When buying a home in Florida, keep in mind Florida real estate has many complexities so you should use a top real estate agent to make certain you know all your options along the way.
For instance, did you know there are several different ways you can take title of the home you purchase? Although most people take title in the most basic, Fee Simple, form, there are actually several options that could determine who gets your property upon your death. It's possible to avoid probate and have your property automatically become the property of your heir just by taking the title in a different form. Here are some of the most common forms of vesting (also known as taking title).
Single Person Fee Simple
This is absolute ownership in its simplest form. If you own property in fee simple, you own the property outright and may dispose of it in any manner you desire. You may sell all or part of it, give it away, or bequeath it through a will or trust. There are enhancements to this vesting type known as "Life Estate" that can limit the ownership based on someone's life, permitting the transfer of the property to another upon death.
Single Person Life Estate (Sometimes called Life Estate Trust)
The person who owns the real property signs a deed that will pass the ownership of the property automatically upon her death to someone else, known as the "remainderman".
As part of the deed, the owner keeps what is called a life estate, which means they can continue to live on and use the property for the rest of their life. They become a "life tenant." The deed would normally include language like "to "owner" for life, to "other party" as the remainder." The life estate deed is completed when the owner signs the document, and it is filed with the county. Benefits to this form of vesting include avoiding probate upon the owner's death. The property becomes the remainderman's upon the owner's death with no court proceeding. The owner also doesn't need to include the property in a will. This transfer of property is preferable over gifting the property to avoid a gift tax.
Lady Bird Deed (Enhanced LIfe Estate)
The Lady Bird Deed is another name for the enhanced life estate deed. It's only available in a few states, Florida being one. This is very similar to a Life Estate, but in this case, the life estate tenant (owner) has the right to sell, mortgage, or give away fee simple ownership without any requirement for the remainderman’s agreement to the action. The tenant does not hold any liability whatsoever to the remainderman for the proceeds from the sale or for waste of the property, and the remainderman has no present interest in the property that can be attached by creditors unless and until the life estate tenant passes away and title transfers to the remainder man. Known as springing interest, it lies dormant until the remainderman dies and then springs to life.
Joint Tenants with Full Rights of Survivorship
This is probably the most common form of ownership, but it is not without possible problems. Joint tenants take ownership of property with the survivor taking full ownership at the first death. Therefore, a joint tenant cannot devise his or her share through a will or trust. A joint tenancy deed generally reads, ". . . to John Smith and Mary Smith as joint tenants with full right of survivorship." If the deed does not mention joint tenancy and right of survivorship, it will be considered as tenants in common. When a joint tenant dies, the joint tenancy with respect to the owner dies. Two signatures are required of joint owners of certain types of property (like stock), and upon incapacity of one party, a guardianship may be necessary. A joint tenancy of real property can be converted to tenancy in common by a deed transferring that person’s interest to another person.
Tenancy by the Entireties
This is a form of joint tenancy between husband and wife. If a deed reads, ". . .to John Smith and Mary Smith, his wife," a tenancy by entireties is created. Neither party can convey any property without the approval of the other(unlike a joint tenancy with rights of survivorship), and each party is deemed to be a full owner. When one spouse dies, the "tenancy by entireties" ends and the new survivor has full ownership without ascertaining a new deed (by filing the death certificate of the deceased spouse). Upon divorce, the property reverts to tenants in common.
Tenants in Common
This is a type of ownership in which you share ownership with others, but you retain the right to sell your portion without permission of the others. All of the owners have a share of the estate. If one of the owners dies, his portion can pass through to his heirs.
Make certain you speak with your Realtor and your title agent about how you want to take title when you purchase new property. Also, please keep in mind, if you plan to claim homestead protection on your property, the form of vesting you use could affect that.
Photo courtesy of Cytonn Photography via Unsplash.
Content courtesy of Tina Ibrahim, Tampa Bay Title.