Sometimes, after the closing, homeowners want to change how they took title to a property by adding a family member or spouse, or by transferring the property to a corporation or trust. Beware that such transfers likely would create unintended tax liabilities. The best time to consider how to take title to property is prior to entering into a contract.
There are a number of ways to take title to Florida real estate, and each has potential advantages and limitations. Here are common options:
Sole Ownership. Unmarried people, those who are legally divorced and married people who wish to hold the property in their own names may use this form of ownership. However, if a married person takes title in his or her own name and the property benefits from a homestead exemption, Florida homestead laws require the other spouse to sign the deed for the transfer or otherwise formally relinquish rights to the property.
Joint ownership as Tenants in Common. Any number of individuals can hold title under Joint ownership as Tenants in Common with the share of the property, depending on the person’s contributions. Also, in this form of ownership, each owner has the right to sell, lease or bequeath (give away at death) interest in the property to his or her legal heirs.
Joint Tenancy with Right of Survivorship. Under this type of ownership, all joint tenants have equal rights to their share in the property. In addition, due to the right of survivorship, which is not present for Tenants in Common, when a joint tenant dies, his or her share is automatically distributed among the remaining joint tenants. There are no restrictions on the number of persons that can be joint tenants under a Joint Tenancy with Right of Survivorship.
Tenancy by the Entirety. This option is available only to married couples and allows the couple to hold title in the name of both spouses. Both the husband and wife have equal possession rights to the property. When one spouse dies, his or her share is automatically distributed to the surviving spouse.
There are several advantages to Tenancy by the Entirety. First, it protects the asset if, for example, a creditor is pursuing a judgment against one spouse. Second, it offers control over how the property is disposed of. Unlike Joint Tenancy with Right of Survivorship, Tenancy by the Entirety requires both parties to sign a deed transferring any interest in the property. One spouse cannot sell, dispose of or mortgage the other’s one-half interest without consent/signature. Third, one spouse cannot gift his or her interest in the real estate without the consent/signature of the other spouse. This protects the other spouse from unknowingly losing an interest in the property.
Ownership through an entity. Rather than own a property as people, owners may choose to acquire it through a separate legal entity, such as a corporation or a limited liability company. Corporations and limited liability companies can have any number of shareholders or members, but rights to the property of individual shareholders or members will be limited to the face value of the shares or membership interests each person holds. Title to Florida property also may be held in the name of a partnership of two or more persons. Partners would have equal right to possession of their respective share in the property.
Ownership through land trust. Finally, title may be held in the name of a Florida Land Trust, in which the legal title of the property is transferred to a trustee for the benefit of the named beneficiaries. This form of title offers privacy because the deed does not state who the owner is or the amount of the purchase price.
News Source: Florida Realtors®