Preparing for Probate: Is Homestead Property A Probate Asset?
The answer is “yes” and “no”
If a homestead property is established and meets Florida eligibility requirements, the property can be distributed to the beneficiaries of the decedent free of creditor’s claims. If the property still has a mortgage, owes money for repairs or homeowners association liens, the homestead protection does not apply in full and those creditors can seek to reclaim that debt.
If an Enhanced Life Estate Deed or Lady Bird Deed is in place, the property will pass directly to the beneficiaries of the Deed and not go through probate. Follow our blog series for an article dedicated to this topic.
Definition of Homestead Property
Let’s start at the beginning with the definition of homestead property.
Homestead property is defined as the home and attached land of an individual or family serving as the primary residence. Florida courts have liberally expanded definitions of homestead property to include more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres in any county in Florida.
Homestead property is protected from creditors upon death if you are a permanent Florida resident, and the homestead property is your primary place of residence. This means that a creditor cannot force the sale of your homestead to satisfy a judgment.
In order to maintain this post-death exemption, the homestead must pass to a person or persons who are declared the deceased owner’s “heirs at law.” If this is the case, the court should be made aware of this through a specific petition in order to preserve the homestead protection. Like many such exemptions or protections, if you don’t ask for this protection from the court, you don’t get it. This is one of the biggest dangers of trying to take an estate through probate without an attorney.
What Is Not Considered Homestead Property?
These properties are not protected by the Homestead law and may be considered a probate asset.
1. Property purchased as a future residence is unprotected until the property is occupied as a principal residence.
2. A second home or investment property cannot be considered a Florida homestead.
3. Only “natural persons” qualify for homestead protection, so properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify. Property owned by a living trust can be homestead property.
What makes Florida’s homestead protection such a powerful asset protection tool is its unlimited monetary protection. A Florida resident can invest millions of dollars in large estate homes and farms and protect the full value of these luxury residences under Florida’s homestead law. The provision is written into the Florida Constitution, Article X, section 4, so it cannot be removed without a constitutional amendment.
As with any law, there are exceptions. Four types of creditors can still force the sale of a homestead to collect debts owed to them. These are:
1. The State of Florida and its counties or municipalities, to collect past due property taxes.
2. Parties to whom the property was specifically pledged as credit for a mortgage.
3. Mechanics who are owed money for work performed in repairing or improving the property.
4. Any creditor with a lien that pre-dates the establishment of homestead. This usually includes condominium and mandatory homeowner association liens, depending on the language and age of the covenants.
5. Co-ownership of a homestead can jeopardize the homestead exemption when one of the co-owners does not reside on the property. A judgment creditor of the non-resident co-owner can force the property to be sold.