The Florida homestead exemption has many nuances. One in particular that Florida residents need to be aware of is the limitation on the size of your homestead. If your property is located outside a municipality you probably don’t have to worry. You enjoy homestead rights to the extent of one hundred and sixty acres. However, for a majority of residents, who live within a municipality, the homestead extends to the extent of one-half acre. Art. X, Sec. 4 Fla. Constitution.
An interesting question regarding the calculation of the half-acre limitation is presented when the homestead is a very large condominium. Specifically, what comprises the size of the homestead? A creditor recently argued that the size of the homestead should be determined in a condominium by: (taking the square footage of the condo) + (the percentage the condo’s square footage represents of the overall development) x (the square footage of the common areas). The creditors hope was to disqualify the condominium from a homestead exemption, because it was larger than a half-acre. However, the Third District Court of Appeals disagreed with the calculation.
In Braswell v. Braswell, 890 So.2d 379 (Fla. 3d DCA 2004), the Court found homestead protection for four residential penthouse condominium units that had been grouped into one homestead unit. The homestead unit was larger than one-half acre when adding in the common area using the above formula. The creditor claimed, because the claimed homestead exceeded the maximum size allowed, it should be set aside. The Court rejected this argument holding that to set aside the homestead would require the court to “….redraft the provision to read ‘land, plus the square footage of any multi-level construction beyond the one level.’”
Homestead, It's Not a Family Affair in Florida.
Florida courts do not allow the homestead exemption to be used against family members. The purpose of homestead rights is to protect Florida families from being displaced from their home. However, that purpose is no longer served where the person seeking to set aside a homestead was once a family member protected by the exemption.
Recently, the Fourth District Court of Appeals allowed foreclosure of an equitable lien on a homesteaded property. Partridge v. Partridge, 912 So.2d 649 (Fla. 4th DCA 2005). The creditor was the former wife whose former husband owed her support payments. Likewise, the First District awarded a former wife a special equity in a homesteaded property secured by a mortgage. It appears that a person who enjoyed the protection of a homestead property as a family member can avoid a homestead exemption being used against them.
Homestead, the ‘Estate’ of Affairs in Florida.
Homestead may be believed to be a right that is given to owners of property in Florida. However, homestead protection may be claimed by someone who is not vested with legal title to the property. In fact it may be claimed by an owner even after he has conveyed the property to the trustee of his revocable trust. This outcome may have an impact on estate planning and enters a complicated hybrid area of real estate transactions with estate planning.
Recently, those complications were revealed by the Fourth District Court of Appeals. Engelke v. Estate of Engelke, 921 So.2d 693 (Fla. 4th DCA 2006). In Engelke, Paul Engelke set up an inter vivos revocable trust. The primary asset of the trust was a one-half interest in his residence. Paul Engelke died testate, survived by his spouse, Judy, and three adult children from a previous marriage. Also, in the trust was Judy’s one-half interest in the residence.
The trust instrument provided that upon Judy’s death or removal from the home, Paul’s children would receive the property through the residuary provision. The trust also said that the trustee was directed to pay from the trust estate all claims against Paul’s estate should the probate estate have insufficient funds to do so. Judy acted as the Personal Representative of Paul’s estate. However, Paul’s estate did not have enough assets to pay the claims against the estate nor to pay a court order family allowance for Judy.
Judy filed a motion with the Court directing the trustee to pay claims against the probate estate. Payment could only be accomplished by liquidating the residence in trust to pay the debts of the estate of Paul. The children opposed the motion claiming that Paul’s homestead exemption protected the property. The probate court granted the motion finding no homestead exemption applied.
However, the Fourth District Court of Appeals reversed finding the homestead exemption applied. It was noted that while Paul’s residence was held in a revocable trust, it was owned by a “natural person” for the purposes of the homestead exemption. Paul maintained a right to revoke the trust so he maintained an ownership interest in the property, even though he did not have title. Thus, Paul’s interest in the property entitled him to the homestead exemption.
The Court found that the trust devised the property to Paul’s children via the residuary provisions of the trust, because revocable trusts are merely will-substitute devices. Thus, Florida law precludes use of a homestead to satisfy estate debts.
Consequently, the provisions of the trust requiring the trustee to pay all claims against the estate of Paul were found to be frequently used language, which did not trump the homestead exemption. Paul’s children could properly assert a homestead exemption to stop the sale of the property as requested by Paul’s wife Judy.
This case is illustrative of the many issues which arise regarding homestead exemptions interacting with estate planning. Special care must be taken when real estate transactions involve title being held by instruments of trust and estate planning.
Contact attorneys Rana Gorzeck or Joseph Garrity for more information.