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What You Should Know About Inherited Property Laws in Florida

What You Should Know About Inherited Property Laws in Florida

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It happens all too often – a loved one passes away, leaving their property to a relative or friend who has to make sometimes difficult decisions about what to do with the piece of real estate. Determining what to do with that house, and whether to sell inherited property in Florida, often requires doing a lot of soul searching and a lot of research. 

First off, it’s important to realize that you have lots of options. Real estate laws in Florida vary based on what the condition of the loan is and the stipulations in the will, but there are four options for most people who’ve inherited property. 

  • Walk away and let the mortgage foreclose
  • Keep the house and rent it
  • Negotiate with co-owners from the estate to live in the house
  • Sell the inherited property

Depending on your situation, any one of these might be the best solution. What’s never a great idea is delaying the decision. The longer you wait, the more time, money, and stress it will cause you. 

You’re already dealing with the grief of losing a loved one. Inherited property in Florida shouldn’t be an additional stressor. The following information about property laws and options will help you to make sense of what you can do. 

Two questions to consider with inherited property

When you inherit a piece of property in Florida, you need to start off by answering the following two important questions. These answers will guide you in understanding where you stand and what your next steps should be.

  1. How did you inherit the home?
  2. How will you manage the issues surrounding the inherited property?

Whether you can get a house sold in a way that will get the most benefit for the owner of the property quickly while dealing with other family members is an important step in making sense of inherited homes.

Ways to inherit a home under Florida law

probate court in Florida

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Under the Florida Statutes, the codified laws that govern everyone and all pieces of property in the State of Florida, there are three ways that someone can inherit property. 

  • Inherit by trust 
  • Inherit by deed
  • Inherit by will

The means through which you inherited the piece of property in Florida will determine what the process looks like for you. It’ll also determine what options are open to you for dealing with the property and how you can exercise the rights that you have. 

Inheriting by trust

Inherited home in Daytona Beach, FL

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If you inherited the property by trust, it means that you, and possibly other inheritors, have rights to the home under Florida law. Inheriting by trust when someone passes away always involves the probate process only if there are children under the age of eighteen (minor children) or a living spouse. Florida homestead rules state that if minor children or a spouse are present, then the title of that home will have to be cleared through the court process. 

Once the title has been cleared through probate court, the inheritor is free to sell the house through a traditional real estate sale or to a cash buyer. 

Inheriting by deed

When a home is left to an inheritor by deed in Florida, the person who inherits is called the “remainderman”. This means that the person who inherits the home owns it jointly with another family member or loved one. 

A common misnomer is that spouses inherit by deed in Florida. This isn’t the case. Under Florida law, when a person dies, the other owners automatically take possession of the property. No other transition is legally necessary. 

For loved ones who aren’t spouses, property that is inherited by deed in Florida is not subject to probate. That being said, there is typically a recording of the death certificate or an affidavit filing that must happen. Should the inheritor by deed decide to sell the home, it’s fairly straightforward and easy when inheriting by deed. 

Inheriting by will

Last will and testament in St. Petersburg, FL

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When someone in Florida passes away and theirs is the only name on the deed, then the inheritor is named in the will. To do anything with a house that’s been inherited by will in Florida, the new owner must go through the entire probate process. 

Expect the home to take up to six months to go through probate court in Florida, during which time it cannot be sold. After probate court is complete, the new owner can do whatever they’d like to with the home as it will have a clear title.

When a house goes into Florida probate court

Probate court

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Depending on the factors involved, probate in Florida can either go very quickly, or it can go very, very slowly. 

When someone has been deceased, and the property has been left unchanged for two years, then probate court will fly along quickly in Florida. In this case, the new owner can sell fast on the open market and settle the estate. 

When someone has just passed away, or if the decedent’s death has occurred, then probate proceedings will move at a snail like pace. If more than one person has legal ownership of the home, be prepared for the probate process to be complicated and long.

With any Florida property in probate, don’t expect a hassle free sale to happen quickly. It’s simply a reality that an inherited home will be run through the wringer with all interested parties and the legal title will take some time to settle.

Why is probate in Florida so slow?

House by the water in Tampa Bay, FL

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The reason that a probate proceeding takes so long is that, under Florida law, notices to potential creditors must be published in the newspaper. Once those are published, the property held in trust must sit there for at least four months to allow all creditors to make their claim.

No potential owner can sell the house during this time, but repairs needed can be addressed. The property must sit there as-is until all the paperwork for the probate process has gone through.

Creditors and other claimants, or their appointed personal representative, have the right to make a claim during the process. Sometimes a personal representative will come in from far out of Florida to appear in court, most often an attorney.

Another important point here is that creditors can dispute homestead status on an inherited house. The creditor has a right to get their piece of the appraised value of the inherited property.

Though most of the time, creditors like income tax collectors, municipalities owed property taxes, are known before the deceased person is gone, that’s not always the case. That’s why the court must make efforts to find creditors.

Getting a clear title on a piece of inherited property, one without income tax or other creditor claims, is the only way to be able to sell property, including an inherited house in Florida.

The title through line

man signing a will in FL

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There has to be a through line on an inherited house from every single owner. Though there may be sentimental reasons for someone passing money, a house, or an estate onto you through their will, the legal ramifications have to be considered as well – whether the property is valued at a hundred dollars or a hundred thousand dollars.

Though there might be a last will and testament from an individual, there’s still the matter of putting a name on a deed. It’s not like a home sale, where the person can sign the house over.

In fact, there’s no way to get a house quickly signed over for a fast sale or for any other reason if the person is not available to sign over the house.

Probate is when the judge declares that an owner who is not on the deed now has the house. It’s the act of changing the name on the title of the house without a sale.

couple holding hands at an inherited house in Florida

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When a judge does make that final decision in Florida probate court, the probate judge issues something called an order determining homestead status of real property. This is the legal document that officially allows the inheritor to sell the property, renovate the inherited house, or sign over the house to another person without any money exchanging hands.

What about taxable income on an inherited house?

inherited house about to go up for sale

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Selling inherited property for market value or to cash home buyers for a fast sale and money in hand can

When selling an inherited property, don’t forget about the money you’ll have to pay in taxes after the sale. The income from that sale of a house is considered capital gains and will require you to pay capital gains tax on your next income tax return.

For federal income tax purposes, selling inherited property is the same as if you sell any other kind of investment property. Capital gains tax applies and will be paid on your income taxes the following year.

Do note that the income taxes when you sell an inherited property won’t be too bad thanks to the “step up on basis” rule in Florida property law. This means that you’ll only pay on gains from the house as is – as in from the time of the person’s death.

You won’t have to pay capital gains tax on the appreciation from the time of the original purchase by the owner.

Living room of an inherited home in FL

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This represents a huge savings in terms of capital gains tax. Otherwise, you could end up owing a massive amount in state, local, and federal taxes when you sell the inherited home.

Homestead property in Florida

Inherited property in Tampa

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Under the Florida general statutes, a property address that’s lived in by the homeowner is called a homestead property. This means it’s your primary residence, and you don’t have to pay taxes on the appreciation of the home when you sell the house.

Paying taxes is unavoidable on an inherited home if it’s not your homestead. This will only include appreciation on the house from the time of the death of the original owner – you would owe much more money if that appreciation went all the way back to the previous sale of the house.

When more than one person inherits a house

Inherited home in Tallahassee

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It’s not uncommon for multiple people to inherit a house from a single person. This usually happens when siblings or grandchildren inherit a home.

In Florida, everyone who owns a piece of the inherited home is responsible for everything equally. This includes debts, income, and also liabilities associated with the property address.

The mortgage, homeowner’s insurance, property taxes, costs for repairs needed on the house, etc. will all be the responsibility of everyone involved.

The hard truth is that, in most of these situations surrounding a house, everyone is not on the same page. Joint tenancy is tricky business, and it’s common for people to get hard feelings, especially when money is involved.

It can be a nightmare trying to get a fast sale on a house with multiple owners, or even to get a sale of the house at all. Getting everyone to agree can be almost impossible.

Inherited home in Coconut Grove, FL

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People are often hesitant to sell a house when someone can offer cash, in part because they feel like a better price is out there. A fast sale can save a lot of headache, though.

Administering the pay out from a buyer who will offer cash for the sale of a house is much less of a long term headache than the day-to-day maintenance of keeping a house rented.

Under Florida property law, everyone gets an equal share, but how that equal share from the sale price or from the rental fee is up to the group to figure out. It’s a lot of work.

When you want to sell a house with a mortgage

When a home has a remaining mortgage and the owner decides to sell, the full remainder of the loan comes due when the house is transferred to the new owner. However, if a home is inherited, through any means, there’s a federal law that allows the inheritor to keep the mortgage.

This law is called the Garn-St. Germain Depository Institutions Act of 1982, and it applies to inherited homes in the Sunshine State. Under this law, individuals who inherit a home can continue to make payments on the existing loan while it stays in the original owner’s name.

There’s also a process whereby the inheritor can transfer the loan to their name.

The great news is that, under these federal laws, the mortgage company won’t go through the ability-to-pay process, which is the customary process for loan approval in the United States.

The inheritor can simply be added to the loan, without having to jump through hoops or trying to sell the property.

Figuring out selling inherited property

man and woman standing in an inherited house Orlando

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There are so many factors to understand here. From whether you can sell inherited property to real estate investors, or for market value, or whether the life estate will cover closing costs and income taxes. Inherited property in Florida can feel burdensome, but the deceased person certainly didn’t mean for it to be.

A significant chunk of the process is understanding how to get on the same page as the court system. Understanding things like the difference in homesteaded property and non homesteaded property, as well as the Florida probate court will make it all less stressful in dealing with the deceased’s assets. 

Brett Riggins

Brett Riggins

Founder of Connect Home Buyers Brett Riggins started his real estate journey after graduating from Western Michigan University in Construction Engineering. After completing his first few residential flips, him and his wife Arin started Connect Home Buyers LLC, and today, they help homeowners sell their property quick and hassle-free.

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