Will a land trust avoid an increase in real estate taxes when parent dies

Hoit: Well, I suppose that my home is held in a land trust, and the beneficiary of that trust beyond myself is my daughter. When I pass, the beneficiary of the trust, number one becomes my daughter. However, the trustee and so forth remain the same. What are the liabilities on this?

Attorney Tom Olsen: Yes. Hoit, be more specific for me. Are you talking about real estate taxes? Where are you going with this, Hoit?

Hoit: I'm talking about my daughter automatically receiving my home. All right? Upon my death. There would be no change in the Orange County records.

Attorney Tom: Okay.

Hoit: As the house is held in a land trust.

Attorney Tom: Earlier in the show I was talking about this. Somebody text us, they said, "Tom, because I've lived in my home for a very long time, my real estate taxes are artificially low." Okay. They can only raise the assessed value of your home no more than 3% per calendar year. She said, "When I pass away, will my kids get the benefit of that?" The answer is no. When mom passes away, this is where the county will take this opportunity to raise the assessed value of your home to up to market value. If you've got a real savings, they're going to be, that's going to be a substantial jump.

Attorney Chris Merrill: Correct.

Attorney Tom: Yes. What Hoit is saying is, well, first of all, we typically don't put homes in the name of the trust. If when we do, or when I've seen other attorneys put a home, your homestead where you live in the name of the trust, it does allow you to continue to get homestead exemption. The property appraiser's website will make you show the magic language within the trust. [crosstalk] Just do not get hung up on that but there is magic language. What Hoit is saying is that, "Okay, I own my home in the ABC trust."

Attorney Chris: I get it.

Attorney Tom: "I get homestead exemption, I've got artificial low real estate taxes, and when I pass away, all that's going to happen is that my daughter's going to become the beneficiary of that trust. How would the county know that I've died and now my wife or my daughter owns it?" I can tell you one way, it's really just occurred to me. [crosstalk] He's trying to game the system and he [crosstalk] to say that-

Attorney Chris: I completely understand what he's trying to do, but I'm curious what yes. What your answer is-[crosstalk]

Attorney Tom: Here's my answer. Okay. Hoit, hopefully you're still listening. Every January we get a card from Orange County Property Appraiser's website. It says, "You are entitled to homestead exemption for this"-- It came in January for 2023. "If anything is changed, you need to let us know." That card comes addressed to you and me. All right?

Attorney Chris: Right.

Attorney Tom: Let's just say that Hoit puts his plan in place and Hoit has passed away and the daughter gets this card from Orange County or any county you happen to live in, it's addressed to Hoit.

Attorney Chris: It would be her legal obligation to let them know it.

Attorney Tom: Yes. That's how they're going to find out. Hoit said, "Hey, what if she doesn't tell the county that things have changed?" Well, believe me folks, I have had plenty of clients over the years that have tried to-

Attorney Chris: Get around the system, [crosstalk]

Attorney Tom: Game the system or sometimes unintentionally.

Attorney Chris: Right. I understand. Yes.

Attorney Tom: Violate homestead exemption. Man, when they get caught, back taxes, penalties and interest. Man, property appraisers do not like it when you are wrongfully claiming homestead exemption for real estate tax saving. [crosstalk]

Attorney Chris: For any reason. [crosstalk]

Attorney Tom: Just for example, I'm going to give you some examples. Okay. If you own a home in another state and you're claiming homestead exemption up there and you're claiming homestead exemption in the Florida, Florida's checking that out.

Attorney Chris: They're finding out.

Attorney Tom: They're not going to allow you to claim homestead exemption in two places. I've had a married couple before that say, "Tom I have a home in Orange County. She's got a home in Leon County. We're both claiming homestead exemption." Guess what? They're checking other counties.

Attorney Chris: Oh, Yes.

Attorney Tom: By the way, he was even saying, "Tom, we're separated, we're still married, we're separated." She's got her home. I got home.

Attorney Chris: Doesn't matter.

Attorney Tom: Doesn't matter.

Attorney Chris: I think that your answer is absolutely right. That card is really the ticket. If daughter does anything other than tell the county the truth, she's liable for at a minimum back taxes when they do find out, [crosstalk] because at some point they will.

Attorney Tom: Penalties.

Attorney Chris: And penalties and interest at a minimum. There also could be some other legal penalties to her for, again, because what she was doing was falsifying information.

Attorney Tom: Let's take it another level too, that is this. Folks, what we're talking about is this. It is that if it's your home, it is a home you live in and you have applied for homestead exemption, the property appraiser's website will knock $50,000 off the assessed value of your home every year. That will save you about $750 a year in real estate taxes. The other thing that a homestead exemption gets you is that the property appraiser's website cannot increase the value of your property by any more than 3% in any calendar year. Again, folks, this is for the home you live in.

Attorney Chris: Homestead only.

Attorney Tom: This is not your vacation condo or [crosstalk] your rental property.

Attorney Chris: Correct.

Attorney Tom: People are interested in getting this homestead exemption because it's money, saves you money.

Attorney Chris: Exactly.

Attorney Tom: The property appraisers website is always on the lookout for cheats. By the way, if you go to their website, there'll be words when they're like, "Do you know somebody who's claiming homestead exemption, that shouldn't be? Please let us know."

Attorney Chris: Exactly. They're really on it. In other words, they're on it.

Attorney Tom: I had a client coming to me a few years ago. She goes, "Tom, it is my home. I got a letter from the property appraisers that they're taking away my homestead exemption. They want back taxes, penalty and interest. They're canceling it." I go and we both sound her out her why and reason was that for some reason it was her home, but the power bill was not in her name.

Attorney Chris: Wow.

Attorney Tom: The property appraiser's website is-[crosstalk]

Attorney Chris: Found that out.

Attorney Tom: They're actually looking, if you're claiming homestead exemption-

Attorney Chris: Looking to see.

Attorney Tom: They're looking to see is the power bill in your name? Is this the address you're using for them to mail your annual real estate tax bill to? They may be looking at one or two other things, but the point about that story is they're looking for people who are claiming homestead exemption, who are not entitled to it.

Attorney Chris: Right. In other words, they are putting in resources as far as doing that. I think, aren't I correct that one of the key reasons why all the counties in Florida, they really are on this, is because that is the way that they get revenue. Florida, for example, has no income tax.

Attorney Tom: Exactly.

Attorney Chris: This is the way for the state and the individual counties to get revenue.

Attorney Tom: Yes.

Attorney Chris: That's why they have to be on top of it.

Attorney Tom: Yes.

[00:07:34] [END OF AUDIO]