Sonia Sotomayor and the Florida Life Estate Deed

There’s been a lot of talk about whether Celina Sotomayor and Omar Lopez, Supreme Court Nominee Sonia Sotomayor’s mother and step-father, are entitled to the Florida homestead and senior citizens’ tax exemptions for their condominium in Margage, Florida, despite that they deeded it to Judge Sotomayor. I want to assure you that there’s been no foul play.

A quick rundown – Florida’s homestead exemption developed in 1933 during the Great Depression. It reformed the ad valorem tax scheme (tax based on the value of Florida real estate or personal property) such that property owners who were unable to pay their property taxes could keep their homes. The homestead exemption operates by reducing the value of a home for the purpose of property tax assessment by a specified number. In January 2008, Florida voters approved the “Save Our Homes” Amendment to the Florida Constitution that increased this number to $50,000.00.

So, say you own a Florida home, the fair market value of which is $90,000.00. If you designate this property as your ­homestead (your primary and only residence), you will be taxed on it at $50,000.00 less than its value – in this case, $40,000.00.

As a result of the Florida homestead exemption, and a senior citizens’ exemption that applies to citizens aged 65+ who earn less than $20,000 per year, Ms. Sotomayor and Mr. Lopez’s condo has a taxable value of $48,880.00. So, their tax bill last year totaled $107.00.

But, this is entirely legal – and very common. So, what’s the problem? Ms. Sotomayor and Mr. Lopez deeded the property to Judge Sotomayor as part of a life estate eight years ago. And, understandably, laypersons not familiar with the nuances of estate planning are convinced that the property now belongs to Ms. Sotomayor and, as such, no longer qualifies for the aforementioned tax exemptions. This, however, is not the case.

A life estate is a common estate-planning tool that allows real property owners to bypass making a Florida will and still designate ownership of their property upon their death. The remainderman (the individual specified in the deed as the intended recipient) has no right to possess the property until the natural completion of the life estate. He is entitled to neither the privileges, nor the responsibilities, of ownership with regard to the property in question, including tax liability. In fact, if the property owner creates an enhanced life estate, he retains for himself even the right to sell or otherwise convey it during his lifetime; and the property passes to the remainderman upon the life tenant’s death only if there is any interest left at that time.

Because Ms. Sotomayor and Mr. Lopez continue to maintain the dominant interest in their home, they are entitled to the tax exemptions that would not be available to Judge Sotomayor if she were to take immediate possession and control of the property.

Please refer to “Sotomayor family tax breaks in Broward face questions” to read more on the topic or to contribute to the debate.

If you are interested in learning more about this topic, you can either post a comment to this blog, contact me, a Broward Real Estate Lawyer, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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