In Florida, many people utilize trusts to protect assets in many ways, which include putting assets out of the reach of creditors, avoiding probate proceedings, reducing taxable estate, or protecting the interest of a beneficiary upon death.
However, there is plenty of doubt when it comes to associating the asset protection granted by a trust with a homestead exemption property in Florida.
In this article, you will find out what you need to know about the association of revocable trusts and homestead exemption property in Florida.
Homestead Exemption – A Brief Definition
Essentially, homestead exemptions are state laws that protect the equity in real property.
In layman’s terms, it means that if an individual has a $10 million property in Florida and it was all paid off, every cent of the property’s equity is protected from creditors once the property comes under the protection of homestead exemption.
In terms of estate planning, a Florida homestead exemption is a statutory tool that is utilized by individuals of various backgrounds to mitigate taxes and protect the equity of property against creditors.
In the United States, homestead exemption rules vary a lot from state to state. Florida is one of the favorite states for people looking for homestead exemption for their real property, given that state law offers unlimited exemption.
Nationwide, most states do not offer an unlimited homestead exemption, which demonstrates the advantages of owning real property in Florida.
Homestead Exemption in Florida – In Detail
As provided by Florida Statutes Section 196.031, a Florida resident who owns the property and makes it his/her permanent residence or the permanent residence of his/her dependent(s)may be eligible to receive a homestead exemption.
The amount exempted can be up to $50,000. Firstly, the initial $25,000 exemption for school district taxes applies to all exempt properties in Florida.
Plus, individuals who qualify for homestead exemption in Florida are entitled to an additional exemption up to $25,000 to non-school taxes, which applies to properties with an assessed value between $50,000 and $75,000.
Homestead Exemption in Florida – Real-World Examples
In the following topics, we provide examples of how the homestead exemption applies to properties with different values in Florida.
A property with an assessed value of $45,000 under homestead exemption has the first $25,000 of the value exempt from all property taxes, with the remaining $20,000 being taxable. Notice that the value of the property in this example is under $50,000.
Another feasible case would be a property with an assessed value of $65,000. In this case, the first $25,000 of the value would be exempt from all property taxes. Then, the next $25,000 would be taxable, and the remaining $15,000 of the property’s value would be exempt from non-school taxes.
Last, let us say there is a property in Florida with an assessed value of $85,000. In this example, the first $25,000 would be exempt from all property taxes.
Consequently, the next $25,000 of the value would be taxable, the third $25,000 would be exempt from non-school taxes, and the remaining $10,000 would be taxable.
Homestead Property vs Revocable Trust in Florida
One of the most common recommendations estate planning experts tell people is to put their primary residence into a revocable trust.
However, when someone puts a residential property under homestead exemption into trust in Florida, does it violate the homestead exemption? The answer is no.
This way, Florida residents who own homestead property are allowed to put their property into a trust without violating their homestead exemption.
Holding Homestead Property into Trust in Florida – Preparing the Paperwork
It is crucial noting that property owners must utilize precise language when transferring their property into a trust in Florida, which includes stating that the trustor intends to use the property as their residence, hence retaining the homestead exemption.
Regardless if the trust is either a revocable trust or another type of arrangement (e.g., land trusts, irrevocable trusts, etc.), it is essential to use precise language when preparing the paperwork to transfer a homestead property into it, which includes provisions about:
- The right to fully use the homestead real estate
- The right to occupy the homestead real estate
- The right to possess the homestead real estate
Revocable Trust vs Homestead Exemption in Florida – We Can Help You
Under Florida law, putting your homestead property into a trust will not violate it. Attorney Romy B. Jurado Esq. is an experienced attorney in the field of estate planning and asset protection to help you make it the right way.
Waste no time with uncertainty. Call us today at (305) 921-0976 or send us an email at [email protected] to schedule a consultation.
