Florida Homestead and Revocable Trusts
Thursday, March 26, 2009 at 10:07AM
There is a lot of confusion surrounding the issue of titling your homestead into your revocable trust. Many clients have said that they have been told that you cannot transfer homestead into a revocable trust. If this were the case, a major asset of most people’s estates would be left vulnerable to probate.
In order to fully address this issue, we have to delve into the complexities of the Florida homestead law. The law regarding Florida homestead is set forth in the state constitution as well as various sections of the Florida Statutes. It cover three distinct areas.
The first area, which most people are familiar with, concerns the exemption from property tax of the first $25,000 in value.
The second aspect involves the exemption of homestead from the claims of creditors.
The third area is what we will be discussing today. It deals with what happens to homestead property when its owner dies. The restrictions contained in this part of the law deal only with married persons or persons with minor children. If you are a single person without minor children, there are no restrictions and you may transfer your property to your trust without any adverse consequences.
However, if you are married, Florida law states that your homestead may not be devised if the you are survived by a spouse, unless it is devised to that spouse.
If a married person tries to leave his interest in the homestead to someone other than his spouse, that transfer under law would be void. Instead, the law says that in this case, the spouse would receive a life estate in the property and at the spouse’s death such interest would pass to the lineal descendants of the person who died first.
As you can guess, this creates huge title problems for the surviving spouse. She would not be able to sell the homestead or put a mortgage on it without the consent of the deceased spouse’s lineal descendants.
What, you may ask, does this have to do with my trust? Some attorneys and title examiners believe that leaving the property in joint trust after the death of one spouse is different from leaving it directly to the spouse, as required by the homestead law. They contend that this causes the ugly life estate scenario and that any future transactions will require consent of the lineal descendants.
Because of this, I structure your trust to distribute the deceased spouse’s share of the homestead directly to the surviving spouse. The surviving spouse would then deed that interest back into the trust. In this way we comply with the homestead law and avoid probate.
One exception to titling your homestead into the trust is when you have minor children. Because property owned by husband and wife as tenants by the entireties is exempt from this provision, the property should not be put into the trust if you have minor children.
It is also worth noting that transfer of your property to your revocable trust does not affect the homestead tax exemption or the value of the property under the “Save Our Homes” amendment.