Oct 032012

Article VII, Section 6 of the Florida Constitution currently allows for homestead protection from ad valorem real property taxes.  The effect of this provision is to exempt the first $25,000 of property value for all purposes and also to exempt another $25,000 of value for homes worth up to $75,000 for all purposes but the property taxes calculated for schools.  This exemption may be further expanded following the 2012 election.

Many people wonder how they can preserve their homestead protection from taxes if the property is transferred to a revocable or irrevocable trust.  Florida Statute § 196.031(1)(a) says that every person who, as of January 1, has legal or equitable title to real estate and maintains it as their permanent residence is entitled to their homestead exemption.  Florida Statute § 196.041(2) says that a person who otherwise qualifies for the homestead tax exemption is entitled to the exemption when their possessory interest in the residence is based upon an instrument granting them a beneficial interest for life.  Finally, Chapter 12D-7.011 of the Florida Administrative Code says that the beneficiary of a passive or active trust has equitable title to real property if he is entitled to the use and occupancy of such property under the terms of the trust.  Therefore,
a homesteader who is the beneficiary of a trust that meets these requirements is sufficient to claim homestead exemption.

Qualifying for homestead exemption may be done in several ways.  In instances where the grantor of the property is also the trustee of the trust, a common scenario when utilizing the Florida revocable trust, it is sufficient to state on the deed that the grantee/trustee is authorized by the terms of the trust to reside on the real property during their lifetime.  Alternatively, the property appraiser will usually accept a copy of the trust agreement itself, or the relevant portions therein, to establish that the claimant has the necessary possessory rights.

Where the homesteader is not also the trustee of the trust, it may be necessary to record a statement by the trustee which grants the individual a lifetime beneficiary right and possessory interest in the property.  This serves to establish that the homesteader who is not serving as trustee of the trust nevertheless meets the above-discussed requirements of Florida law.

It is always a good idea to consult with a Florida estate planning attorney before making a real property transfer.  Issues not discussed here, such as Florida documentary stamp tax, property insurance coverage, and federal tax consequences will also play a part in the decision of whether or not to transfer Florida real property into a trust.  Once the transfer is complete it may be too late to unravel any damage that has been done.

If you have questions about transferring your Florida real property into a trust, contact an Attorney in Jacksonville who can assist you.