Legal & Accounting Aspects

What is the difference between a Title and a Deed?

While some people use these terms interchangeably, as synonyms, the Title is the right to ownership, while the Deed is the actual physical or electronic document that conveys such ownership rights.  The most common types of Deeds are:

- Warranty Deed, which guarantees Fee Simple (complete and unrestricted) ownership of the property.  This is the most commonly used type of deed in residential transactions. 

- Quitclaim Deed does not offer a guarantee of ownership.  It is often used for small changes and corrections to an existing deed, transfers between family members, or to transfer the property to a Trust or create a Life Estate.

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What are Title "Defects"

In general lines, they refer to impairment to ownership and transfer of the Title because someone else has an interest in the property.  It may also refer to errors and inconsistencies in the actual language of the deed.  When you purchase a property through a Title company, they typically perform a search for Title defects and offer a Title Insurance to protect your Title from undetected issues.

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Do I need Title Insurance?

By definition, insurance is something that protects you from an unexpected hazard that may have disastrous consequences on your life and finances.  Most people will never need to file a claim with their Title insurance company, but if it happens, the insurance may save you from losing your largest asset.  When you buy your home with a mortgage, the originating bank will require you to purchase Title Insurance to protect their interest in the property, and the Title company will offer you an addendum to cover your own interest in the house.  The price and features of Title insurance are regulated in most states, and the regulation varies between states.  Make sure to discuss Title insurance with your real estate attorney and Title company processing your purchase.

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Should I create a Trust?

This is legal and accounting territory, and you should discuss this with your account and consult a real estate attorney.  It is not a one-size-fits-all, but in many cases, a Trust can be an effective way to avoid probate and minimize taxes for your heirs.  Another option to avoid probate is an  Enhanced Life Estate Deed, also known as Lady Bird Deed, which avoids probate and may provide some tax savings. 

There are important differences on taxation, asset protection, and asset control between Revocable and Irrevocable Trusts, as well as between Life Estate and Enhanced Life Estate.  These are complex decisions that require agreement between family members and the counsel of an attorney and an accountant.

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What is a Homestead?

In Florida, you may qualify for a reduction of up to $50,000 of the assessed property value used to calculate your property taxes.  You will need to apply for this Homestead exemption in the county where you live and prove that you qualify and that the property is your primary residence.

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Can I depreciate my property for tax purposes?

If you are referring to property taxes, the county where you live will have a process for appealing the assessed value of your property, if you have a reason to believe it is incorrect and can substanciate your argument.

Discuss with your accountant how to calculate depreciation for your investment property, for income tax purposes. You can only depreciate income-generating properties; you most likely cannot depreciate your primary residence, and you cannot depreciate the value of land (you may be able to reassess it).  Your accountant can explain the rules to determine if a vacation home may be depreciated.