Oftentimes when individuals hear the term “homestead,” they fail to truly understand the protections that a Homesteaded property brings with it. While any homeowner with a Homestead property surely appreciates the $50,000.00 Homestead Exemption when tax season rolls around, this Exemption is only the tip of the iceberg as far as the expansive, inviolable protections that the Florida Constitution affords the homestead. Under Article X of the Florida Constitution, “a homestead of 160 acres of rural land or one-half acre of urban land and one thousand dollars worth of personal property is to be exempt from execution and forced sale.” While it may not be evident from the plain language of the Florida Constitution, the protections derived from Article X extend far beyond just the tax exemptions and protections from creditors. Understanding these implications-those that benefit as well as those that impede an estate plan-is a necessity in order to create a comprehensive estate plan.
There are two important points overlying the many intricacies and nuances of Homestead law in Florida: (1) Homestead property does not become part of the estate upon the death of the decedent, and (2) Florida Courts have extended the Homestead creditor protections beyond just the piece of land that is the typical embodiment of one’s “Homestead Property.” Both of these factors provide tremendous advantages when properly accounted for and further the ultimate purpose of the Homestead, which is to keep the Homestead owner and his or her family in the property, regardless of what hard times may befall the family. Kohn v. Coats, 138 So. 760 (1931). These factors also give rise to two additional concerns, however, that owners of non-homestead property are not faced with. First, how will the homestead property be maintained in the event of the death of the last-remaining owner? Because the Homestead does not pass through the estate, the Personal Representative of an estate, unless specifically instructed to do so through the testamentary instrument, is not obligated to use estate assets for the upkeep on the Homestead. While a strong argument can be advanced that the Personal Representative “may” use estate assets in a limited set of circumstances, they are almost unquestionably under no duty to do so. Thus, it is crucial to consult with an attorney experienced in Florida Homestead Law when developing an estate plan.
The second concern is how best to take advantage of the equity in one’s homestead property, without jeopardizing the protections? Because there is no limit as to the dollar value of a homestead, it is not uncommon for individuals to have a large percentage of their net worth in the form of their Homestead. What happens, however, when that individual finally retires after years of hard work and no longer has an income stream with which to sustain their cost of living expenses? While it is always advisable to have a diverse portfolio of assets, including some that are more liquid than real property, the fact of the matter is that many IRAs, 401(K)s, and/or pensions were decimated during the “Great Recession.” While the general conception of the Homestead is limited to the real property itself, inroads have been made in the sense that some funds obtained through Homestead properties can receive protection. Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So.2d 201, 203 (Fla. 1962). These exceptions to the general rule are limited in number and come with many requirements. Obtaining legal guidance from an attorney experienced in Florida Homestead Law is essential to safely navigating these complex issues related to utilizing a Homestead’s equity to support cost-of-living expenses, without jeopardizing the Homestead’s Constitutional protections.
Chepenik Trushin, LLP’s combination of specialty practice areas makes it uniquely adept at handling all aspects of asset protection, estate planning, real estate transactions, probate matters, guardianship matters, and any litigation that may arise therefrom. Please do not hesitate to contact us for an initial consultation.