More Disadvantages Than Advantages
You can, but there’s a better way, so let’s look at all the facts:
Florida transfer tax (called DOC stamps) may be due when you execute the deed. There are several exceptions but the code is complex. Transfer taxes may be due to the State of Florida if there is a mortgage at the time of transfer. The tax rate is 70 cents per $100 of any mortgage balance. There are some exemptions to the imposition of the tax but the code is complex!
DOC stamps tax can be quite significant and failure to pay or underpayment penalties are severe. This is a situation where the Department of Revenue may contact you years later once penalties and interest have ballooned.
Contact My Florida Deed for expert deed preparation and let us answer your question of “should I put my kids on my Florida Deed?” and help you determine if putting your children on your deed will incur the Florida transfer tax.
Don’t Put Your Homestead Exemption At Risk
If your property is your primary residence and you have a homestead exemption, you may be putting your Florida “save our homes” cap at risk. Reassessment of your property can cause a huge rise in property taxes. Specific language is necessary in your deed in order to protect your homestead exemption and “save our homes” annual cap and avoid reassessment. If such language is not present, the property will almost surely be reassessed with a hefty increase in property taxes along with the loss of the homestead exemption.
If you change the ownership status of your Homestead Property in certain ways, you can cause your Assessed Value to RESET to the Market Value, which means you will lose all the Save Our Homes savings that you have accrued over the years. Some types of change of ownership can trigger a reset of your Assessed Value (you want to avoid those!).
The bottom line is – be VERY CAREFUL in making any changes to your Deed if you have Homestead filed on your property!
Common Traps Of Adding Your Kids To Your Deed
- Adding kids to your deed exposes your property to the claims of your children’s creditors. That might result in the loss of the property unless it is your homestead. Homestead property can’t be taken by creditors (except the mortgage company, of course) until you die or sell but creditors can place a lien. Should you wish to mortgage or refinance, the liens must be paid off first.
- Change your mind and decide to sell the house, buy an RV, and roam the roads in your old age? Hopefully your children, as part owners of the property will agree to the sale because you can’t sell without their agreement.
- Family blowup? That big Thanksgiving day argument resulted in family members not only not speaking, but now Susie wants to sell the property! She can force a sale by bringing a partition suit. The judge will order a sale on the open market and you will only receive your percentage of ownership share of the proceeds.
If your children inherit your home when you die, they will also receive a “step-up” in basis. That means they inherit the property with a tax basis of the fair market value at the date of your death. When they sell the property, they will have no or very little taxable capital gains. If you add your children to your property now, they will have the same basis as you, meaning whatever you paid for the property. On sale, taxable gains can be significant.
So What Is The Better Way? A Florida Lady Bird Deed
Florida is just one of a handful of states that allows such a deed and the benefits are amazing! The Lady Bird Deed (Enhanced Life Estate Deed), is a special deed with tremendous benefits for grantors (owners) who wish to keep their property and name remaindermen (beneficiaries) who will receive the property on the grantor’s death. This deed avoids probate and there are no transfer taxes or other costs. The remaindermen simply record the grantor’s death certificate and the transfer is automatic.
This deed allows the current owner to preserve a homestead exemption, keep the property out of “Medicaid” assets, avoid reassessment, provide a step-up in basis, and remain in complete control of the property until death. The owner can even ‘undo’ the deed by creating a new deed of any type.
See Lady Bird Deed.
Get All The Information You Need First
Sometimes, yes, there are specific reasons to add a child to your deed. Just be very careful and allow us to help guide you to accomplish your transaction without committing a fatal deed error. Remember, a deed is final. Correcting it or creating a second deed to reverse an action is possible, but “undoing it” is not an option!
Understanding the many little-known facts surrounding adding your children to your deed is important for making informed decisions about deeding your property. Every situation is different and the nuances involved in property ownership and previous deeds can be very complicated. Lack of all the information necessary can lead to fatal deed errors.
Visit us at myfloridadeed.com for help with your deed. Having a knowledgeable guide can make all the difference and with our experience, we guarantee the right deed for your needs at the most advantageous cost!