Adding a Name to a Deed in Florida
Self-help and legal DIY projects are always highly discouraged. This is particularly the case in reference to adding or removing individuals to and from deeds to real property in Florida. Often times, real estate lawyers are hired to fix the mistakes of those who “Googled” their way through adding a relative or friend to their deed only to find out they’ve placed themselves at a severely negative legal disadvantage.
Alternatively, clients sometimes find themselves having hastily, although legitimately, adding a non-relative such as a friend, girlfriend or boyfriend to a deed only to realize how difficult it is to undo after the relationship falls apart.
In such a case, the client has two options – first, sue the ex-friend in attempt to remove them from the deed, which is definitely expensive and not entirely guaranteed, or second, ask the individual to execute another deed granting the property back to you, which may prove easier said than done.
Similarly, families regularly add members to deeds in efforts to “avoid probate”. While this may be a viable option after weighing alternatives with an attorney, there are several negative issues that may arise and need to be considered.
Ultimately, despite common practice, changing the name on a deed should not be approached or considered without first consulting a licensed and experienced attorney.
The question remains, if you won’t treat a broken bone without seeking the help of a doctor, why “cut and paste” your way through a legal document that carries such serious impacts?
What is a Deed?
A deed is the document that allows an owner to transfer all or a portion of ownership in property to another person. Transfer deeds are always used when purchasing property from others. In addition to identifying the parties to the transfer and the specific property being transferred (usually via the legal description and the physical address), deeds require particular information to be considered valid in Florida.
For example, according to Florida Stat. § 689.02, all transfer deeds must include the property’s Parcel ID number in the legal description. This information may be easily located on the county’s property appraiser’s website.
Further, to ensure the validity of a transfer deed, it must be signed by all current owners while in the presence of two independent witnesses and a notary. The notary may act as one of the two needed witnesses.
See Florida Stat. § 695.26. Upon completion of proper execution of the deed, it must then be recorded with the Clerk of the Circuit Court for the county in which the property sits. This typically requires a nominal fee for recording and may incur transfer taxes depending on the nature of the transfer.
There are three main types of deeds utilized in Florida, namely a General Warranty Deed, a Special Warranty deed and, perhaps the most commonly used amongst DIYers, a Quit Claim Deed.
The General Warranty deed involves a guarantee from the transferor to the transferee that she or he owns the subject property, that they have the legal right to transfer the property and that no other owners exist.
The Special Warranty deed, however, provides a limited type of warranty assuring the transferor that the transferee has not conveyed the property to anyone else during this transaction. However, this type of deed does not protect against any transfer prior to the transferee obtaining the property.
Since these prior types of deeds require some form of background verification to confirm the warranties being conveyed, they are more desirable in formalized purchases and other arm’s length transactions.
Conversely, the Quit Claim deed provides no guarantee of ownership or legal authority to transfer the property held by the transferor. It is most commonly used in informal or familial transfers of property and simply stated the transferor is conveying whatever ownership she or he may or may not have in the subject property.
Steps to transferring property via deed?
Perhaps it’s the ease in which transfer deeds are effectuated that make them so attractive to those who practice legal self-help. In Florida, there are three main steps involved in successfully adding a name to a deed. They are as follows:
- Hire an attorney to review the prior deed to be used in the preparation and drafting of the new deed. Information such as the rightful current owners, the legal description and parcel identification number can be located on the prior deed. However, they should all be verified before being relied upon.
- Prepare the transfer deed based on the needs of the parties (i.e. preparing a General or Special Warranty deed after the thorough title search is completed or a Quit Claim deed for use between non-arm’s length parties). Upon completion of drafting, the transferor must execute the deed in the presence of two witnesses and a notary.
- After the deed is adequately drafted and executed, it must be recorded in the Florida county in which the subject property sits. The recording process involves submission to the county and payment of recording fees and transfer taxes, based on the nature of the transfer, the intent of the parties, whether there is a mortgage on the subject property and if the transferee is paying the transferor for ownership in the property.
Pitfalls to consider before adding a person to a deed
As alluded to throughout this article, there are several pitfalls to adding a person to a deed without thorough consideration and consultation from an attorney. The following is a list of common pitfalls and issued encountered by the transferors and transferees when adding names to a deed:
- In Florida, adding a name to a deed is usually a one-way street. The only options to remove that name later down the line would be a costly law suit or having the person voluntarily transfer the deed back to the original owner alone. The latter rarely occurs if the situation is contentious.
- Transferring property may lead to the loss of the Florida homestead exemption in certain circumstances. This is most common among parents who choose to add their children to a deed as joint owners. This may lead to loss of significant tax benefits offered through the homestead exemption.
- The language contained in the deed may not result in the property being passed to the correct individual upon the passing of the owner. Many mistakenly believe that adding a person’s name to a deed will automatically allow the property to be passed to that person upon the original owner’s death. However, if the deed does not specifically state specific language, such as Joint Tenants with Rights of Survivorship, then the property may pass in accordance with Florida probate laws and not necessarily as the original owner would have preferred.
- Generally, properties with more than one owner require consent of all owners to be sold or refinanced. Lenders and buyers will typically require all named owners to consent to the refinance or sale. This poses a significant roadblock if the added individual chooses not to cooperate.
- Persons to which property is transferred may lose entitlement to certain governmental long-term care benefits such as Medicaid. Qualification for such benefits often depend on a person’s total assets being below a certain value. Therefore, increasing one’s assets by the value of the property may prevent that person from receiving these governmental benefits for long term care.
- The transfer may unintentionally qualify as a taxable gift under the federal gift tax laws. Although these thresholds have been changed to values that preclude a vast majority of the public and apply mostly to wealthier folks, individuals may still find themselves owing taxes unintentionally.
- Additionally, named individuals may end up paying higher income taxes when the property is sold. Taxes are calculated on the difference between the original price of the property and the price for which it is ultimately sold. When property is inherited through probate or a trust, the beneficiary receives a “stepped-up” basis, which is the value at the time the property is sold. Conversely, there is no “stepped-up” basis when a name is added to a deed and, therefore, taxes may be calculated on the difference between the original purchase price of the property and the sale price.
While it may appear easy enough to fill out an online Quit Claim deed form and record it with the county, it is imperative that one consult with a professional and consider all unique factors surrounding their circumstances prior to adding a name to a deed.
It is not only important to consider the implications regarding the property itself, but advisable to consult with an estate planning attorney to ensure that your planning objectives will still be met.
Contact us at ASR Law Firm to discuss how we may be of assistance to you and your family regarding adding names to your property’s deed.