January Two-Do List: Two New Year Must Do Things for New Florida Homeowners
Posted: January 18th, 2022
January Two-Do List: Two New Year Must Do Things for New Florida Homeowners
There are two major things anyone who bought a home in Florida in the previous calendar year should do:
1. Apply for the homestead property tax exemption (and any others for which you are eligible).
- Get a durable power of attorney.
I’ll comment on each below.
- Apply for the homestead property tax exemption (and others you’re eligible for).
It seems strange but some people never ‘get around to’ applying for the homestead property tax exemption.
It’s never been easier to file for the exemption.
If you live in Brevard County and are qualified the application starts here.
What:
Under the homestead property tax exemption:
The first $25,000.00 of assessed value is exempt from school related taxes.
The first $50,000.00 is exempt from non-school taxes.
***The exemption also limits the annual increase in taxable value to 3% per year***
Other available exemptions include widow, blind, disabled, veterans, and first responders.
Who:
Florida residents are entitled to a ‘homestead’ property tax exemption on their primary residence i.e. their one actual home (not a second home or investment property).
Why? (What’s the big deal?): “Save Our Homes”
The homestead and other exemptions provide a several hundred dollar annual tax saving, but major long term benefit comes from the 3 percent per year limit on annual increases in taxable value.
This provision is called “Save Our Homes”.
While assessed values of properties may be appreciating at higher rates, under the 3% Save Our Homes cap, the taxable value on property with homestead exemption can only increase by a maximum of 3 percent per year.
The taxable value will be reset to current market levels after the currently homesteaded owner loses the exemption (such as by sale, death, or just no longer using the property as primary residence i.e. leasing the property to a tenant).
Thus, the homestead property tax exemption once obtained on a property becomes ever more valuable each successive year that you own and live in your property, so the last thing you want to do is lose the exemption and the ‘save our homes’ credit.
When:
Exemption applications are due by March 1 for the current year’s tax exemption.
Generally, the exemption automatically renews from year to year unless there is a change to the status of ownership (such as a new deed adding or removing an individual from title, establishing a life estate, or putting the property into a trust).
It is very important to monitor your exemptions and to re-file for the exemption if you made any changes to your deed whether voluntarily, such as by recording a life estate deed with the goal of avoiding probate, or involuntarily, such as by death of a spouse, or other co-owner, the foregoing being just some examples of how the exemption can be lost unless reapplied for before the March 1 deadline in the year following the change of status.
Because the homestead tax exemption is so valuable, the opportunity for financial advantage tempts many to improperly claim the exemption under circumstances in which they are not truly eligible for the exemption.
The Brevard County Property Appraiser’s Office aggressively investigates unlawful claims of exemptions and will lien your property for the difference in lost tax revenue plus fines and penalties (and potential criminal liability).
Portability:
The ‘portability’ feature allows one to transfer built up ‘save our homes’ credit when moving from one homestead property to another.
Related Concept: Exemption from Creditors/Judgments:
The word ‘homestead’ is used in several contexts under Florida law. In this comment we are discussing the tax exemption. A related matter is the constitutional homestead exemption from claims of creditors i.e. money judgments.
Applying for, receiving, and maintaining the homestead property tax exemption over the course of one’s ownership of the property is necessary to avail oneself of the ‘Notice of Homestead’ which is a statutory mechanism set forth in Section 222.01 of the Florida Statutes for asserting one’s homestead rights against a judgment creditor by filing an affidavit with the clerk of court.
Failure to file for the homestead tax exemption can be taken as evidence in a judgment action that the property owner does not have the requisite intent to reside in the property as the primary residence.
How:
Visit your County’s Property Appraiser’s website for more specific information about how to apply.
If you live in Brevard click here for more information about the available exemptions and how to apply.
- Get a Durable Power of Attorney.
A durable power of attorney is the only thing standing between you and a guardianship in the event that you are ever incapacitated in the future i.e. unable to handle your own affairs.
What:
A power of attorney allows you to give another person authority to take legal action on your behalf, such as making contracts, filing insurance claims and claims for government benefits.
A durable power of attorney is one that survives incapacity (special wording is required to accomplish this effect).
The ‘principal’ is the person making the durable power of attorney and giving another permission to act on the principal’s behalf.
The ‘agent’ or ‘attorney in fact’ is the person appointed under the durable power of attorney to take action on the principal’s behalf.
Who:
Anyone who owns real estate in Florida needs a Florida durable power of attorney because nobody (not your even your spouse) can handle your property (or any other legal affairs) on your behalf without one.
Don’t assume that a power of attorney prepared and executed in another state will be compliant in Florida.
Why? (What’s the big deal?): Avoiding guardianship.
If you become incapacitated and do not have a durable power of attorney in place, a guardianship proceeding would be needed to have the court appoint a legal guardian to manage your affairs.
Guardianship is a costly court proceeding. You can read more about it here in The Florida Bar’s consumer pamphlet on guardianship.
Among other things, the guardian must file reports regularly and would need specific permission from the court to handle certain bigger transactions such as selling or refinancing the mortgage on your house.
By its nature, guardianship is significantly more publicly visible than having one’s affairs administered by use of a durable power of attorney, which affords greater discretion and privacy.
When:
Now (before you become incapacitated).
Once you become incapacitated, it’s too late because you would then lack the legal capacity to be able to give someone a durable power of attorney.
Florida State Specific Requirements:
If you have a durable power of attorney from another state, you should have it reviewed by a Florida attorney to confirm that it complies with Florida’s strict requirements.
For example, some states don’t require witnesses for a durable power of attorney to be valid, but that would not be valid in Florida and could not be used to sell or refinance the mortgage on homestead property (but it could be used for secondary, a vacation home, or vacant land).
The point is if you are now a Floridian, you should be a Florida power of attorney.
Proceed With Caution, But Do Proceed:
A durable power of attorney is a powerful document not to be undertaken lightly only after consulting with a Florida attorney.
If you are concerned about giving that level of authority to another person, you should be, but don’t let it stop you.
First, consider that you may appoint more than one person under the durable power of attorney and you can require that they act jointly so that no single person can act nefariously.
Second, if you are not comfortable with a family member or friend, be aware that many estate planning attorneys who prepare durable powers of attorney in the normal course of their practice regularly undertake the role of agent under the durable power of attorney (for a fee, of course) when the client either doesn’t have someone else they trust or if the client simply doesn’t want to burden a family member and would prefer to pay the attorney to carry out these actions in the time of need.
How (and How Much?):
The best (and most common) way to obtain a durable power of attorney is as part of a comprehensive estate plan suite of documents prepared by a Florida attorney specializing in estate planning (including a will, possibly a trust, and other related legal documents).
The problem is most people put off getting a will and the rest of their estate plan (for many reasons) so they also put off getting a durable power of attorney.
If you are not ready to deal with all of the rest (many aren’t, that’s ok), don’t let that stop you from proceeding with getting a durable power of attorney.
You can just get a durable power of attorney; you’re not required to make a will or any other document.
If you don’t want to meet with an attorney, you can get it done for under $100.00 on legalzoom.com.
No excuses!
After Getting the Durable Power of Attorney:
First, once you have your durable power of attorney, be sure to put the original (i.e. the actual wet ink signed piece of paper) in a safe place because at some point the original may need to be produced.
Many durable powers of attorney provide that a copy is sufficient, but in some very important circumstances, such as recording in public land records in connection with a sale or mortgage refinance, the original is required.
If the original is lost and cannot be located, a natural inference is that you revoked the power of attorney and destroyed it.
Many closings have been delayed or needed guardianship court approval in order to be completed because the original durable power of attorney could not be located.
Second, you should let the person(s) you have appointed as your agent(s) under the durable power of attorney know that you have appointed them and where to find the original document in case it is ever needed.
Summary
Applying for the homestead tax exemption and getting a durable power of attorney are the two most important things that anyone who bought a home in Florida in the preceding year should do as soon as able.
Coda:
The two items above were the first two items on a longer list that I prepared as part of a weekly presentation to a business networking group that I am a member of.
Some other things to consider doing in January that were on the list I shared with the group:
- Setting up survivorship rights on your deed by an enhanced life estate or ‘ladybird’ deed.
- Setting up your mortgage and condominium or homeowners association dues to be paid automatically.
- Adding your spouse to your deed (if you have married since buying your home).
- If you have had your home for a longer period of time, you should consider getting a home inspection performed (as if the property were being sold). Most laypersons are not savvy enough to see all of the early signs of trouble with your home. A professional home inspector can detect these red flags before they become bigger problems and thus hopefully mitigating the financial costs associated with any needed repairs, etc.
- If you own a Florida business entity, you should get your annual report filed on sunbiz sooner than later and make any needed updates such as changing officer/director designations and corresponding addresses, but also to simply avoid the $400.00 late fee for any filings after Sunday May 1, 2022.
- If you have any elderly persons in your life, make sure to get the code to their phone and password to get into their computer!
I hope you have enjoyed this post.
More to come.
Cheers.
Michael A. Schneider, Esq.
President/CEO
Echelon Title Services, LLC
Michael@EchelonTitle.com
(321) 450-4770 Telephone
(321) 806-4480 Facsimile