Florida law provides a number of benefits to a Florida resident’s primary residence, also known as their homestead. This includes protection from all creditors with a couple exceptions, reduction of the tax base of the property by $50,000 and more for the blind or widows, and limitation to property taxes increasing more than 3% annually even if the value rises more rapidly.
Florida homestead law also provides some transfer restrictions though. A surviving spouse (assuming they have not validly waived their rights in a pre or post marital agreement) has rights to the property that cannot be taken from them involuntarily and minor children have an interest in parents homestead that they owned at their death.
The Florida Constitution article X section IV and Florida Statute Section 732.4015 prohibit a Florida resident who is married or the parent of a minor child from devising his or her homestead, except that a married Florida resident with no minor child may devise his or her homestead only outright to their spouse in fee simple. If not lawfully devised (if married and not devised to the spouse), or if there is a minor child, it then descends as provided by Florida law with the surviving spouse (if any) receiving a life estate and the remainder interest passes to the decedants descendants per stirpes. (Equally to the deceased owners surviving children with the share of a predeceased child passing to his or her descendants). The life tenant had been responsible for all taxes, insurance and interest on the home and could not force a sale.
Florida statute Section 732.401(2) now allows an option instead of a life estate, a surviving spouse may elect to take a 50% tenant in common interest in the homestead with the decedent's descendants taking the remaining 50% interest. This election must be made within six month and once made it is irrevocable. A life tenant has all the responsbility for annual taxes, insurance and year to year basic living expenses so to reduce some of the expenses of being a life estate tenant, to simplify estate and gift tax issues (as a life tenant it is their actuarial value instead of just 50% of the sale price which is far easier to calculate) of the life interest or to own an interest in the homestead which may be disposed of by the spouse as the spouse determines. If a spouse chooses they can force a sale of a tennant in common homestead interest while they cannot do so with a life estate interest. The new statute was created in part because spouses were unable to afford to maintain their homestead in some situations but yet were unable to sell them without the consent of the remainder beneficiaries who did not always allow them to do so. This allowed further protections to the surviving spouse.
Florida homestead devise restrictions can often complicate or even prevent the owner’s desire for how they would otherwise transfer the property. The owner may be married and have one child they do not want to receive an interest in the property or not want a minor to receive the property. They may want to put the property into a revocable trust with it then passing to a trustee on behalf of the minor children and It could also prevent a couple from devising to a credit shelter trust to help utilize the exemption from estate tax on the first spouses death to minimize estate taxes on the second death.
A validly executed waiver of homestead rights through a pre or post marital agreement by a surviving spouse prior to the owner’s death is allowed pursuant to Florida Statute Section 732.702. Full disclosure of financial information is required for a post nuptial agreement but not a pre marital agreement. The spouse may also sign a deed devising away their rights. This allows the owner to devise the homestead in any manner they would like provided they have no minor child.
Additionally tenants by the entirties avoids the homestead restrictions and Florida Statute Section 739.203(4) says that the disclaimer of the tenants by the entirety interest by the surviving spouse. Estate Tax planning and seeking to pass the homestead to a tax exmpt trust may be among the reasons to do that. It would not cause the disclaimed interest to become subject to the devise restrictions applicable to Florida homestead.
Florida Statute Section 732.4017, now allows the owner to transfer the homestead to an irrevocable trust during the owner’s life. If the owner is married, the owner’s spouse will be required to join in this conveyance, but once devised, the spouse will only have those rights granted by the trust to the spouse. When the owner subsequently dies, the trust provides how the homestead descends without any hassles of the owner’s intent by Florida’s devise restrictions, even if the owner is survived by a minor child. Another example in which this may be useful is if the owner is not married but has a serious illness and a minor child and they are seeking to avoid any probate or guardianship issues with the property given the minor child. They may also want the other parent who likely would be the child's guardian of the person not to have anything to do with the property.
Florida law does not allow the owner to pass their property in a revocable trust without further court proceedings if they have a minor child at their death even if the property is for the benefit of the minor child. There would be a number of issues to consider and this is an isolated situation but for example a terminally ill parent of an 11 year old with short life expectancy who owns a home worth no more than they paid for it and wants to avoid probate and guardianship as well as directing what will happen with the property may direct it be held for the child but without giving the parents any right to manage or sell it or they could have it pass to whomever they wish if properly and irrevocably devised out of their name / control prior to their death. There are some title insurance notes which discuss this and the reasoning behind.
Homestead is a confusing area and it is important to consult with an experienced attorney prior to transfer property which is or may be homestead in order to have it actually pass as desired.
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