What Are The Pros And Cons Of Not Doing Anything With Your Property Until You Die?
If someone chooses to do nothing with their property in Florida before they die, then the state of Florida will be in charge of the distribution of that person’s assets upon their death. This means that the decedent’s property will have to go through probate before their family will be allowed to sell it. One advantage of this is that it maintains the beneficial tax impact of inheriting property. In other words, the decedent’s children will inherit the property on the date of death, and only have to pay taxes on any gain in value from the date of the death to the date of the sale of the property.
The downside of doing nothing with one’s property prior to death is that the heirs will be defined by Florida law, which means the decedent will have no control over who receives which assets. This means that their property may end up going to someone whom they wouldn’t have wanted to receive anything. In addition, if a decedent’s child has passed away, then their share of the assets would automatically go to their children. The process can create very fractional and disjointed shares in ownership of the property, and the more people who own the property, the more complex it can be to manage and sell everything.
What Are The Pros And Cons Of Giving My Property To My Children During My Lifetime?
If someone wants to give their house to their children during their lifetime, they would likely do so by using a quitclaim deed. This deed would transfer to their children during their lifetime and confer the advantage of allowing the children to do with the property whatever they please without having to deal with the courts or the probate process. However, there are many negative consequences that could result from a person giving their house to their children during their lifetime. For example, if someone’s child has their own home that they are living in, then the property taxes will increase. This is because a person cannot simultaneously claim homestead exemption and property tax exemption on two separate parcels of real estate in Florida.
When the child decides to sell the house during or after the parent passes away, there will be income tax consequences to the sale of that property. Specifically, the child will be unable to take the $25,000 exclusion from income tax from the equity upon sale during their parent’s lifetime; if the child sells the house after their parent passes away, then the child will have to pay the difference between the value at which the property was purchased and the value of the property at the time of the sale, which is usually a lot greater than the amount associated with inheriting the property.
Another negative consequence would come into play if the parent must be placed in a skilled nursing home. If this is the case, then the transfer of the deed would be considered an invalid transfer or gift of property, which would delay the disbursement of Medicaid benefits for five years from the date of the transfer of the property. Due to these variables, gifting a house outright to one’s child is not usually a wise move.
What Are The Pros And Cons Of Giving Your Home To Your Child But Retaining A Life Estate?
Florida law recognizes two separate types of life estates, which are generally referred to as vanilla life estates and enhanced life estates. The vanilla life estate provides lifetime rights to the owner of a property, and upon their death, the people named on their deed become the new owners without having to go through probate. A life estate deed also avoids many of the negative consequences of joint tenancy.
The differences between enhanced life estates and vanilla life estates revolve around control. Under enhanced life estates, an individual is able to change the beneficiaries on their deed. If the people they have named as beneficiaries have problems with creditors and/or judgement liens against them, then that could create problems. Under Medicaid rules, an enhanced life estate is not considered a transfer of an asset that violates the lookback period, which makes this type of estate is preferred when trying to protect assets in a long-term care or nursing home situation.
For more information on Not Doing Anything With Property In Florida, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.
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