Florida’s Homestead Laws May Trump Your Estate Plan

By: Ronald L. Siegel

Most Floridians are familiar with the tax benefits of Florida’s homestead laws.  If a Florida home is a person’s primary residence, he or she is entitled to a $50,000 exemption from most real estate taxes.  In addition, the “Save Our Homes” Rule limits the amount that the assessed value for tax purposes can increase in any one year to three percent (3%).  Finally, a person’s homestead is exempt from the claims of most creditors (other than those having a direct relation to the property, such as a mortgage or work done by a contractor).

What is not as well-known is that Florida’s Constitution restricts how homestead property can be devised if a person is survived by a spouse or minor child.

If a person is married at the time of his or her death, unless he or she leaves the homestead residence outright to the surviving spouse, the spouse will receive a life estate in the property, with the remainder interest passing to all of the decedent’s children (whether minors or not, and including children from any previous relationship).  The life estate gives the surviving spouse the right to live in or rent out the homestead property for the balance of the surviving spouse’s life.  In that case, the surviving spouse would have the responsibility to pay ongoing maintenance of the property, including taxes and homeowner or condominium association assessments, as well as the interest portion of any mortgage on the property.  Significant repairs, such as roof replacement, are divided between the surviving spouse and the remainder persons (children) based on life expectancy of the surviving spouse and the expected useful life of the repair.  Numerous problems can arise with this arrangement, including getting the remainder persons to pay their allocated expenses, such as the principal portion of the mortgage.

Because many surviving spouses may not be able to afford the upkeep of the home, Florida Statutes §732.401(2) gives the surviving spouse the alternative option of petitioning for the property to be sold, in which case the proceeds are divided equally between the surviving spouse (50%) and the surviving children (50%).  This election must be made within six months of the death of the homestead owner.  After the six-month period, the surviving spouse cannot sell the property without the consent of the children, which presumably would include a negotiated sharing of the proceeds.

In order to avoid the unintended results as set forth above, it is generally best to either devise the homestead outright to the surviving spouse, or to title the homestead property in joint name with the surviving spouse.  In either such case, all of the above problems will be eliminated.

Even if there is no surviving spouse, if a person is survived by a minor child, the homestead residence cannot be devised, and will instead pass automatically to all of the decedent’s children.  There are certain techniques that can address this problem, but they are much more difficult to implement than a bequest to a surviving spouse.

A decision on how to title and devise the homestead residence should be made as part of a complete review of your estate plan.

Ronald L. Siegel is a Florida Bar Board Certified specialist in Wills, Trusts and Estates. From his office in Boca Raton, Florida, he focuses his practice in all aspects of estate planning, probate, trust administration, guardianship and real estate.  He can be reached at 561-241-3113.