I receive many calls requesting assistance with conveying real property into a trust, whether it be a revocable trust, land trust or the like. Some people desire to hold title to their real estate in the name of a trust for estate planning purposes, which may include spouses attempting to equalize their estates. Other people desire to hold title to their real estate in the name of a trust so the beneficiaries of the trust are kept private. And other people elect to hold title in the name of a trust for no other reason than to avoid the need to probate their estate. All of these reasons are valid reasons to consider conveying your real estate into a trust. However, there are some things you should be aware of before proceeding with the conveyance.
Florida’s “Land Trust” Statute
First, here is a little history on Florida law known as the “land trust” statute. Under Florida law, legal and equitable title is vested in the name of the trustee and provides the trustee with the authority to act on behalf of the trust beneficiaries. This authority is typically stated in the deed conveying the property to the trustee. The benefit of this is that any person dealing with the trustee does not need to review the actual trust agreement and that person is protected from any action of the trustee, even if the trustee exceeded his or her trust authority. Anyone dealing with the trustee is assured the trustee has full authority to deal with the property and any claims between the trustee and the beneficiaries will not affect the transaction between the trustee and any third party.
Here are some factors to consider before deciding whether to convey your real property into a trust:
- Is there is a mortgage encumbering the property? If so, you will need to determine if documentary stamp tax is due on the conveyance. Florida law provides that documentary stamp tax is due to the State of Florida on documents that transfer an interest in Florida real property. The current tax rate is $.70 per $100 (or portion thereof) of the total consideration paid, given, or to be paid or given, for the transfer (other than Miami-Dade County, where the tax rate is $.60 per $100 or portion thereof). If the property is mortgaged, tax is generally due on the outstanding balance of the mortgage encumbering the property. There are some exceptions to this rule that you will need to review to determine if documentary stamp is due on your conveyance. If tax is due and you do not pay it, the State of Florida may impose penalties and interest on the conveyance and you may not be notified of this for several years after the conveyance.
- Do you have written consent from the lender? You should also review the mortgage to determine if a conveyance into a trust is permitted, or if prior written consent is required from your lender. If the loan document requires prior written lender consent and you do not obtain the consent prior to conveying the property to a trust, this may be deemed an event of default and the lender may be able to accelerate the loan and foreclose on the property.
- Condo and HOA Concerns. If the property is governed by a condominium, homeowners or property owners association, you should review the association documents to determine if association approval is required prior to your conveyance to the trust.
- Florida’s Homestead Laws. If the property is your homestead (or if you anticipate the property will be your homestead in the future), you should review your situation as it relates to Florida’s complex homestead laws to determine if it is best to convey the property into a trust or continue holding title to the property in your individual name or with your spouse.
Bottom line: To avoid undesired and unanticipated consequences, it is always best to consult with a real estate attorney prior to conveying your real property into a trust.