Written by Thomas Upchurch
Trusts can be valuable because they offer protection for both property owners and their beneficiaries. Before the Trust Code was modified in 2007, a settlor had to make a disposition of property so that they were no longer vested with its full legal and equitable ownership, and a person will want to make sure they are working with an experienced Florida trust administration attorney.
In Flinn v. Van Devere, 502 So. 2d 454 – Fla: Dist. Court of Appeals, 3rd Dist. 1986 – Google Scholar, the Third District Court of Appeal of Florida held that the failure of a settlor to execute a deed conveying the real estate to trustees precluded the creation of a living trust. Florida Statute § 736.0106 establishes that the common law of trusts and principles of equity supplement the Trust Code, except to the extent modified by the Trust Code or another Florida law.
The first thing a person will need to do to transfer property into a trust in Florida is to prepare and sign a new deed. The two most common kinds of deeds are warranty deeds and quitclaim deeds.
Warranty deeds are often used for real estate because they provide a warranty that there are no liens against the property, and no other party has a claim to the property, although they can require a title search and title insurance. Quitclaim deeds will not offer any of the protections of a warranty deed because they are simple transfers of ownership interest of a person signing a deed and do not require a title search or title insurance.
Quitclaim deeds are frequently used by family members and friends and can be helpful for clarifying ownership of the property if there are multiple owners.
When filling out a deed, the person who is transferring ownership of the property to a trust must include the property’s current owner(s) name(s), the new owner(s) name(s), and a proper legal description of the property. The property owner must use the exact same form of their name used on the trust agreement and on the deed that originally transferred the property to them.
Filling out the name(s) of the trustee(s) will require a person to use the same name outlined in the trust document. After reviewing the name(s) involved in the agreement, a person must include the date on which the trust document was signed in front of a notary.
The legal description of the property to be included in the deed should be the same as it appears on an original deed. If the property is co-owned with someone and one of the co-owners wants to transfer their share only, the legal description must state that the deed is transferring only a specific share to the trust.
Once a document is ready, a person must sign and date the deed in front of a Florida notary and two witnesses. The deed should then be recorded in the county office that maintains local property records.
If a person owns several commercial investment properties, they might own each of the properties through an individual limited liability company (LLC) to limit their liability. When a person establishes a living trust, they can transfer 100% of the ownership of each LLC into the trust so that their beneficiaries inherit their interest in each LLC.
People who transfer real estate by deed have to pay a fee called a documentary stamp tax. All counties except Miami-Dade County charge a rate of $0.70 per $100 of value received for the property.
The fee needs to be paid to the county clerk’s office or wherever a deed was recorded. If a person is transferring property to a living trust, only minimum documentary stamp taxes will be due.
If a person has a mortgage on the property that they plan to transfer into their trust, a due-on-sale or due-on-transfer clause in their loan can be triggered. A person will want to check with their lender before they transfer any property into a trust, and many lenders will be flexible and not expect people to pay loans in full.
In many cases, retitling property puts it into a trust with the same ownership and will not require an acceleration of a loan repayment. When a person is splitting property in a new ownership percentage, like a divorce or gifting property, that can trigger a due-on-transfer clause.
A person must notify a mortgage lender when they transfer their deed into a trust, even if no accelerated repayment is required. Before transferring property into a trust, a person should check with their title insurance company.
Depending on the person’s location and the title company, transferring a deed to a trust may require an endorsement on a title insurance policy or even require the purchase of a new title insurance policy because of a change in ownership. An endorsement on a title insurance policy might only cost $100.
Transferring real estate into a trust should not require other changes to property taxes or insurance. But a person will still need to provide information to their insurance company and keep all documentation of a transaction.
A person does not lose the benefit of a step-up on the basis of their property in the event of their death for property held in a revocable trust, nor will their property tax assessment change if 100 percent of the property is going into their own trust. People should still retain documentation showing the change in ownership and file a change of ownership status that clearly states that the ownership is a simple transfer to a trust. Not doing so can trigger a property reassessment.
People should also notify their homeowner’s insurance carrier about any transfer of ownership of property to a trust. Premiums and a homeowner’s policy should not change, but a company does need a policy to reflect the appropriate ownership status.
Are you confused about how to transfer your property into a trust legally? Get in touch with Upchurch Law to get the legal help you need.
Our firm has decades of experience with all kinds of trust issues. Call (386) 320-6169 or contact our Florida inheritance theft attorney online to set up an initial consultation.
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