Florida Irrevocable Grantor Homestead Trust: Having Your Cake and Eating it Too Second Course

The FIGHT is a way for people in Florida to pass on their homes to their family without having to worry about certain restrictions. But it’s important to understand the tax implications of using a FIGHT, because it could affect estate, gift, and income taxes. Basically, using a FIGHT means that the home will still be included in the owner’s estate when they pass away, which might affect the taxes their family has to pay. But overall, using a FIGHT can still be a good way to make sure the home goes to the right people. When you give a gift of property like a home to a trust, you may have to pay gift tax. To avoid this, the trust can be set up in a way that the gift is not considered complete, so you don’t have to pay the tax. Also, if the trust is set up as a grantor trust, you can still get tax benefits like deducting property taxes and mortgage interest. When you put your home in a trust, the bank usually can’t force you to pay off the mortgage right away, thanks to a law called the Garn-St Germain Act. Even if the trust is irrevocable, as long as you still have the right to live in the home, the bank can’t make you pay off the mortgage. If the person giving property to a trust dies before the trust is used, the property goes to the trust. If the property goes to the person’s spouse or child, the bank cannot demand immediate repayment of any loans. If the property stays in the trust for the person’s family, it may still be unclear if the bank can demand immediate loan repayment. It might be seen as a transfer to a relative, which might be allowed under the law. To make sure the family can still claim the property as their main home and get tax benefits, the trust should say that the family member can use and have the property.

If the property is in a trust, it will be harder to do things like sell it or use it as a guarantee for a loan. The person who set up the trust will also have to pay taxes on any profit from selling the property, even if they don’t get all the money. If you transfer the ownership of your home to a trust, it may not cause your property taxes to go up as long as you still have the right to live in the home. It’s best to talk to a lawyer to make sure everything is done correctly. When someone dies and their property is transferred to a surviving spouse or dependent child, the property should not be reassessed for tax purposes. However, if the property has a mortgage and is transferred to a trust, there may be a tax called the documentary stamp tax, depending on whether any beneficial interest in the property has been transferred to someone else. The Florida Department of Revenue (DOR) said that certain property transfers are not subject to doc stamp tax. For example, if a married couple puts their condo into a joint trust, they may not have to pay the tax because they still own it together. In another case, a couple transferred their home to special trusts and didn’t have to pay the tax because they still owned it. The DOR also said that a type of deed called a lady bird deed doesn’t count as a transfer of ownership, so it’s not subject to the tax. This means that if you transfer property but still keep some ownership rights, you may not have to pay the tax. The Department of Revenue said that if someone only gives away a life estate in their property (meaning the right to use it during their lifetime), then they don’t have to pay the tax when they transfer the property. This applies to a FIGHT because the person transferring the property still keeps a future interest in it, so they shouldn’t have to pay the tax. In simple terms, when a person transfers their property to a trust with themselves and their daughter as beneficiaries, the tax that needs to be paid depends on the amount of the mortgage on the property. If there is no other payment made for the transfer, then the tax is based on the percentage of the mortgage being transferred to the daughter. It’s like paying a tax on the portion of the mortgage that the daughter is getting. If someone gives their house to a FIGHT, but still gets to live there, only the part of the house that they don’t get to keep would be taxed. In Florida, there’s a table that shows how much the remaining part of the house is worth, based on the age of the person giving it away. So, if a 40-year-old gave a house with a $1 million mortgage to a FIGHT, only $84,000 of the mortgage would be taxed, and the tax would be $588. In Florida, if someone creates a trust for their own benefit, their creditors can still reach the assets in the trust, especially if the person kept the power to control the trust. However, if the trust is set up so that the person can’t control the assets, then their creditors may have limited or no access to the trust assets. This can be helpful for protecting properties like a primary residence. A FIGHT (Florida Irrevocable Trust) is a type of trust in Florida that cannot be revoked or changed by the person who created it. However, it is still possible to amend or revoke the trust under the laws of Florida. This type of trust can be useful for unmarried people with minor children, as well as for married couples with children and a significant amount of property. It can also be used if one person owned the property before getting married, or if the property is owned jointly by a married couple. A married person can use a FIGHT to transfer their home, but they need their spouse’s permission unless their spouse already gave up their rights to the home. The FIGHT can also be used instead of a prenuptial agreement, and it can include the spouse as a beneficiary. There are different ways to structure the FIGHT, and it’s important to be careful when choosing one. You can also avoid the FIGHT by co-owning the home with a minor child or transferring the home to a business entity. When creating a FIGHT, it’s important to follow the law and make sure the terms of the trust meet the requirements. The FIGHT can also include provisions for when it ends, like when the youngest child turns 18. It’s also important to limit the transferor’s interest in the FIGHT to avoid creditors. Finally, the FIGHT can include the transferor, their spouse, their children, or anyone else they choose as beneficiaries. A FIGHT is a special kind of trust that helps protect a parent’s property and provide for their children after they pass away. It’s important to be very careful when setting up a FIGHT to make sure it follows the law. Enjoy the cake! If you own a home and sell it, you may not have to pay taxes on the money you make from the sale. If you’re single, you can exclude up to $250,000 of the profit, and if you’re married, you can exclude up to $500,000. There are also rules about trusts and how they affect tax exemptions. Additionally, there are laws that protect the rights of family members if the homeowner passes away or transfers ownership of the home. There are also rules about how the value of a home is assessed for property taxes. In Florida, there are laws that require a tax to be paid when property is transferred to a trustee for a trust. Some attorneys try to use a different law to avoid paying this tax, but it can be risky. The Florida Department of Revenue has given different opinions on this issue, causing confusion. But in 2020, they said that a certain type of deed does not trigger the tax. Despite this, there is still debate about how the law should be applied. This is a list of rules and letters from the Florida Department of Revenue about taxes on property transfers. It includes examples of when taxes may or may not apply, such as when property is transferred to a trust or a qualified personal residence trust. It also refers to tables from the Florida Department of Children and Families that are used for calculating life estate and remainder interest. If someone in Florida sets up a trust for themselves, their creditors can potentially reach the money in the trust to pay off debts. But the amount that can be taken by creditors is limited to what the person who set up the trust can receive from it. This means that if the person can only receive income from the trust, then that’s all the creditors can take. If the person can receive the entire trust, then the creditors can take the entire trust. A self-settled irrevocable trust can be reached by creditors if the person who set up the trust can receive money from it and has the power to decide how assets are distributed. In Florida, a beneficiary of a trust is someone who will receive money or assets from the trust in the future. The terms of a trust can be changed if the person who set it up and all the beneficiaries agree. In Florida, the law about trusts is based on what the lawmakers intended. In some cases, the person who set up the trust can give up their right to change or end the trust, for example, through a marriage agreement or a legal document about their home. When a married couple gets divorced, their property is usually divided fairly between them. But if they have a special type of trust, the rules are different and the trust assets may not be divided. If the couple uses their money to pay for their house, the house might be divided in the divorce. There are also special rules about owning property with other people and putting property into a special type of company. It’s important to be careful when making legal agreements about property so that everything is fair and protected. A remainder interest holder didn’t get homestead protection because they didn’t live on the property while the previous owner was alive. The author is a lawyer who focuses on estate planning and other legal matters. This article was dedicated to the author’s late grandmother. The article was submitted on behalf of a section of The Florida Bar that focuses on real property, probate, and trust law.

Source: https://www.floridabar.org/the-florida-bar-journal/florida-irrevocable-grantor-homestead-trust-having-your-cake-and-eating-it-too-second-course/