Previously, this column provided a general outline of Florida's Save Our Homes cap and how it works.

The Save Our Homes cap is a constitutional limitation on the increase of the assessed value of homestead property for ad valorem tax purposes.

To obtain the benefit of the cap, the owner must apply to the property appraiser on or before March 1 of the year for which homestead status is claimed, and the homestead must be the permanent address of the owner or a dependent.

The Save Our Homes cap limits the increase in the assessed value to the lesser of 3 percent or the increase in the cost-of-living index. This makes it important that homeowners take care to preserve the homestead status of their property and avoid the loss of the Save Our Homes benefit.

Change in ownership of homestead property will result in the property being reassessed at just value on Jan. 1 of the year following the change. Sale of property clearly constitutes a change in ownership.

For this purpose, foreclosure or a transfer of legal title or beneficial title in equity also will trigger reassessment, unless the change in ownership can be disregarded by statute. This makes it important that any homeowners considering a change in title or ownership consult an experienced attorney to be sure their change will not result in the homestead being reassessed.

The following are examples of changes, some that lose the cap and others that don't.

Transfers between husband and wife are not considered a change in ownership for Save Our Homes purposes. One of the spouses must be a transferor and the other a transferee. However, the statute is unclear as to whether a transfer from one spouse as trustee of a revocable trust to the other spouse outright is exempt.

Change in ownership does not require reassessment where the same person is entitled to the homestead exemption before and after the transfer. This can occur when transfer of title is from an individual to that individual as trustee of his trust, or where the transfer is to correct an error in previous documentation.

Some transfers at death also can escape reassessment. If ownership passes by operation of law under homestead rules for descent and distribution (by statute, a life estate in the decedent's spouse after which the decedent's lineal descendants take title), there is no reassessment.

There is also no reassessment if ownership passes to someone who is a permanent resident and is legally or naturally dependent upon the owner at the time of the owner's death. There may be some question as to interpretation of "legally or naturally dependent," but the statutory exemption exists.

More often than not, reassessment is triggered because an owner is trying to avoid probate by adding others to title through recordation of a deed. Some specific examples might be helpful.

An older sister adds her younger sister as co-owner. The older sister currently has homestead exemption and protection of the Save Our Homes cap, and both are permanently residing in the residence. Florida's attorney general has opined that the property must be reassessed in its entirety, and not merely the half owned by the sister.

On the other hand, the older sister could deed the property to herself for her lifetime with the remainder to her younger sister. The Florida Department of Revenue has ruled that this type of conveyance is not considered a change in ownership for Save Our Homes purposes.

If siblings are co-owners, and the property has qualified as homestead for both, conveyance from one sibling to the other will trigger reassessment. Florida's attorney general has opined that removal of an owner is treated the same as addition of an owner for reassessment purposes.

Transfers to revocable living trusts normally will not trigger reassessment. In the usual case, the owner prior to transfer is also the sole beneficiary of the trust, so there is no change in equitable ownership. Where the trust has other current beneficiaries, a change in ownership occurs, and the property will be reassessed. That is why the property appraiser frequently asks to review a copy of the trust to be sure that the property continues to qualify for the Save Our Homes cap.

For estate-planning purposes, some people establish what is known as a qualified personal residence trust (QPRT). In this type of trust, the owner enjoys use and ownership rights in the property for a limited term, after which time it usually passes to the owner's children.

Creation of the QPRT is not considered a disqualifying transfer where the same person or people owned the homestead prior to transfer and have an equitable ownership interest under the trust after the transfer. But when the property transfers to the children, the Save Our Homes cap is lost and the property is reassessed.

The QPRT is used to transfer property to children at a reduced value and to minimize both gift and estate taxes. The present value of the property is reduced because the parents have use of the property for a number of years after the transfer, and the market value of the remainder interest is less than the full value of the home.

If the property appreciates in value, the appreciation is not considered part of the gift or part of the estate of the parents. But if the property has substantially appreciated, the parties may be shocked when the tax bill is issued after ownership passes to the children, even if the parents remain in possession.

The foregoing examples are merely illustrative. There are many questions and uncertainties in this area that cry out for advice from experienced Florida counsel.

In my practice, I have often found non-Florida attorneys preparing wills, trusts and other estate-planning documents for clients who have moved to Florida. These attorneys are often not familiar with the Save Our Homes cap and, despite the best of intentions, draft documents that might result in substantial expense to their clients.

Anyone buying, selling or transferring Florida real property should retain a Florida lawyer. At the time of purchase, title issues should be addressed so there will be no need to change it later. As explained above, changing title can lose the Save Our Homes cap, so it is important to do it right the first time.

William G. Morris is an attorney with offices at 247 N. Collier Blvd. on Marco Island. The information in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney. Questions for this column can be sent by e-mail to wgmorrislaw@earthlink.net, or by fax to (239) 642-0722. Read other columns at http://www.wgmorris.com.