As estate planning attorneys, one of the recurring issues we encounter is a lack of knowledge regarding Florida documentary stamp tax and its effect on the conveyance of real property. Given the rising popularity of the revocable living trust, a basic understanding of the economic consequences of the documentary stamp tax is essential to properly planning and constructing an affordable estate plan.
Documentary stamp tax is levied on documents as provided under Chapter 201, Florida Statutes. Documents subject to the tax include, but are not limited to: deeds, notes or written obligations to pay money and mortgages, liens, or other evidences of indebtedness, For the purposes of this article, we are concentrating on the documentary stamp tax that applies to deeds. To learn more about documentary stamp taxes not mentioned in this article, visit the Florida Department of Revenue’s website.
Documentary stamp tax is generally levied at the rate of $.70 per $100 (or portion thereof) on documents that transfer an interest in Florida real property, such as warranty deeds, quit-claim deeds, easements, and deeds in lieu of foreclosure. An exception is Miami-Dade County, where the rate is $.60 per $100 (or portion thereof) when the property is a single-family residence. The tax is calculated based on the amount of consideration that passes between the buyer and the seller.
Importantly, consideration in this instance is not limited to actual money that changes hands but may also take the form of a mortgage on the real estate. Thus, a transfer of real property from an individual to that individual’s revocable living trust can incur documentary stamp tax even though the trust does not pay anything to the individual for that property.
It is not hard to see that these taxes can quickly compound the cost of establishing even the most basic of estate plans since the price you pay to draft and establish your revocable living trust may not be close to the actual cost incurred when the plan is put into place. Too often we see attorneys and online drafting services who sell people on the idea of forming a revocable living trust without assisting them with the transfer of property into their trust or even bothering to explain important issues such as documentary stamp taxes. This can often lead to the trust going unfunded, either from lack of knowledge or lack of funds, which unfortunately means that the trust is nothing more than an expensive stack of paper.
Like many things in life, a well-conceived estate plan requires both knowledge and attention to detail. If you are interested in starting or modifying your estate plan and want to consult a professional who will assist you through every step in the process, then contact an Attorney in Jacksonville to discuss your situation with someone who cares!