Estate planning is a broad and complex subject. While preserving one’s estate for the future is the best approach for everyone, each person needs a strategy tailored to his or her circumstances. One of the most flexible estate planning tools available in Florida is a trust.
In this article, you will discover whether transferring the title of a residential property to a Florida trust is a good idea.
Revocable Trusts vs. Irrevocable Trusts – Understanding the Concept
In essence, a trust is a legal arrangement to preserve assets for a specific purpose. Every trust must have three parts, which are the trust maker, the trustee, and one or more beneficiaries.
The trust maker (referred to as “trustor” or “settlor”) transfers the nominal ownership of specific assets to a trustee (fiduciary), who is responsible for controlling the assets for the benefit of one or multiple beneficiaries.
There are two types of trusts in Florida – revocable trusts and irrevocable trusts. The most popular option is setting up revocable trusts. While the trustor is still alive, he or she can modify, amend, or even revoke the trust.
The trustor of a revocable trust “living” trust can also designate him or herself as the trust’s trustee, waiving nominal ownership of the assets while maintaining control over them throughout their life.
Why Should You Put Your House in a Florida Trust? – The Verdict
A house is often the most valuable asset owned by Florida residents. Transferring the title of a residential property to trust has several benefits, which are:
- Avoiding probate court upon the homeowner’s death
- Avoiding guardianship court in the event of severe illness or incapacitation
- Avoiding guardianship court for minor children by transferring the house title directly to them
- Permitting the homeowner to determine who will inherit the house
- Protecting a loved one with special needs
- Shielding beneficiaries against third parties claims
Asset Protection Trusts vs. Homestead Property in Florida – Taking a Closer Look
Florida Constitution Article X, Section 4 (a) provides that “there shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon (…), the following property owned by a natural person:
- A homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality, or
- If located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family
- Personal property to the value of one thousand dollars”
Section 4 (b) specifies that “these exemptions shall inure to the surviving spouse or heirs of the owner.” Additionally, “homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child.”
A house held in a revocable trust can still qualify for Florida homestead exemption. Under state law, a person is entitled to the homestead exemption after the property is transferred to a trust.