Choosing a Method of Ownership for Real Property Located in the Miami, Florida Area

Choosing a Method of Ownership for Real Property Located in the Miami, Florida Area

 

For foreign investors, the first issue to resolve when purchasing real estate in the Miami, Florida area is how to hold title to the property intended to be acquired. Unlike many other foreign countries, the United States allows foreign citizens to hold title to real estate in fee simple (personally and absolutely, regardless of an immigration status and without the need for assistance from a US trustee or company).
Important to note is that when selecting a method of real estate ownership, foreign investors should seek professional advice, and should not only consider the tax and estate planning ramifications of their choice, but also consider the short and long term costs which will result from their choice.
The most common methods of ownership in Florida can be divided into ownership through persons and ownership through legal (corporate) entities.
 
Ownership through Persons
 
The simplest form of ownership is fee simple. In this instance, the buyer may purchase the real property in his own individual name. The buyer is usually required to disclose his or her marital status. Marital status becomes important when he or she will in turn sell or mortgage the property to a third party.. The signature of the unnamed spouse is required in order to mortgage or sell a primary residence located within the State of Florida. If the real estate is a second home, the deed or instrument of conveyance executed by the Seller must contain language stating that the property being conveyed is not the Seller's primary residence or homestead.
The main advantage of sole proprietorship in fee simple is the fact that it can be easily conveyed without the necessity to produce the signatures of others (except for the spouse) or any other sort of trust or corporate formalities.
Co–Tenancies are created when two or more individuals or entities share ownership of real property as a whole. There are three basic forms of co-tenancies, Tenants In Common, Joint Tenancy with Right of Survivorship and Estate by The Entirety. Please see the Glossary for an expansive description of these three co-tenancies.
 
Ownership through Legal Entities
 
When foreign investors can take advantage of double tax avoidance treaties, they might have a significant advantage exempting property from estate taxation in the US by holding it through a corporate entity. Although there are advantages to owning real estate through a corporate or similar business entity, these advantages come at a cost.
 
In addition to the annual fees and additional accounting requirements which will be required for the proper maintenance of corporate formalities, financing will be more difficult and costly to obtain. Some areas of concern would be larger equity in the property required, a higher interest rate and personal guarantees of foreigners. Also, insurance premiums for the property will probably be higher.
 
Trusts
 
Some estate planners may recommend the use of a trust or “Florida Land Trust” under certain circumstance. Most trusts grant the power to hold, manage and convey the property to one or more trustees who must perform their duties in the best interest of the trust. Under certain types of trusts the trustee(s) may also be beneficiaries of the trust. Depending on the language of each trust agreement, the powers of trustees can be more or less restricted to fit the specific intent and purpose of the individual(s) creating said trusts.
 
There are several types of trust agreements including revocable, non-revocable and land trusts. The choice of a specific type of trust should only be made after consulting a specialized professional.
 
3 kinds
 
Tenants in Common – “tenancy in common” – created by conveyance (or transfer) to two or more persons. It may arise by a deed or conveyance of an undivided tract of land to 2 or more person, in which case the new owners are tenants in common until the tract is divided by agreement or otherwise. Among partners – may be created if a partner purchase properties out of partnership fund where the property is not to be used for partnership purposes. If one partner conveys his partnership interest to a stranger, the latter and remaining partners become tenants in common.

 

For foreign investors, the first issue to resolve when purchasing real estate in the Miami, Florida area is how to hold title to the property intended to be acquired. Unlike many other foreign countries, the United States allows foreign citizens to hold title to real estate in fee simple (personally and absolutely, regardless of an immigration status and without the need for assistance from a US trustee or company).

Important to note is that when selecting a method of real estate ownership, foreign investors should seek professional advice, and should not only consider the tax and estate planning ramifications of their choice, but also consider the short and long term costs which will result from their choice.

The most common methods of ownership in Florida can be divided into ownership through persons and ownership through legal (corporate) entities.

Ownership through Persons 

The simplest form of ownership is fee simple. In this instance, the buyer may purchase the real property in his own individual name. The buyer is usually required to disclose his or her marital status. Marital status becomes important when he or she will in turn sell or mortgage the property to a third party.. The signature of the unnamed spouse is required in order to mortgage or sell a primary residence located within the State of Florida. If the real estate is a second home, the deed or instrument of conveyance executed by the Seller must contain language stating that the property being conveyed is not the Seller's primary residence or homestead.

The main advantage of sole proprietorship in fee simple is the fact that it can be easily conveyed without the necessity to produce the signatures of others (except for the spouse) or any other sort of trust or corporate formalities.

Co–Tenancies are created when two or more individuals or entities share ownership of real property as a whole. There are three basic forms of co-tenancies, Tenants In Common, Joint Tenancy with Right of Survivorship and Estate by The Entirety. Please see the Glossary for an expansive description of these three co-tenancies.

Ownership through Legal Entities 

When foreign investors can take advantage of double tax avoidance treaties, they might have a significant advantage exempting property from estate taxation in the US by holding it through a corporate entity. Although there are advantages to owning real estate through a corporate or similar business entity, these advantages come at a cost. 

In addition to the annual fees and additional accounting requirements which will be required for the proper maintenance of corporate formalities, financing will be more difficult and costly to obtain. Some areas of concern would be larger equity in the property required, a higher interest rate and personal guarantees of foreigners. Also, insurance premiums for the property will probably be higher. 

Trusts 

Some estate planners may recommend the use of a trust or “Florida Land Trust” under certain circumstance. Most trusts grant the power to hold, manage and convey the property to one or more trustees who must perform their duties in the best interest of the trust. Under certain types of trusts the trustee(s) may also be beneficiaries of the trust. Depending on the language of each trust agreement, the powers of trustees can be more or less restricted to fit the specific intent and purpose of the individual(s) creating said trusts. 

There are several types of trust agreements including revocable, non-revocable and land trusts. The choice of a specific type of trust should only be made after consulting a specialized professional. 

3 kinds 

Tenants in Common – “tenancy in common” – created by conveyance (or transfer) to two or more persons. It may arise by a deed or conveyance of an undivided tract of land to 2 or more person, in which case the new owners are tenants in common until the tract is divided by agreement or otherwise. Among partners – may be created if a partner purchase properties out of partnership fund where the property is not to be used for partnership purposes. If one partner conveys his partnership interest to a stranger, the latter and remaining partners become tenants in common.


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