When planning your estate in Florida, it’s important to take the state’s Homestead Exemption laws into consideration. Unfortunately, Florida homestead law and its implications for estate planning are often misunderstood. Many people are unaware of the potential issues that can arise if they don’t plan carefully.
In this article, we’ll discuss how Florida Homestead laws affect estate planning, the possible difficulties that could happen, and how you can avoid them.
What is the Florida Homestead Exemption?
The Florida Homestead Exemption has several parts. You may be familiar with one part if you have applied for the home property tax exemption, which may be worth up to $50,000 if you meet certain eligibility requirements. There is also a cap on how much your property taxes can go up annually.
Tax benefits are certainly nice to have. However, many homeowners focus only on the tax benefits and don’t understand how homestead law affects estate planning. This is one reason why people are sometimes confused about homestead law—they have only learned about the tax benefits.
But the tax credit is just one part of the law. The Homestead Exemption also provides protection from creditor claims, both during your lifetime and when your estate goes to probate. What that means is that if your estate has creditors, they can’t force the sale of the house to satisfy any debts, and the home can remain with your heirs.
How Does the Florida Homestead Exemption Affect Your Estate Planning?
Another part of the law affects inheritance. If you die owning a home that is considered your homestead, and you have a spouse and/or minor children, they can inherit the home by operation of law, without consideration to creditor claims.
A surviving spouse may receive a “life estate,” meaning they can live in the house for the rest of their life. The children may receive a “remainder” portion of the estate, which will be shared with the spouse. Then, when the spouse passes on, the children will inherit the home.
This law is intended to ensure stability for a decedent’s family, and in many cases, it does work that way. However, if you are unaware of the law, it can contribute to family conflicts in some instances.
For example, sometimes the surviving spouse ends up sharing the home with the decedent’s children from a previous marriage. If they get along, that might be fine. But if they disagree about important issues, they could all find themselves in an uncomfortable situation.
On the other hand, if you have a spouse but no minor children, your spouse alone may inherit the property by operation of law. This can sometimes cause difficulties if you previously promised the home to another relative, but did not properly plan your estate to account for this.
For instance, let’s say we have a client whose first spouse died many years ago. He promised his adult children that they would inherit his home when he passed. Now, he’s remarried, and he still intends to keep that promise. Unfortunately, Florida Homestead laws could get in the way.
Fortunately, there are steps homeowners may be able to take to prevent difficulties in the future when it comes to their homestead and how it is inherited. It is important to review this issue in your estate plan with an attorney.
How to Plan for Florida’s Homestead Exemption
If you have concerns about planning your estate with the Homestead Exemption in mind, the best solution is to contact an experienced Florida estate planning attorney. They will ask about your goals and any concerns you have. Once they understand more about the situation, they may discuss options to address any potential issues with the Homestead Exemption. Here are a few possibilities:
- Joint ownership. If you simply want your spouse to inherit the property outside of probate, you can arrange to co-own the property as tenants by the entirety.
- Spousal waiver. Your spouse can choose to waive their rights under the Homestead Exemption in a prenuptial or postnuptial agreement.
- A carefully-worded revocable living trust. In some cases, placing the home in a trust can allow you to keep Homestead protections while ensuring the home passes outside of probate after your death.
- Lady Bird Deed. In some situations, you can retain control of the property while alive and ensure it passes outside of probate after your death.
These options are not appropriate for every situation, so it’s essential that you discuss the details with a qualified legal professional before making a decision.
What Counts as a Homestead Property?
To qualify for the Homestead Exemption, the property has to be owned by a “natural person” (not a business) who uses it as a primary residence. Homestead properties can include single-family homes, townhouses, and condominiums. You may also apply for a Homestead Exemption if you own a mobile or manufactured home, as long as you also own the land it’s situated on. A multifamily home like a duplex may also be eligible, but only the part the owner actually lives in.
There are also size limits to keep in mind:
- In a city or municipality, only 0.5 acres of contiguous land the home sits on is protected.
- In rural areas outside a municipality, you can protect up to 160 acres of contiguous land the home sits on.
FAQs:
Q: Can I get a Florida Homestead Exemption on more than one property?
A: No. If you own more than one property, you can only get the Homestead Exemption on your primary residence. This should be your “primary domicile,” where you spend most of your time.
Q: What if I have other properties or assets I want to protect from creditors or pass on to my heirs with a minimal tax burden?
A: Depending on your situation, there may be options that allow the property to pass outside of probate and reduce the tax burden for your heirs. If you have these concerns, you should schedule a consultation with an experienced estate planning attorney who can explain the possibilities for your specific circumstances.
Q: Can my spouse and I each take a Homestead Exemption on two separate properties?
A: No. Under Florida Homestead Law, spouses are expected to share a Homestead tax exemption.
Q: Is there a limit to the home’s size or financial value for the Homestead Exemption?
A: No, only the size of the surrounding property is limited.
Q: If my Homestead property will pass to my spouse anyway, do I really need to do any estate planning?
A: Yes, it’s still a good idea to sit down with a lawyer and discuss your estate plan. There could be other aspects of your estate that you still need to plan for, such as the disposition of other assets. We will also ask about issues like pay-on-death accounts, life insurance beneficiaries, and guardianship plans for minor children. Many people overlook these aspects of estate planning, or forget to make updates as they go through life changes, such as a divorce or remarriage.
Speak with a Florida Estate Planning Attorney Today
If you have questions about the nuances of Homestead Exemption law, or other estate planning concerns, talk to an estate planning professional before taking the next steps. At the Law Offices of Rina Feld, we offer free 15-minute phone consultations about estate planning in Florida.
Disclaimer: This page is for informational purposes only and should not be taken as legal advice. If you need legal guidance, please contact an estate planning attorney for assistance.