Part Two: The Creditor Protection and Transfer Restrictions Under The Florida Homestead Exemption - Considerations in Estate Planning

By Molly Carey., Esq.

​While Florida’s robust Homestead Exemption is enticing given the strong creditor shield it provides to homeowners, Florida and prospective residents alike would be wise to consider the additional lesser understood nuances of the Homestead Provision in The Florida Constitution.  They entirely determine how one can transfer their protected real property both during life and upon death.   The transfer restrictions are set forth in Article X, Section 4(b) and (c), and are further codified in the Florida Probate Code. In pertinent part, sections 4(b) and (c) state –

(b) These exemptions shall inure to the surviving spouse or heirs of the owner. 

(c) 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.  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. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.

Of upmost significance for a homeowner to recognize is that if he or she is married with a minor child, the devise of protected homestead realty in one’s will, or revocable living trust will be invalid if not devised as authorized.  Upon death of the owner, title to the protected realty, by operation of law descends to, and the constitutional exemption from claims of the resident-decedent’s creditors inures to, the surviving spouse and descendants in being.  To illustrate the various scenarios that can unfold upon the death of a homeowner that is married with a minor child, consider again hypothetical Florida residents Sally and Joe who reside in their Star Island homestead in Miami Beach. 

When Decedent is Survived by a Spouse and Minor Child
Sally and Joe are married with twin 15-year-old girls. Contrary to their estate planning attorney’s advice to execute a deed that vests title in both their names as husband and wife, as tenants the entirety, Joe holds title in his name alone. Without warning, Joe is attacked by a shark on his regular afternoon swim and suffers grave injuries that cause his immediate death. Because Joe owned their homestead solely in his name, title did not pass automatically to Sally as the surviving spouse.  Rather, a probate estate must now be opened.  Adding to Sally’s dismay, she discovers a Last Will and Testament that Joe had executed long before they were married, wherein he specifically devises his Star Island mansion to his childhood best friend, Rico. Rico is elated to learn this information, but the thrill is short lived because he quickly finds out that such a devise is not permitted under The Florida Constitution, the Florida Probate Code, and defies a long line of authoritative case law disallowing such an affront that could very well leave Sally and his daughters homeless.  Indeed, Rico has no rights to the homestead at all.  Rather, in accordance with F.S. 732.401, Sally is entitled to a life estate in the homestead, meaning she has the right to reside in the Star Island mansion until her death.  Joe and Sally’s twin daughters inherit a remainder fee simple interest as tenants in common, per stirpes.  This means the two daughters own equal shares of the homestead; should one of the daughters pass away, her heirs inherit a 50% interest in the homestead as tenants in common with the surviving daughter.  Worth noting is that even if Joe had devised his protected homestead to Sally in his Will or Living Revocable Trust, this transfer would be invalid due to their two 15 your old daughters in being at the time of his death who are entitled to a remainder fee simple interest as tenants in common.

Alternatively, in lieu of a life estate, Sally could timely elect to receive a 50% interest as a tenant in common with her daughters as provided by F.S. 732.401(2). If she made this election, Sally would own half the homestead, and each daughter would own a fourth. One other option Sally has is to waive spousal rights to the homestead entirely.  In the circumstances of a waiver, Sally would be treated as having predeceased Joe, with title vesting in their daughters, not subject to Sally’s life estate.  Such a waiver is unlikely here in the case of a first marriage with shared children, but much more common in second and third marriages where a remarried individual wants biological children to inherit a majority of their assets.  In these cases, a disclaimer can be executed before or after marriage by written contract, agreement, or waiver in accordance with F.S. 732.702(1). 

When Decedent is Survived by a Spouse and No Minor Child
Another scenario in which one’s constitutionally protected homestead is restricted from devise apart to one’s spouse, is when a homeowner is married without a minor child.  For example, fast forwarding 15 years, Sally and Joe’s daughters are now 30.  Joe is no longer risking his life on a daily ocean swim, but has taken up skydiving, which sadly catches up to him one afternoon when his parachute malfunctions. Tragically, he dies upon impact from his injuries. All these years later, Joe remained the sole owner of their Star Island homestead, so when Joe dies, probate is required. Sally is again limited to a life estate interest and their adult daughters inherit a remainder fee simple interest as tenants in common, per stirpes.  Sally again has the option to elect to receive a 50% interest as a tenant in common with her daughters in lieu of a life estate. The same outcome would result notwithstanding the fact that Sally discovers Joe’s antiquated Last Will and Testament, leaving his Star Island homestead to Rico.  The outcome would only be different for Sally had Joe devised the homestead specifically to her in his Will or Living Revocable Trust, as she would then take the entire fee simple interest in the homestead, rather than just a life estate.  In this case, Joe’s devise to Sally would be authorized under The Florida Constitution and its statutory counterparts.

A valid disclaimer is also a possibility. If Sally disclaimed her rights in the homestead, she would be deemed to have predeceased Joe. For instance, assume this was Joe’s third marriage and he has a son from his first marriage; the twins are Sally’s biological children and Joe’s stepchildren. Before Sally and Joe married, they executed a prenuptial agreement wherein they each waived their homestead rights. Provided there is not a long lost will to be found that devises the Star Island mansion to Rico, Sally’s disclaimed interest passes pursuant to F.S. 739.201.  Now, Florida’s intestacy laws are invoked and dictate that Joe’s biological son inherits all rights in the homestead, to the exclusion of his stepdaughters as Florida does not recognize stepchildren as lawful heirs under F.S. 732.103.  Further, the constitutional exemption from claims of Joe’s creditors inures to his sole biological son.

However, this outcome drastically changes if Joe’s Last Will and Testament does exist. Its terms devising the Star Island homestead to Rico are valid provided Sally’s disclaimer in the prenup agreement because there are no minor children in being at Joe’s death entitled to fee simple title.  Now Rico’s enthusiasm is warranted as he takes title to his best friend’s mansion as devised. The downside for Rico is that the homestead will now be probated like any other asset, subject to administration and the claims of Joe’s creditors. If there is a $10 million dollar judgment lien (recall the business loan he personally guaranteed and defaulted on in Part 1, discussing creditor protection), a sale of the Star Island mansion may be required to satisfy the judgment, leaving Rico out of luck. 

When Decedent is Not Survived by a Spouse and/or Minor Child
This analysis is short circuited when there is both not a surviving spouse and minor children in being at the time of the resident-decedent's death. The question becomes simply whether the decedent was survived by heirs and to whom, if anyone, was the protected homestead devised. Let’s presume that Sally predeceased Joe, and upon Joe’s subsequent death, his stepdaughters are thirty, and biological son is forty. Joe had torn up his Will devising his mansion to Rico in a fit of rage years earlier after they got into a terrible fight over which Florida Key to take their annual fishing trip that year. In this fact pattern, Joe’s son again inherits the fully protected homestead.  Similarly, if Joe did not have any descendants surviving upon death (and no grandchildren), with his Will revoked, the homestead and its constitutionally protected status would descend to his heirs per Florida’s intestacy statute, with title vesting potentially in parents, siblings, or cousins as tenants in common.  Had the Florida Key argument amicably resolved, and Will not been shredded, its terms would control. Rico would again be entitled to the star Island mansion, regardless of whether Joe has living descendants upon death, but he would take ownership subject to the probate administration and Joe’s creditor’s claims.  

Lastly, the second part of section 4(c) states that a married homeowner may only mortgage, sell, and gift the protected homestead with the joinder of his or her spouse. For example, Joe, as sole owner of the Star Island homestead, could not transfer title to Rico during his life, just as he is prohibited from devising the property in his Last Will and Testament, to transfer it upon death.  Rather, Sally would need to agree with the transfer and execute the deed as an additional grantor.  Similarly, Joe would not be able to pledge their home as collateral for a loan by taking out a mortgage without Sally’s agreement, evidenced by her joinder and execution of the mortgage as an additional mortgage signor. 

Having gone through the various restrictions that The Florida Constitution imposes on protected homestead realty, it is paramount that these limitations are understood from an estate planning perspective.  Grasping the implications of Article X, Section 4, in conjunction with the Florida Probate Code will inform a homeowner’s decision on how to title homestead property, to whom protected homestead property may be devised, and what planning is crucial so that estate plans are not frustrated after death.  These implications also serve as a reminder of the importance that one revisits their estate plan to make the pivotal updates as time goes on to ensure devises remain authorized by the Florida Homestead Exemption. Marriage, children, divorce, re-marriage, children reaching adulthood, and even ended friendships can necessitate revisions to one’s estate plan.