In formal probate, the surviving spouse and lineal heirs, whom the decedent was obligated to support, have a claim for a what is a called a family allowance described under Fla. Stat. §732.403. Under this statute, the spouse and heirs can file a petition to claim up to $18,000.00 in available funds from the estate for their maintenance and support during the probate process. The family allowance is significant to all interested parties due to the fact that funds are distributed directly to the spouse or heirs and would not be available to satisfy other beneficiaries or creditors.

A family allowance is awarded at the discretion of the judge presiding over the probate case. Fla. Sta. §732.403 clearly states that the classes of beneficiaries described above are entitled to an allowance. The question for the judge becomes the reasonableness of the allowance and how such a payment is to be made. DeSmidt v. DeSmidt, 563 So.2d 193 (Fla. 2d DCA 1990). The court does not have to grant the maximum amount provided by law and can allow for a lesser amount and payments over time instead of a lump sum payment. There is no consideration given for the necessity of the allowance. Therefore, case law seems to indicate the judge should not consider whether the spouse or the lineal descendants have ample means from which to provide their own support during administration. The difference between what considerations show reasonableness and what considerations show necessity are not completely clear.

If an objection is filed to a petition for family allowance by a beneficiary or creditor, the court will schedule a time to hear the petition and the objection. Such a hearing should be an evidentiary hearing as the court is going to have to consider the daily living expenses, anticipated remaining length of the probate process, standard of living, and availability of other means of support. Some courts have also considered life insurance benefits and any support given during a decedent’s lifetime as additional factors.

Gifting Real Estate to Family Members Using a Quitclaim Deed. While you can leave real estate as a gift to a family member as part of your estate plan, you can also give your home or property as a gift in other ways. When you’re transferring property as a gift to a family member or friend, generally a document such as a Quitclaim Deed is used. Real Estate Coaching Helps Agent Get Family Time Back Post-Cancer RisMedia.com Tri-Lakes real estate sales: April 12-18, 2021 - Colorado Springs Gazette Tri-Lakes real estate sales: April 12-18, 2021 Colorado Springs Gazette Gryphon Real Estate Capital Partners and CarVal Investors Form Transitional Multifamily Bridge Loan Venture - PRNewswire.

It is important to note that any family allowance is a benefit that is in addition to other exemptions that may be available to the surviving spouse or lineal descendants, including exempt property and homestead rights. The family allowance is also not chargeable against the elective share. If you are presented with a situation involving a family allowance, contact an experienced Fort Myers probate attorney for a full appraisal of your rights.

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Real estate transfers are common among family members. Whether it’s out of the goodness of your heart or a part of an estate planning strategy, these transactions happen for a number of reasons. While property transfers can be useful to accomplish a particular goal, not all taxpayers consider the tax consequences.

There are other non-tax related issues that should be considered before attempting the property transfer by deed, will, or trust. For example, if the property is secured by a mortgage, the remaining balance may become immediately due when ownership changes. If you are considering employing any of these strategies, talk to an attorney licensed in your state with expertise in real property transfers.

Thus, here are common property transfer scenarios between family members and the respective tax implications:

Family Property Transfer: Adding a Joint Owner

SITUATION

You add another family member to the deed as a joint owner of your home so that it will pass to them automatically upon your death.

TAX CONSEQUENCE

So, what are the tax implications of this? Adding a family member to the deed as a joint owner for no consideration is considered a gift of 50% of the property’s fair market value for tax purposes. If the value of the gift exceeds the annual exclusion limit ($14,000 for 2016) the donor will need to file a gift tax return (Form 709) to report the transfer. However, they will not likely owe gift tax due to the unified gift and estate tax exemption, which is currently more than $5.4 million. Additionally, each owner will have a basis in their respective ownership interests equal to 50% donor’s basis on the date of the transfer.

When one of the owners dies, the decedent’s personal representative must include the fair market value of the decedent’s ownership interest in the gross estate for estate tax purposes. The surviving owner receives the decedent’s ownership interest with a stepped-up basis equal to the inherited property’s fair market value (generally the same amount included in the decedent’s gross estate). The surviving owner combines the stepped-up basis in the inherited portion with the basis received at the time of the gift to determine their total adjusted basis in the entire property. Basis is used to determine gain or loss when the home is later sold.

Note that adding a family member to the deed while retaining a right to use the home exclusively for the rest of your life has different tax consequences. Such a situation results in the creation of a life estate, which is discussed next.

Family Property Transfer: Gifting Real Estate

SITUATION

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You give a piece of real estate property directly to your child or grandchild.

TAX CONSEQUENCE

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If you give a plot of land to your child or grandchild, it’s considered a gift in the eyes of the IRS. Gifts of real estate to your child are not tax deductible. You can’t claim a loss, even if the paperwork shows you sold the property for $1 or another nominal amount. So the tax issues are all in the nature of expenditures, not savings.

For example, if you gift land worth $500,000 and you do not receive anything of that value in return, there are tax implications for the donor. As of 2016, the IRS allows you to give $14,000 annually to anyone you like, tax-free. If you’re married, you and your spouse can each give $14,000. However, if the value of the gift exceeds the annual exclusion amount, you, as the donor, must file a gift tax return (Form 709) to report the gift. As discussed earlier, you will not likely owe any gift tax if you have not yet used up your unified gift and estate tax exemption.

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While you may think you can fly under the radar with real estate transactions, this is not the case. Do your research on property transfers so you can plan ahead from a tax perspective.

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