You own real estate in Florida, but have you given consideration to what impact the real estate title has on probate and who inherits the property following your death? If you never gave it a thought, you are not alone. A survey by Caring.com found that 78% of millennials (age 18-36), 64% of Generation X (age 37-52), and 40% of those 53-71 years of age don’t have a will or estate plan.
No one wants to contemplate the end of their life, but when it comes to real property ownership in Florida, the methods of holding title are important. If you want to find out what will happen to your property when you die, keep reading. We are going to take a look at how types of tenancy and holding title affect Florida probate court.
1. Sole Ownership
As a single, unmarried person purchasing real estate, sole ownership is the easiest, most straightforward method of real estate title. This type of title may not provide you with any ownership advantages or special tax breaks.
If you die as sole owner without an estate plan or designate a beneficiary for the property, the real estate will be subject to probate court proceedings.
2. Tenants in Common
If you hold title to Florida real estate by yourself or if there is more than one person on the title, this falls under the classification of Tenants in Common.
The title may list the names of both owners, then say tenants in common. It may also list names and not specify tenancy, in which case tenancy in common is the presumption.
Unless the title states differently, tenants in common have equal ownership of the property. If the title specifies, ownership percentage may vary. The percentage of ownership transfers to their heirs upon death.
This inheritance may also be designated in your will. The beneficiary you designate will have to open a probate administration in Florida to change the ownership of the title. The exception is if interest is held in a Florida Revocable Trust.
To handle the probate administration your heirs will need a probate attorney. There are many complications that can arise in Florida probate. Your probate attorney will have the legal knowledge to handle those issues if they arise.
3. Joint Tenancy
This is similar to tenancy in common, except that with joint tenancy all ownership portions must be equal. When one of the joint tenants dies the heirs of that person or beneficiaries in their will or trust inherit their portion of the property.
This ownership method does not avoid probate. To avoid probate court you must hold the property as joint tenants with rights of survivorship.
4. Joint Tenants With Right of Survivorship
This is the same as joint tenancy except if one tenant dies their portion of the property transfers to surviving joint tenants without probate. This is not a good choice if you want to make sure heirs inherit your property. It is an excellent choice for married couples because if one spouse dies the other immediately assumes full property ownership.
When only one person remains on the real estate title, ownership immediately changes to tenancy in common. This will require probate upon the owner’s death.
5. Tenancy by the Entireties
This title provides you with the benefits of joint tenancy with rights of survivorship. It may only be held by married couples. Owners listed as “husband and wife” on real estate titles are presumed owners of tenancy by the entireties.
When one spouse dies ownership passes to the other without probate. The surviving spouse needs to create an estate plan to avoid probate upon their death.
6. Homestead Restrictions
Florida homestead restrictions prevent you from transferring your homestead into a will or trust if you have minor children. If you do not have minor children, you may transfer the homestead to your spouse only.
If you have neither spouse nor children, you may transfer the homestead to any person of your choosing. However, homestead protection will only inure if your transfer is to a person listed under the Florida intestacy statute.
One way of sidestepping these restrictions is making your homestead a joint tenant with rights of survivorship. You may also hold it as either tenancy by the entities or joint tenant with the rights of survivorship with your spouse. Florida Statutes § 732.401(5) sets forth exceptions for these types of ownership.
Under Florida probate law your homestead is not a probate asset. You will need to open a formal administration for a probate judge to declare the real estate property as the homestead of the deceased. Once the declaration is made the real estate passes to the beneficiaries.
7. Florida Homestead Advantages
The Florida Homestead Act provides benefits, including protection from creditors. This means with few exceptions creditors are unable to place liens on your homestead to satisfy debts. Mortgages, tax liens, mechanics liens, and most HOA liens do not have protection because the debts pre-date homestead qualification.
It also provides you with special exceptions and caps on property tax. This prevents you from losing a home during rapid property value increases. You will need to supply documents proving you qualify as a homestead including proof of it as your primary residence.
8. Irrevocable Homestead Trust
If you have minor children and property that is a homestead, you may want an irrevocable homestead trust. These trusts are complicated and many hesitate to transfer property into an irrevocable trust.
The property is held in the trust until your child turns 18. At that point holding property title reverts back to you. If you are married, your spouse must consent to the change in property ownership.
Be aware irrevocable trusts cannot be changed or modified without the beneficiary’s consent. This prevents you from making changes to the trust or its beneficiaries. If you later decide you want to sell your homestead, this trust prevents you from doing so.
9. Lady Bird Deed
A Lady Bird Deed provides you and your spouse a life estate on the homestead property. This deed allows you to maintain your rights to rent, mortgage, sell or revert the title of the property back to yourself. When all life tenants pass away the property passes to the beneficiary on the deed.
10. Revocable Living Trust
You may wish to transfer the homestead into a Revocable Living Trust if there are no minor children. Your spouse will need to consent to this transfer. The transfer may be to a joint revocable trust, or each spouse may transfer 50% of the homestead into their own individual revocable living trusts.
A revocable living trust may also be combined with an interest in a Limited Liability Company (LLC). This provides asset protection and with the trust holding title to the LLC, it avoids probate.
Understand Your Real Estate Title
Make sure you understand how your real estate title shows ownership. This impacts whether your real property in Florida goes to probate.
Florida law requires a probate attorney for most cases. The Boyer Law Firm, P.L. invites you to schedule a consultation regarding your probate matters. You may reach out to us by sending an email to [email protected] or using our online form.