Florida Homestead Exemption: What You Need To Know – Part II

Oct 15, 2018

Welcome Back! In case you missed the first part on the Florida Homestead Exemption, you can find my post on the homestead creditor protection here.

 

As stated last time, everyone in Florida at some point will address the Florida Homestead Exemption at some point. It can have a dramatic effect in the outcome of a lot of legal issues in Florida. Knowing more about it is extremely important for all Floridians, or people who own real property in Florida.

 

The purpose of this blog post is to continue to introduce to you the Florida homestead exemption. By the end of this blog post you should at least have a good understanding how the Florida homestead exemption can affect you and your family regarding conveyance, encumbrance, inheritance, or device of a homestead.

 

As a reminder, there are three basic categories or areas of the law where Homestead plays a significant role. Those three areas are:

 

Creditor protection;

Conveyance, Encumbrance, Inheritance or Devise; and,

Taxation

 

I trying to provide you a comprehensive understanding of how I’ll be Florida Homestead act and the Florida homestead definition plays out in the state of Florida. This article shall address the how the Florida Homestead affects the conveyance, encumbrance, inheritance, or device of a homestead.

 

For this analysis, we need to look at the Florida Constitution. The foundation of the Florida homestead exemption starts with the Florida Constitution (Here). Take a look at following provisions:

Article X, § 4, of the Florida Constitution provides as follows:

(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.

I have highlighted the important provision so that you can begin to see the basis of how the Florida Constitution controls the conveyance, encumbrance, or devise of your homestead.

 

There are two main categories of control in this provision. The first category of control deals with who you can give your homestead to at the time of death. The second category of control deals with how you handle your homestead property during Your life.

 

Can’t Always Give Your Homestead to Who You Want

 

Minor Children Must Have a Home. The very first control the Florida Constitutional Homestead provision places on your homestead is that it dictates that if you have minor child, you cannot give your property to anyone else.  The fundamental principle underlying this provision is that you are and have to be a responsible parent. Therefore, if you have minor children, you cannot leave those children without a roof over their heads.

 

For many of my clients, I see this as an issue as I have seen this play out in the number of different ways. For example, often, I encourage my clients to put in their last wills and testaments a contingent trust. The purpose behind the contingent trust is to avoid the necessity of the guardianship for a minor and provide for the disposition of the property when there’re minors involved. For example, my contingent trusts include a provision that the assets are to remain in trust until the minor reaches the age of 25 (I personally find this age to be more appropriate because an 18 or 21 year old may not be able to best manage a large amount of money).

 

Nevertheless, this constitutional provision prevents me from setting up this mechanism. Unfortunately, if the client of mine has a homestead and minor children, anything I put in a last will and testament regarding the homestead is not valid. The constitutional homestead provision controls.

 

Spouses Have Rights. Simply put, spouses have rights in Florida, including the Florida spousal elective share. While a number of factors come into play in regard to spousal interest in the home, you cannot leave your spouse without a roof over his or her head. I will discuss the different spousal interests for the spousal election in another blog post. For now, when you are doing estate planning you must factor this constitutional provision into the effect it’s going to have on your estate planning.

 

During Your Life, Spouse Must Consent

 

As you can see, the second main control deals with your ability to sell or mortgage, or otherwise dispose of, your homestead during your life. This control comes up in number of different instances. For example, at some point you may want to sell your house, you may want to borrow against it (initial mortgage or refinance), you may want to simply give it away for tax purposes, charitable purposes, or for some other reason. Essentially, you cannot do those things without the consent or agreement of your spouse.

 

This issue comes up for my purposes mainly when I am preparing deeds or handling real estate transactions for clients. When parties execute a purchase and sale agreement, the contract is sent to our office to ”close.” We begin preparing the necessary paperwork and discover that the seller of the property is married. In order to finalize the sale, all of the paperwork will have to be signed by the spouse. I can tell you that it’s made for some very awkward conversations.

 

Keep in mind that if the seller’s spouse does not consent, then the seller, who is under contract, is now in breach of that contract. At that point, the seller can be sued for not fulfilling the agreement. While I’m not to get into the mechanics of defaulting  on a purchase agreement here in this post, it’s important that you understand that if you are trying to sell your property during your life, and you are married, you better check with your spouse first. Happy Wife, Happy Life!

 

Conclusion

 

While there are many pros and cons to the Florida Constitutional Homestead Exemption Provision, it is a reality nevertheless. As such, it is important that every Floridian consider the devise, encumbrance, mortgage, and conveyance provisions that it dictates. It is most certainly one aspect that every Florida asset protection and estate planning attorney should be addressing for their clients. If you have questions would like assistance in this regard, please do not hesitate contact my office.

 

I hope this blog post has begun to introduce you to Florida Homestead Provisions. I also hope that it’s giving you a little bit of direction and perhaps the basic information you need to protect yourself and family.

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