Passing Down Your Home
August 14, 2023
Generally speaking, there are three (3) methods for passing your home to your heirs.
One method is a “Transfer-on-Death Deed” (sometimes commonly referred to as a “Lady Bird Deed” or an “Enhanced Life Estate Deed”). Using this deed, you can designate beneficiaries (commonly referred to as “remaindermen” in this context). The Deed gets recorded in the public records at the time of signing, and title will automatically transfer to the remaindermen once your death certificate gets recorded in the public records. There is widespread use of these types of deeds among members of the legal community, and its use has been accepted by the title insurance industry in Florida. However, these deeds do have their shortcomings. For example, it does not work for a homestead property if the homesteader is survived by a spouse or minor child. Article X s. 4(c) of the Florida Constitution. This method would also leave an unfilled void if the remainderman should die before the property owner. Another common concern is whether the remainderman’s creditors can somehow attach claims to the remainderman’s interest in the property.
Another method for passing your home to your heirs is a Trust. There are different types of trusts, and that conversation is beyond the scope of this article. But generally speaking, through a revocable trust, you can retain ownership and control of your property and the conditions under which it can be sold.The home would remain part of your estate until your death, at which time it would pass to your heirs outside of probate. This would require a deed transferring the property to your trust.
The third method for passing your home to your heirs is a Last Will and Testament. You can use your Will to designate who you want to inherit the property and in what proportions. Please keep in mind that a Will must go through the probate process. There are many good reasons to avoid probate. But, depending on your circumstances, avoiding probate may not necessarily be a priority, and passing your property through a Last Will and Testament may be appropriate.
It is important to keep in mind that, regardless of the method you use to pass down the home, it will receive a new cost basis upon your death. This means that capital gains taxes resulting from a future sale would be calculated using the fair market value at the time of the transfer. However generous your intent, you must know that your heirs are likely to incur costs associated with improvements, insurance, maintenance, and taxes. It is important that you consult with a qualified tax professional who can discuss the tax consequences of each type of transfer. It is also important that you consult with an experienced attorney who can explain the pros and cons of each different method, so that you can decide which works best for you.
