,000 will reduce the total credit available to one’s estate for the determination of federal estate tax.

6.  Documentary Stamp Tax Planning – If one decides later that the person should transfer the ownership of the real estate back to you, and the real estate has a mortgage, Florida’s documentary stamp tax must be paid at the time the deed is recorded.  The “doc stamp” tax is calculated based on 1/2 of the mortgage principal balance due at the time of the transfer (assuming there are two owners of the property).  Example: 1/2 of the principal mortgage balance at the time the gift is made is $50,000; the transfer occurs in 2012, the doc stamp tax will be $350, plus a recording fee of about $18.50.

Consult with your Florida estate planning lawyer or your Florida real estate lawyer before you consider changing ownership of your property as one of your estate plan techniques.