Posted on January 04, 2022 in: Guest Column
January 2022 Guest Column
“How do I change title on my property?” “How do I prepare my deed?” “I want to add my spouse, child, etc. to my deed.” These are all great questions that the taxpayers often ask our Customer Service Department.
What is a deed one may ask? Cornell Law defines a “deed” as a legal document that grants its holder ownership of a piece of real estate or other assets (law.cornell.edu/wex/deed). Ownership on a deed is a very important thing to understand when it comes to owning a piece of property. Unfortunately, the employees at the Citrus County Property Appraisers office are not able to tell you how you should handle the transferring of a document or what ownership type you should choose. However, we can try our best to explain the difference between a few of them. We always recommend you seek professional advice from an attorney, paralegal, title company etc. of your choice.
We see a lot of “do-it-yourself” deeds come through our office and while that is fine to do, sometimes you might not be fully aware of ownership you just listed. The change in ownership can compromise the exemptions or Save Our Homes (SOH) protection you might have had. What that means to you is an increase on your tax bill, as well as it can cause many different legal issues that you weren’t expecting. Once that document is recorded at the Citrus County Clerk of Courts office it can be quite the process fixing a mistake that you weren’t aware you were making. Leaving a simple ownership type off the end of name, not deeding out the way you originally held title, misspelling of a name, etc. are all ways that can cause issues that you don’t want.
Remember, please seek professional help prior to preparing your own deed. The following are simplified examples of different types of ownership and scenarios. Hopefully this will give you a basic understanding of the ownership types.
The first type of ownership is “Tenants in Common (TIC)”. Each of the owners owns a share of the property, which may be sold separately. Florida law presumes equal ownership interests, unless specific percentages are written in the recorded deed. Example: “To Bill Johnson and Mary Smith” would give Bill and Mary ownership of 50% each. Under TIC, if only one of two owner’s files for homestead, the property would get 100% of the $25,000 homestead exemption, but only 50% (the amount owned by the one who filed) of the assessed value is protected by the SOH cap.
The second type of ownership is “Tenants by the Entirety (TBTE)”. This applies only to married couples, who should be identified in the deed as “a married couple.” This TBTE status -- which is automatic when that language is stated -- gives each spouse overlapping 100% interests, full exemption coverage (when one files), and rights of survivorship. This interest automatically converts to TIC status when the divorce is finalized (unless or until the property is transferred to one spouse pursuant to the divorce settlement or court order).
The third type of ownership is “Joint Tenants with Right of Survivorship (JTRS)”. This gives two or more unmarried co-owners legal rights to property. Example: “To Mark Wright and Bill Johnson, as joint tenants with right of survivorship.” The JTRS co-owners would each own overlapping 100% interests -- and any one owner filing for homestead would qualify for 100% of the homestead and SOH coverage. When a JTRS co-owner dies, all remaining title interests are automatically divided between the living JTRS co-owner(s).
The fourth type of ownership is “Life Estate (LE)”. This is the present interest to use a property for life, but leaves the remainder interest (i.e., title after the life estate holder dies) to one or more future owners. Example: “To Mary Smith for her life, with the remainder to her sons Bill Johnson and Steve Johnson.” Mary (the life estate holder) is the only person eligible for homestead during her lifetime. It is also possible to create joint life estates allowing more than one person to have full rights to use the property at the same time (example: an elderly couple retain joint life estates before leaving the remainder to their child).
The fifth type of ownership is a “Trust”. Deeding ownership of a homesteaded property into a trust (revocable, irrevocable, land trust, etc.) is another common way for maintaining homestead on a property while avoiding probate and taking maximum advantage of federal tax laws. However, as these are rather complex to establish correctly -- in that the trust must be formally created before the property ownership is deeded to the trust.
Lastly, Partnerships, LLCs and Corporations. You will LOSE your homestead exemption (or be unable to qualify for homestead) if your property is deeded to a partnership, LLC or other corporation. Florida courts have ruled that these entities are simply not eligible to qualify for homestead. See: Prewitt Management Corp. v. Nikolits, 795 So.2d 1001 (Florida 4th District Court of Appeals, 2001).