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Jeff Baskies: Beware of Ad Valorem Tax Malpractice Trap when Transferring Clients’ Florida Non-Homestead Real Property to LLCs & Trusts

July 2023

A very recent Florida 3rd DCA opinion, highlights a ‘new’ risk associated with transferring clients’ Florida non-homestead residential real properties to LLCs or trusts – such transfers may trigger a significant increase in annual ad valorem property taxes.  The increase in ad valorem taxes comes from the change of ownership causing the clients to lose their built-up non-homestead, 10% ad valorem residential property tax cap benefit (the benefit of their ‘Assessment Limitation’). 

This new case highlights how very standard and maybe even ‘typical’ advice (e.g., ‘You should transfer that Florida rental property you own into an LLC to protect your other assets in case of a slip and fall on the property.’) might lead to an unintended but quite costly consequence – a doubling or more in ad valorem real property taxes in the year following the deed and then a much higher base for annual assessments annually following the loss of the Assessment Limitation. 

Advisors should be aware of this issue (highlighted by this new case and the 3rd DCA’s decision) to ensure they do not give advice that unwittingly costs their clients a huge increase in ad valorem taxes – to make sure they do not fall into this clear malpractice trap! 

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