Homestead and Estate Planning
Florida places restrictions on how a person can leave his homestead property after his death if he is survived by a spouse or minor child. This is important for estate planning purposes because failure to heed these restrictions can result in an ownership nightmare.
This is why I recommend that you not use one of those fill in the blanks wills or trusts that you can purchase from an office supply store or on the internet. You may save some money, but as you’re going to see, your family may pay dearly for years to come.
What happens to your homestead after your death centers on three different issues: 1) is the property your homestead? 2) how does the homestead pass to your next generation? and 3) is the homestead free from the claims of your creditors?
Is It Homestead Property? Before we can plan the distribution of your homestead, we must determine whether the property is homestead at the time of death. Florida law defines homestead as real property, of no more than 160 contiguous acres outside a municipality, or no more than one half an acre of contiguous land in a municipality and the house and other improvements on it, owned by a natural person who is a Florida resident. The property must be the owner's principal residence.
If the property meets these qualifications the homestead law applies. If not, then the property is treated the same as any other asset in your estate. In probate proceedings your personal representative (or executor) can ask the court to determine if the property is homestead.
Legal Restrictions. If you are married, the Florida Constitution does not allow you to leave your homestead to anyone other than your surviving spouse. If you have a minor child, things get really complicated. Therefore, how you can dispose of your homestead in your will is dependent on whether or not you are married or have a minor child at the time of death. If you are not survived by a spouse or minor child, you may devise the property in any manner you wish. The term devise means transfer according to the terms of a will or trust. If you have a spouse but no minor child, you may devise the homestead only to your spouse. In addition, the devise to your spouse must be of your entire interest in the homestead property. If you have a minor child, you cannot devise the homestead property at all. In this situation, as I explain below, the homestead should be owned by the husband and wife as tenants by the entirety.
The next obvious question is: What happens if the owner tries to devise the homestead other than allowed?
If you are survived by a spouse and have a provision in your will or trust which tries to leave the homestead to anyone other than your surviving spouse, the provisions of the will are disregarded by law, your spouse takes a life estate (she owns the property for a term ending at the time of her death) in the homestead, with a vested remainder to your lineal descendants (at the death of your spouse, title to the homestead immediately passes to your children who were alive at the date of your death). Under these circumstances your surviving spouse only has ownership for the remainder of her life. As a result she can only transfer the same interest to a third party. For example, if your surviving spouse sells her interest in the homestead to her friend and dies a week later, the friend’s interest would terminate at your spouse’s death and title would pass to your lineal descendants. This creates the unintended situation where the surviving spouse must obtain the consent of your lineal descendants if she wishes to sell or mortgage the homestead. If you would have left his entire interest in the homestead to your surviving spouse, then the surviving spouse would not have a life estate but full fee simple title with authority to sell and mortgage as she pleased.
If husband and wife own the homestead property together as tenants by the entireties, the restrictions do not apply, and upon the death of one, the surviving spouse has full interest in the property. This is the case even when there is a minor child. For this reason, married couples with a minor child should almost always own their homestead as husband and wife, as tenants by the entireties.
Claims of Creditors. Upon your death, the assets of your probate estate are used to pay any debts that you owed at the time of death, as well as expenses of administration. The probate estate generally consists of assets in your sole name, which contain no provision for automatic succession of ownership at death (such as beneficiary designations). This includes personal property owned by you wherever located and real estate located in Florida, except homestead.
The Florida Constitution provides that your spouse or heirs benefit from the homestead exemption. In other words, your exemption from forced sale by creditors passes to your surviving spouse or heirs. The term “heirs” in this context means those persons who would take your property if you died intestate (without a will). These are usually your lineal descendants such as children and grandchildren.
Therefore, if you devise your homestead to your spouse or to your heirs that would receive it had there been no will, then your creditors cannot reach the homestead and the property passes “free of the claims of creditors.”
If the homestead is devised to persons other than your surviving spouse or heirs (such as a good friend), it is subject to the claims of creditors and is treated as a part of the probate estate.
If you direct in your will that the homestead be sold and the proceeds distributed, then the proceeds are not exempt from the claims of your creditors, even if such proceeds would be distributed to your heirs.
Proper estate planning in Florida must take the strange and unique homestead laws of Florida into account. Distributions that neglect to consider these laws can cause a family to lose one of its most valued and treasured assets -- your home.