If you own or are thinking about buying Florida property, such as a vacation home, it is important to understand Florida’s different property, tax and probate laws. Otherwise, property in Florida can end up costing your family some significant time and money after your death.
What is important to consider when planning for Florida property:
- Property titling
- Creating a will
- Uncapping events
- Florida mortgage and property transfer taxes
Property titling matters for Florida probate
If you own Florida property in your name but are not a Florida resident, it is likely that a probate proceeding must take place in a Florida court after your death in order for your heirs to do anything with the property. This is true even if you have a will and even if your estate does not need to be probated in your home state.
Sadly, the probate process in Florida is much more time-consuming and expensive than it is here in Michigan, likely taking at least six to eight months and costing several thousands of dollars.
Transfer of property is easier (and likely cheaper) when you have a Will
Each state has different laws denoting who qualifies as your heirs and the order in which your property passes to them. If you die without a will, Florida courts will order distribution of the property during the probate proceeding, based on its state laws. This distribution may or may not coincide with your wishes or your family’s expectations.
Property tax uncapping events are different in Florida
The recent passing of Amendment 2 in Florida made the temporary 10% annual cap on property tax hikes for non-homestead property, like vacation homes, become permanent. This is great news for non-resident owners of Florida property, especially property that tends to appreciate greatly in value each year, such as waterfront homes.
Unfortunately, the tax cap that keeps your property taxes lower is removed when a property transfers to someone else, and the taxes on this newly “uncapped” property are levied the following year on the property’s assessed market value. So, as the property passes to your heirs, the taxes could rise significantly because the Florida tax laws are designed to prevent the use of common estate planning strategies (like those we use in Michigan) which allow properties to pass to heirs without uncapping taxes.
Uncapping events for non-homestead property in Florida include:
- Leaving property to one or more adult children
- Leaving property to heirs other than a spouse or minor child
- A change of more than 50% ownership in the composition of the LLC or corporation that owns the property
- Sale of the property
Property purchases and transfers are taxed differently in Florida
As a no-income-tax state, Florida needs other taxes to fund its budget. Taxing real estate transfers, promissory notes and mortgages helps to fill the state’s coffers. Depending on your circumstances, as the property transfers to your heirs, the transfer could be subject to a documentary stamp tax, a tax on a promissory note and/or an “intangible tax” on each dollar secured by a mortgage.
Planning for a more efficient transfer of Florida property
Ideally, you can avoid the painful probate process and taxes associated with transferring a Florida property by using a property titling option your attorney has indicated is appropriate to your circumstances, such as these below:
- Property is titled jointly, with rights of survivorship specifically noted
- Property is titled to you and your spouse and identifies you as a married couple
- Property is held in a living trust
- Property has a life estate deed or an enhanced life estate deed (a “Lady Bird Deed”)
- Property is held in an LLC or corporation
In the event that planning was not completed and a probate proceeding is needed in Florida, it likely to be less expensive for you to utilize an attorney that is licensed in both your home state and in Florida, rather than hiring two attorneys who would have to start the paperwork from scratch in each state and spend time talking to each other. Warner has attorneys who are licensed in both Michigan and Florida who regularly handle estate planning and property transfer issues for families with a presence in both states.
If you have questions about titling or estate planning for your Florida property, contact Karen Kayes (231-727-2619 or email@example.com), Jennifer Remondino (616-396-3243 or firstname.lastname@example.org
) or James Steffel (231-727-2621 or email@example.com).