What Does Homestead Mean To Me?
The term homestead means different things depending on your situation. If you are a snowbird, it means being treated differently when it comes to taxes. If you are a Florida resident, it means that your property tax increases are limited from year to year and your home cannot be forcibly sold to pay a judgment against you except for taxes and improvements made to your property. If you are the lineal descendant of a Florida person who has died, it means that the value of the proceeds from the sale of their residence cannot be used to pay creditor bills. Suffice it say, Florida’s homestead laws are one of the most liberal and consumer protective in the United States.
This article will explore the terms of homestead and how it is treated at the death of a Florida resident. In future articles we’ll review homestead as an asset protector and the new homestead tax laws.
The first thing that you need to know is how homestead is defined in Florida. Florida’s Constitution and statutes state in part that Florida real property consisting of 160 contiguous acres outside of a municipality and a ½ contiguous acre inside a municipality owned by a natural person who resides thereon is considered homestead. If you own Florida real property and permanently reside thereon, your real property is exempt from being forcibly sold, except for the payment of taxes and improvements or repairs made to the property by others. Article X, Section 4, of Florida’s Constitution states in part that the exemptions shall inure to the surviving spouse and heirs of a persons estate. However, Section 4 also states that the homestead property 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.
When a person dies, their homestead property immediately passes to the lineal descendants or heirs of that person. Lineal descendants and heirs may consist of a surviving spouse, the decedent’s children related by blood, and relatives of the decedent. If the decedent has a Will or Trust, the property will pass according to the directives contained in the testamentary document, provided there is no surviving minor child or spouse. To understand how all of this works, let’s examine a few situations of what happens to a decedents homestead property at their death.
Property Titled in a Couples Name as Husband and Wife:
In the event the decedent passes away with or without a Will and the decedent’s residence is titled in the name of both the husband and wife, the property will pass directly to the surviving spouse. In this situation, the property is titled as tenants by the entirety (assuming there was no intervening divorce and a remarriage to the same person). It will not matter if there is a surviving minor child, the property will immediately transfer to the surviving spouse upon death the first spouse.
An intestate estate is one where a decedent did not prepare a Last Will and Testament or Trust document prior to their death. These situations can potentially present some terrible outcomes to a surviving spouse.
Suppose one of the spouses (we’ll call him or her “Spouse 1”) purchased property, followed by marriage which is followed by the birth of a child. Let us also assume that Spouse 1 forgot to place the other spouses name on the deed nor did Spouse 1 prepare a Last Will and Testament or Trust.
In this situation, the property will pass by the probate intestate statutes to the surviving spouse as a life estate with a vested remainder to the lineal descendant’s of Spouse 1 (in this case that would be the surviving child). This means that upon the death of the surviving spouse, the ownership of the property will be transferred to the children of Spouse 1.
Suppose Spouse 1 was previously married with children or had children out of wed-lock prior to marrying the present spouse. Given those facts, the residential property will pass by law as a life estate to the surviving spouse with a vested remainder to all of the children who are connected lineally by blood to Spouse 1.
What happens if the surviving spouse has a child from a previous marriage? The law ignores the surviving spouse’s children from a previous marriage and vests the property in the lineal descendants of Spouse 1 with a life estate in surviving spouse. It will not matter how long Spouse 1 and the surviving spouse were married; nor will it matter if Spouse 1 cared for the children of the surviving spouse from a previous marriage. The fact remains that the property will vest in Spouse 1’s lineal descendants with the surviving spouse taking a life estate.
Suppose there are no surviving minor children or lineal children of Spouse 1. In this situation, the surviving spouse will take the entire property with no life estate in accordance with the intestate statutes of Florida’s probate code.
Testate (Last Will and Testament or Trust)
If Spouse 1 has a Will, and directs his entire property to pass to his surviving spouse, then in that event, the property will pass according to the directions of the testamentary document; provided there is no living lineal minor child at the time of the Spouse 1’s death. When there is a living minor child, the law prevents the property from passing directly to the surviving spouse. This situation can occur when Spouse 1 purchases a home and titles it in his sole name, followed by marriage with a child born shortly thereafter.
Although this situation does not occur that often, when it does, the situation becomes complex because the property will not pass to the surviving spouse regardless of the directives of the testamentary document because of the surviving minor child. In such cases, the property vests to the lineal descendant child subject to a life estate in the surviving spouse. To avoid this problem, Spouse 1 should have re-titled the property in the married couples name as husband and wife during Spouse 1’s lifetime. This would have created a tenants by the entirety interest and would have avoided problems associated with a life estate inuring to the surviving spouse.
Suppose the minor child is not the lineal descendant of Spouse 1, but is the descendant of the surviving spouse from a previous marriage and Spouse 1 did not legally adopt the child nor does he have lineal children of his own. In this situation, the combination of Florida’s Constitution and Probate Statutes would allow the property to pass by Spouse 1’s Will to the surviving spouse since the minor child is not the lineal descendant of Spouse 1 nor are their any surviving lineal children of Spouse 1.
Suppose Spouse 1 devises his homestead by a testamentary document to his mother and not to his surviving spouse and Spouse 1 has lineal descendants. In this situation, the devise will fail and the surviving spouse will take a life estate in the property, with the lineal descendant’s of Spouse 1 taking a vested remainder interest in homestead property. If there are no lineal descendants of Spouse 1, the property will vest entirely to the surviving spouse and not to the mother.
If you have ever experienced one of the situations mentioned above, you also know of the additional problems associated with trying to the sell property that is titled as a life estate. Those problems include the surviving spouse, who holds a life estate in the property, having to obtain consent to sell the property from Spouse 1’s surviving lineal descendants. When this happens, you have to hope that all of the parties are on good terms with one another since the failure of one of the descendents to agree to sell can terminate a purchase and sale contract. If one of the children to a proposed sale is a minor, that child must also have a guardian appointed to protect his or her interest in the selling of the property because a minor does not have the capacity to enter into a contractual agreement.
More importantly, any proceeds from the sale of the property held as a life estate does not necessarily go to the surviving spouse. The proceeds will be split up between the surviving spouse and Spouse 1’s lineal descendants. The amount the surviving spouse will receive is dependant upon his or her age at the time of the sale.
As you can see, failing to have your property titled correctly (when it is homestead) can have significant consequences at the death of the owner. If you are uncertain as to the status of your residence, you should consult with an attorney and find out if there will be problems upon the death of the sole homestead owner (regardless of whether you have a Will or Trust).
Next week we’ll take a look at titling property and homestead as an asset protector.