Most people would rather not talk or think about planning for their death. As unpleasant as the thought of estate planning may be, it is a vital consideration that every condo or co-op unit owner must not overlook. When arranging plans for who will inherit a condo or co-op unit after the owner’s death, one should consider these five tax and estate planning tips to assure grieving family members will receive title to the unit seamlessly during an emotional and financially challenging time.

1. Review the Nature of Title to the Condo Unit or Co-op Shares

First, determine how title to the condo unit or co-op shares is held; i.e. whether in one’s individual name (fee simple), as joint tenants with a spouse (tenants by the entireties), or with another person as tenants in common or jointly with rights of survivorship. While jointly held interests will automatically vest to a surviving joint tenant upon death, an individual or tenants in common owner may need to actively plan to avoid subjecting the unit or shares to scrutiny by creditors in probate court. If joint ownership is not practical, the owner will want to plan for the conveyance of their unit or shares within a last will and testament or revocable living trust, particularly, if the owner has multiple beneficiaries or children that could lay claim to future ownership. 

2. Evaluate Association Governing Documents to Confirm Unit Transfer Methods

The association’s governing documents should be reviewed to identify rules for transfer or conveyance of title to the unit. Typically, this means reviewing the association’s bylaws and lease or occupancy agreement to determine whether the association allows units to be transferred to family members by will or trust. Although a post-mortem transfer may be preauthorized by the association, a bequest of the unit by will or trust may not guarantee loved ones access to the unit until the association approves their membership. Further, any concerns regarding assessments in arrears or loans encumbering the unit should be addressed before speaking with the association’s to affirm transition title of the unit by will or trust.

3. Prepare a Will or Trust to Dispose of the Condo Unit

More commonly these days, condo associations are amending their governing documents to allow members to convey units at death by will or trust to a limited pool of beneficiaries. Typically, this includes the decedent’s spouse, children, siblings or other loved ones who meet the age and financial requirements for association membership. Before naming a beneficiary to inherit your unit by will or devisee to inherit your unit by trust, contact the association’s attorney to verify any restrictions on transfer and to obtain pertinent association documents required to memorialize your present or future interest transfer of the unit.

4. Implement a Land Trust to Dispose of the Co-op Unit and Co-op Stock 

Rights to ownership of cooperative corporation stock and corresponding leasehold interests in the co-op unit may be transferred to beneficiaries by a Florida land trust agreement. In the case of multiple beneficiaries, a trust will assure each beneficiary retains a right to occupy the unit during their lives or otherwise receive a share of proceeds upon its sale. The trust should be drafted consistent with Florida homestead laws and give a surviving spouse and minor children appropriate legal rights to own and occupy the unit. Before assigning the unit to trust, the association attorney should be contacted to confirm any guidelines or language required to be incorporated into the trust document to memorialize the present interest transfer of the co-op shares to trust.

5. Consider U.S. Income Tax Implications of Unit Ownership 

Because a great percentage of Florida condo and co-op unit owners are snowbirds, i.e. non-Florida residents that spend the majority of their time outside the state, their condo unit or co-op shares represents an asset that is subject to U.S. federal income gift, and estate tax reporting requirements. Further, if the unit is rented or sold or the unit owner dies, there may be income and/or estate tax consequences. When coupled with potential probate administration concerns if the owner dies as a resident of the state, it may be advisable to contact a tax and probate attorney to advise about potential tax ramifications and recommendations for conveying unit of shares to Trust to prevent the unit or shares from becoming subject to probate administration.