Florida Homestead UpdateFlorida Homestead Update

Presented by: Randy C. Bryan, J.D., B.C.S.*

*Board Certified in Elder Law & Wills, Trust & Estates

The Law Offices of Hoyt & Bryan, LLC

254 Plaza Drive

Oviedo, Florida 32765

Ph: 407 977-8080

Fax: 407-977-8078

www.HoytBryan.com

What we won’t cover today

Jim Flick & I did a comprehensive homestead presentation in which we addressed, among other things, what type of properties qualify as homestead (condo/ co-

op/manufactured home/etc.);ownership of homestead in a RLT for a single person;ownership of homestead in a RLT for married couple;impact of Bankruptcy Protection Act of 2005;impact of Deficit Reduction Act of 2005

What we will cover

Three aspects of HomesteadNew spousal option when receiving protected homestead

from deceased spouseEffect of disclaimer of homesteadNew option for inter vivos transfer to avoid constitutional

restriction on descent/devise when married or survived by minor children

Impact of 98+ year lease on ad valorem exemption in QPRT

Constitutional Provisions

Article X, Section 4

There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:

Constitutional Provisions

Article X, Section 4

a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality;

or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or his family;

Constitutional Provisions

Article X, Section 4

During Lifetime:

“The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse.”

Constitutional Provisions

Article X, Section 4

After Death:

“These exemptions shall inure to the surviving spouse or heirs”

“The homestead 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.”

Restrictions on Devise

Survived by spouse or minor child – no change to . . .

732.201(33) – “protected” homestead 732.4015 – statutory restrictions on devise

Descent of Homestead

Section 731.201(33)

“Protected homestead” means the property described in s. 4(a)(1), Art. X of the State Constitution on which at the death of the owner the exemption inures to the owner’s surviving spouse or heirs under s. 4(b), Art. X of the State Constitution.

For purposes of the probate code, real property owned as tenants by the entirety is not protected homestead.

Descent of Homestead Section 732.4015 (1) As provided by the Florida Constitution, the homestead shall not be

subject to devise if the owner is survived by a spouse or minor child, except that the homestead may be devised to the owner's spouse if there is no minor child.

(2) For the purposes of subsection (1), the term: (a) "Owner" includes the grantor of a trust described in s. 733.707(3) that is

evidenced by a written instrument which is in existence at the time of the grantor’s death as if the interest held in trust was owned by the grantor.

(b) "Devise" includes a disposition by trust of that portion of the trust estate which, if titled in the name of the grantor of the trust, would be the grantor’s homestead.

Descent of HomesteadConsequence of ineffective devise

No change to 732.401(1) . . . .

“If not devised as permitted by law and the Florida Constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and lineal descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the lineal descendants in being at the time of the decedent's death per stirpes.”

Descent of HomesteadConsequence of ineffective devise

Created burden on life tenant & remaindermen Especially challenging where surviving spouse is not the parent of decedents

children – creates an unintentional partnership between people who may not get along

Allocation of expenses: LE – interest/property taxes/insurance/ordinary repairsREM – principal/extraordinary repairs

Partition not available because remaindermen do not have a current possessory interest

Even if all parties agree to sale, may not like valuation between life tenant and remaindermen

Descent of Homestead New (2) added to 731.401 to address problem:

In lieu of a life estate under subsection (1), the surviving spouse may elect to take an undivided one-half interest in the homestead as a tenant in common, with the remaining undivided one-half interest vesting in the decedent’s descendants in being at the time of the decedent’s death, per stirpes.

Descent of Homestead Process for TIC election:

Right of election exercised bySurviving SpouseAgent under POA or Guardian – both require court approval

Timing of electionMust be made within 6 months after decedent’s death AND during surviving

spouse’s lifetimeNo extension permitted except where court approval is required, the time for

making election is tolled until 30 days after court decision or 6 months from death, whichever is longer

Election is irrevocableStatutory form in 732.401

Descent of HomesteadAllocation of expenses under new law:

Until election is made, traditional allocation of expenses between life tenant and remaindermen

From date of election forward – expenses are allocated based on proportional ownership interest

Descent of HomesteadIssues to keep in mind with TIC election:

Still have issue if decedent didn’t want homestead to pass to all of his descendents or per stirpes

Time for making TIC election different than elective shareTIC election does not apply to property owned as TBE or as

JTWROS Interest in Protected Homestead in addition to elective share

30% of elective estate PLUS interest in protected homestead

Any owner can force partition

Descent/Devise Hypo #1 Patrick and Thelma are in their second marriage and each have children from

their prior marriages, but none are minors. They did not sign a marital agreement. They live in the home Patrick owned before their marriage, which is titled in his RLT. The terms of the trust provide that if Thelma survives she receives all the income, with discretionary encroachment into principal by an independent trustee. At Thelma’s death, the property is to be distributed to two of Patrick’s three children and one of Thelma’s children. Patrick dies.

Does the homestead stay in trust?Does Thelma’s child receive any interest?What if Thelma disclaims?

Descent of Homestead & Disclaimer

New Section added to 732.4015

(3) If an interest in homestead has been devised to the surviving spouse as authorized by law and the constitution, and the surviving spouse’s interest is disclaimed, the disclaimed interest shall pass in accordance with chapter 739.

Descent of Homestead & Disclaimer

Effect of new 732.4015(3)If homestead descends in any manner that would vest a

life estate in spouse & remainder in decedents descendants, a disclaimer by surviving spouse merely accelerates remainder interest and does not change.

If homestead was properly devised, a disclaimer by surviving spouse allows the property to pass to contingent beneficiaries named in decedent’s planning

Descent/Devise Hypo #2 Patrick and Thelma are in their second marriage and each have

children from their prior marriages, but none are minors. They live in the home Patrick owned before their marriage, which is titled in his RLT. The terms of the trust provide that the homestead is to be distributed outright to Thelma, but if she predeceases or disclaims, the property is to be distributed to two of Patrick’s three children and one of Thelma’s children.

Patrick dies and Thelma timely disclaims.

Who receives the home?

John & Elaine are each in a second marriage, but have owned their home as TBE for a number of years. They each of children from their prior marriages – both of Elaine’s children are minors and one of John’s children is a minor. John & Elaine want their homestead property to pass to all 4 children equally at the 2nd of their deaths.

Can they?

Descent/Devise Hypo #3

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

FL constitution and 732.4015 prohibit devise of homestead if survived by spouse or minor child

Nothing, however, prohibits the inter vivos conveyance of an interest in homestead if single or when married if joined by spouse If properly conveyed during lifetime WITHOUT

retention of ENTIRE beneficial estate, the property is not “owned” for purposes of descent & devise

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

New 732.4017 – Inter vivos transfer of homestead(1) permits transfer to one or more persons(2) permits transfer to trust

Both require transferor to NOT retain a power, in any capacity, acting along or in conjunction with another, to revoke or revest the interest in the transferor.

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

Transferor can retain separate legal/equitable interest such as term of years, life estate, reversion, possibility of reverter or fractional fee interest

Transferor can condition transferees possessory interest until a date certain or upon a specified event, including the death of the transferor

Transferor can make transfer subject to divestment, expiration or lapse upon a date certain or upon a specified event

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

If transferred to a trust, transferor can retain power to alter beneficial use/enjoyment within a class of beneficiaries identified in the trust other than the transferor, his creditors, his estate or creditors of his estate.

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

Examples of qualifying inter vivos transfers that are not subject to constitutional restrictions on devise (whether or not survived by spouse/minor child) inter vivos transfer to QPRT inter vivos transfer of remainder interest in homestead to an

individual(s) following life estate retained by owner inter vivos transfer of remainder interest in homestead that is

subject to complete divestment if owner of homestead survives to a predetermined date specified in the deed, or if conveyance to trust, to a date specific in the trust instrument.

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

Create Irrevocable Trust f/b/o minor childrenTransfer remainder interest in homestead to

irrevocable trust, retaining a life estate in Mom/DadMom/Dad retain lifetime LPOA over trust with

authority to change beneficial interestTrust provides that homestead reverts back to

Mom/Dad or survivor when youngest child reaches age of 18

Intervivos Transfer of Homestead to Avoid Constitutional Restraint on Alienation

Questions if using this techniqueWhat if you want to refinance home?What if you want to sell home before youngest child is

18?

Recent CasesGrisolia v. Pfeffer, --- So.3d ----, 2011 WL 5864806 (Fla. 3d DCA Nov 23,

2011) – although foreign national did not qualify for homestead property tax exemption, he may still qualify for homestead creditor protection at death

Marger v. De Rosa, --- So.3d ----, 2011 WL 252942 (Fla. 2d DCA January 28, 2011) – homestead rights evaporate at death if property was owned as JTWROS

Habeeb v. Linder, --- So.3d ----, 2011 WL 613392 (Fla. 3d DCA Feb 09, 2011, opinion withdrawn) – can husband/wife waive homestead rights merely by signing deed?

Homestead in QPRTDuring QPRT term, homestead property tax exemption remains in tact because of right of

occupancyAt end of QPRT term, can Trustmaker execute long-term lease continue ad valorem exemptions

without reassessment?196.041 - lessees owning the leasehold interest in a bona fide lease having an original term of 98 years or more

in a residential parcel . . ., shall be deemed to have legal or beneficial and equitable title to said property.

Amendment to 193.155(3) by adding (3)(a)(1)(b)

There is no change of ownership if:

1. Subsequent to the change or transfer, the same person is entitled to the homestead exemption as was previously entitled and:

b. The transfer is between legal and equitable title or equitable and equitable title and no additional person applies for a homestead exemption on the property.

Florida Homestead UpdateFlorida Homestead Update

Presented by: Randy C. Bryan, J.D., B.C.S.*

*Board Certified in Elder Law & Wills, Trust & Estates

The Law Offices of Hoyt & Bryan, LLC

254 Plaza Drive

Oviedo, Florida 32765

Ph: 407 977-8080

Fax: 407-977-8078

www.HoytBryan.com