One question that has often come into my practice, and has actually been the subject of some question within the Florida legal community, is whether a Florida Homestead should be titled into a Florida revocable living trust?
Defining a Florida Resident
In Florida, a homestead is generally understood as one’s personal place of residence. This means that one would need to be a Florida resident in order to claim a Florida homestead. A Florida resident is defined as someone who lives (is present) in Florida for at least 6 months and 1 day of the calendar year. The idea is that the person spends the “majority” of his/her time in Florida during the year.
With an established Florida residency, the next question is how to determine a Florida homestead. From this question springs the subject of this article, of whether you can title your Florida homestead in a revocable living trust in Florida.
Titling a Florida Homestead in a Living Trust [Pros and Cons]
Florida’s Unique Homestead Protection
This question arises due in large part to the unique homestead protection offered under the Florida Constitution. First, when we talk about homestead protection in this context we are not talking about the tax exemption status offered by the county of residence. Rather homestead protection in this context refers to the protection against creditor attachment or protection against liens and/or judgments filed against the homestead by a creditor of the homeowner.
Florida is unique in offering 100% homestead protection provided the real property meets the requirements of 1/2 acre within a municipality or not more than 160 acres outside of a municipality.
Whether to Title a Florida Homestead in a Florida Living Trust Has Been Questioned Due to an Early by the Bankruptcy Court Ruling in this District.
Without diving into too much legalese, there was a decision by a bankruptcy court judge in a case called In re Bosonetto. In that case, the judge found that because the homestead in that case was held by a trust and not a “natural person”, the homestead protection did not apply. On this basis, the court allowed a creditor to force the sale of the home in order to pay debts. This result is, of course, something to avoid as part of a complete Florida asset protection plan.
The good news is since Bosonetto, 5 Florida courts (2 of which were bankruptcy judges) have opted NOT to follow that case, and have expressly determined that property held in a revocable living trust is exempt from forced sale under Florida homestead laws.
For you legal researcher types, the cases to review are as follows:
|Callava v. Feinberg|
|Engelke v. Estate of Engelke|
|In Re Alexander|
|In Re Edwards|
|Cutler v. Cutler|
Making an Informed Decision
[Whether to Title your Homestead in a Revocable Trust]
The important thing to understand when making this decision, in light of the legal insight discussed in this article, are the pros and cons of titling your homestead in your revocable living trust.
|Revocable Trust Titling Pros||Revocable Trust Titling Cons|
|Avoid Probate Administration||Florida Supreme Court Question|
|Flexible Distribution Plan||Potential Decreased Asset Protection|
Summarizing the pros and cons, it is often very advantageous to title a Florida homestead in a revocable trust due to the major benefit of avoiding the Florida probate administration process in favor of a much simpler Florida trust administration. In addition, the flexibility of a revocable trust allows distribution planning options in the event of a special needs beneficiary in Florida OR if added protection is needed for IRA beneficiaries, estate planning in Florida for second marriages, and the list goes on.
However, when weighing pros and cons, those in high risk professions such as doctors OR contractors might consider opting to leave the homestead out of the revocable trust as an extra precaution.
Is there much of a chance that the Florida Supreme Court could overturn the decisions in favor of the Florida homestead and revocable trusts. It wouldn’t seem likely to this lawyer due to the court’s general understanding that a revocable trust is not really a separate entity from the trustmaker who is also the original owner of the homestead. Still, because we’re speculating, it is important to have all the facts and make an informed decision.
As a side note…you need to be sure to understand the difference between revocable and irrevocable trusts in Florida because homestead protection is NOT available for property in an irrevocable trust.
Another legal nugget…recent Florida legislation also allows a homestead to be afforded full protection if held in a Florida land trust.
Finally, it is very important to understand the spousal rules around the Florida homestead in order plan accordingly.
So, if your Florida homestead is not in your Florida revocable living trust you should have your Florida estate plan reviewed as part of a regular estate planning checkup by your favorite Florida estate planning attorney.
Steve Gibbs, Esq.
This is an updated version of a prior post published in 2015.