Using Florida’s Homestead Laws to Protect and Transfer Your Home

If you are like most homeowners in Florida, your home is, if not your largest asset, certainly an important part of your overall estate. Florida law provides some protections for your home from the claims of creditors. As long as your home falls under the definition of a “homestead” in Florida, the state constitution says it is exempt from certain judgment creditors’ forced sales. From an estate planning standpoint, it can be comforting to have this protection from creditors.

It’s important to understand when property qualifies, when the exemption does not apply, and how homestead property passes at the owner’s death. 

How Does Property Qualify for the Homestead Exemption?

There are some limitations to what is protected. Property will generally qualify as homestead property if it meets one of the following definitions:

  • A personal residence located within city limits (in a municipality) on up to 1/2 acre, including all buildings on that land; or
  • A personal residence located in the country on up to 160 contiguous acres of land, including all buildings on the land.

A “personal residence” does not need to be a single-family home in order to qualify; manufactured homes, condominiums and mobile homes all may qualify. However, the owner must be a Florida resident and a natural person (including a revocable living trust or a land trust), and must use the property as his or her primary residence. Property you own, but rent out to someone else will not qualify. Similarly, vacation property will not qualify, unless it is your personal and primary residence. 

Understanding When Homestead Protection is in Effect

The most important element of determining whether or not homestead protection applies is the intent of the property owner. If you begin occupying a Florida residence and intend to make it your permanent Florida residence, you have protection under the homestead law. Unlike in some other states, there is no requirement to apply for homestead creditor protection treatment for your property, although you do have the option of filing a document in your county called a “Declaration of Domicile.” 

In order to receive homestead tax treatment, property owners must file paperwork with the county where the property is located. However, the asset protection is available to homeowners whether or not they apply for or qualify for homestead tax treatment. 

No Protection Limits

Except for bankruptcy proceedings as described more fully below, there are no limits to the amount of equity you can protect from judgment creditors under Florida’s homestead exemption. This makes the exemption a powerful estate planning and asset transfer planning tool. Here’s why: a Florida homeowner could decide to use other, non-protected assets to purchase a larger personal residence or to pay down (or pay off) a mortgage on an existing personal residence in order to protect those assets from creditors’ judgment claims. 

As it relates to bankruptcy, there are asset protection limits that apply unless a homeowner has claimed the Florida homestead exemption for at least 40 months before filing for bankruptcy. 

What the Homestead Exemption Will Not Do

Of course, there are some caveats and limits to what you may use the homestead exemption for. While the law provides protections from forced sales to pay off creditors, it does not offer protection from any of the following types of claims or obligations:

  • Outstanding mortgage loans on the property
  • Tax liens for unpaid federal, state or local tax obligations
  • Mechanic’s liens, for unpaid labor and/or materials contractors used to improve your property
  • Liens related to homeowners’ or condo owners’ association dues
  • Civil judgments in the same county as your homestead, recorded before you began occupying the homestead property

Treatment of Homestead Property after the Owner’s Death

Florida laws are designed to protect a surviving spouse from becoming impoverished by a vindictive spouse. If one spouse who owned homestead property in his or her name alone dies, the surviving spouse receives a life estate on the property, with the remainder interest going to the original owner’s children, if applicable. If the decedent was married without children, title will pass to the surviving spouse.

When the decedent leaves both children and a surviving spouse, the surviving spouse can, within six months from the date of the original owner’s death, elect to take a one-half interest in the property immediately, with the other one-half being owned by the deceased owner’s children. These rights apply regardless of what the deceased spouse’s will says, unless the surviving spouse had waived his or her rights to inherit through a prenuptial agreement. In fact, the Florida Constitution says that homestead property cannot be devised by will or trust, except to the property owner’s spouse and/or to his or her children, if there was no surviving spouse. In the case of a single property owner without children, the property owner can freely devise homesteaded property. 

Understand How the Florida Homestead Law May Affect Your Estate

If you are a Florida resident and own real estate, the homestead laws may offer important protections and potential limitations on your property. To learn more, consult with an experienced Florida asset protection and estate planning attorney. To schedule an initial consultation. call the Judy Ann smith Law Firm in Jacksonville today at (904) 733-9080.