One of the more frequently encountered areas of confusion in Florida Probate and real property disputes revolves around Florida’s state constitutional protections for homestead property. The Florida constitution Article 10, section 4 of the Florida constitution provides:
SECTION 4. Homestead; exemptions.—
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:
(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family;
(2) personal property to the value of one thousand dollars.
(b) These exemptions shall inure to the surviving spouse or heirs of the owner.
(c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.
The constitutional homestead protection has some serious implications for Florida Probate. But first the basics, what is a homestead? Florida homestead is property that is the primary residence of a Florida residence. This property can be declared a homestead through certain procedures identified in Florida Statute 222.01 and 222.02 but such a declaration is not required. So why would anyone go to the trouble of designating a property to be homestead? There are several key advantages that only a Florida Homestead property contains.
- Exemptions from forced sale during your lifetime
As identified above, if you have designated your Florida property a homestead residence, subject to a few exceptions, the property is free from the forced sale by creditors. Aside from unpaid taxes, assessments, liens or labor relating to the construction of the property and loans securing the property as collateral, there can be no forced sale of your homestead. This is perhaps the most basic and fundamental asset protection in Florida. There are no limits on the amount or value of your homestead property in the State.
Lets look at an example: Able and Bill get into a car accident. Bill sues able and obtains a judgment for 1 million dollars against Able. Able’s homestead property cannot be sold to satisfy the debt owed to Bill.
- Restrictions on Devise of Property
Surviving spouse: In order to protect spouses in Florida, if a property is homestead, it cannot be devised or distributed to the exclusion of the surviving spouse and the surviving spouse has the option of taking a life estate with a vested remainder to the descendents alive at the time of the decedent’s death per stirpes or an election to take an undivided ½ interest in the homestead as a tenant in common with the remaining descendents. Fla. Stat. §732.401.
Minor Children: The law also protects minor children from devise of homestead property to make sure that their interests in property are protected.
- Real Estate Taxes
Taking a homestead election will also save you some money on property taxes in Florida. Florida property owners who take a homestead receive a valuation offset reducing the total amount of property taxed and are also provided with a cap on the allowable increase in annual property taxes. If you own property that you currently reside in, located in Florida you should strongly consider taking the homestead exemption immediately.
FLORIDA PROBATE CONSIDERATIONS WHEN DEALING WITH A HOMESTEAD
As noted above, a Florida property, if it was the homestead of a decedent, has certain advantages unique to homestead property. This creates important implications for Probate proceedings. If a property can be determined homestead, then it is possible to pass on the constitutional protections to heirs and beneficiaries who may also use that property as their new homestead. This is important for a number of reasons. First, if an estate has substantial debts but no assets upon which to liquidate or only a property, the property, once determined homestead is exempt and a non-probate asset. Stated another way, assuming that no restrictions upon the devise of the property exist as identified in paragraph 2 above, Homestead property can pass to heirs or beneficiaries free of estate creditor claims.