Inheriting a Florida Home in a Revocable Trust: Do You Keep the Homestead Exemption?

One of the most common questions Florida estate planning attorneys receive involves the transfer of family property. Specifically, when a parent (the grantor) passes away and leaves their home to a child through a revocable trust, what happens to the property taxes?

Does the child get to keep the parent's original homestead exemption rate? If not, how does the beneficiary handle the new tax situation?

This guide breaks down exactly how the Florida homestead exemption works when inheriting property via a trust, the mechanics of the "tax cap," and the steps you need to take to file for your own exemption.

The Short Answer: Do Property Tax Rates Transfer to Children?

No, unfortunately, they typically do not.

While a spouse can often share a homestead exemption and seamlessly maintain the same property tax rate when a home is transferred to them, the rules are different for children.

If you inherit a home from your parents—even if it was held in a revocable trust—you generally cannot sustain their original tax rate. If you intend to make the property your primary residence, you must reapply for the homestead exemption yourself.

Why Use a Revocable Trust for a Home?

Before diving into the taxes, it is helpful to understand why the home was in a trust to begin with.

A "Grantor" (your parent) creates a revocable trust and places their primary residence into it primarily to avoid probate.

• Probate is a court system process that can be costly and time-consuming.

• Revocable Trusts allow the grantor to keep their homestead exemption and tax benefits while they are alive and living in the property.

• Inheritance: When the grantor passes, the trust ensures the property passes to the beneficiary (the child) without court interference.

The "Tax Reset": Understanding the 3% Cap

Why are property taxes likely to go up when you inherit the home? It comes down to how Florida assesses property value over time.

1. The Parent's Scenario (The Cap)

When your parent owned the home, their property taxes were based on the assessed value. In Florida, there is a "cap" on how much that assessment can increase year after year.

• This ceiling is roughly 3%.

• Even if the market value of the home skyrocketed, the parent’s tax assessment could not rise more than that ~3% cap annually.

2. The Child's Scenario (The Reset)

Once the property transfers from the trust to you, that history is wiped clean. The property is reassessed at its current market value.

Because property values have likely increased since your parents bought the home (perhaps significantly), the new assessed value will be much higher than what your parents were paying taxes on.

• The Result: You will likely see an increase in property taxes—potentially a significant one.

• The Silver Lining: Once the property is in your name and you apply for your own homestead exemption, you will then benefit from the same ~3% cap on increases moving forward.

What Happens During Trust Administration?

If you are the beneficiary (for example, an only child) set to inherit the assets, here is the typical process after the grantor passes:

1. Trust Administration Begins: The Trustee (the person responsible for managing assets) initiates the process.

2. Asset Distribution: Since the trust usually directs assets to be distributed upon death, the home does not stay in the trust forever.

3. Deeding the Property: The Trustee will sign a deed transferring the title (rights to the property) out of the trust and directly to you.

4. Closing the Trust: Once assets are distributed, the trust is closed.

How to File for Your New Homestead Exemption

Once the deed is in your name, if you make this home your primary residence, you should apply for the Florida homestead exemption immediately.

Steps to apply:

• Check Online: Go to your specific County Appraiser’s website. Most counties have a dedicated tab for "Homestead Exemption" where you can file online.

• Call the Office: You can call your County Appraiser’s office directly to ask about the filing process.

The process is generally fairly easy, but it is a critical step to ensure you start building your own tax cap protection for future years.

Have Questions About Florida Estate Planning?

If you have questions about homestead exemptions, property in revocable trusts, or any other estate planning matters in Florida, we are here to help.

Contact atCause Law Office today for a Free Consultation on your specific situation.