HOMESTEAD. David Weisman

Transcription

1 HOMESTEAD David Weisman I. Basic Concepts a. The Language of the Law: Since January 9,1985, homestead has been defined in the Florida Constitution as the following property owned by a natural person: "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..." b. What is Homestead: resided upon by any person (or resided upon by family members). For purposes of defining "family," Florida law may not necessarily limit the term to relatives, and may include unrelated dependents. i. For example, one former spouse no longer lives on the property, but his son, who he supports, lives there with the mother. It is the homestead of both parents: Homestead status after divorce. A former marital home of a divorced couple was still homestead and owned as tenants in common, notwithstanding that the former husband no longer lived there and had remarried and that the former wife occupied the home under the marital settlement agreement only until the youngest child of the marriage graduated high school. Friscia v. Friscia, 39 Fla. L. Weekly D (Fla. 2d DCA, Aug. 27, 2014). c. Exemption from Forced Sale: Not subject to execution by judgment creditor: 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 i. Will not protect 1. Taxes 2. Purchase obligations 3. Improvements

2 d. Conveyances and Mortgages: 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. II. Dealing with a Lien i. Joinder vs and. This raises a contract question. If a mortgage is signed by a spouse who is not a title holder [John Smith and Mary Smith, his wife] where John is to sole owner, Mary might be obligated for the covenants of the loan documents. The better practice, and what Mary should insist upon: John Smith, joined by his wife, Mary Smith. ii. Interspousal Conveyances: It is not necessary for the spouse to join in a conveyance which creates tenancy by the entirety. iii. Guardians Where a spouse is incompetent, a specific petition and order of the Court are required in order to encumber or alienate homestead with the joinder of the guardian. iv. Power of Attorney: Must be with the formalities of a deed. If the spouse can sign the POA, eliminate the controversy and just get the deed signed. v. Ante-nuptial does not overcome. This is a big error many clients make. They think that because they got the young hussy to sign off on the prenup, they can mortgage or sell the house. NO!! The constitution cannot be waived. Contrast this with that permits a waiver of rights upon death of the owner of the homestead. a Provides a method i. (1) Whenever any natural person residing in this state desires to avail himself or herself of the benefit of the provisions of the constitution and laws exempting property as a homestead from forced sale under any process of law, he or she may make a statement, in writing, containing a description of the real property, mobile home, or modular home claimed to be exempt and declaring that the real property, mobile home, or modular home is the homestead of the party in whose behalf such claim is being made. Such statement shall be signed by the person making it and shall be recorded in the circuit court b. Use the statutory form NOTICE OF HOMESTEAD To: (Name and address of judgment creditor as shown on recorded judgment and name and address of any other person shown in the recorded judgment to receive a copy of the Notice of Homestead).

3 You are notified that the undersigned claims as homestead exempt from levy and execution under Section 4, Article X of the State Constitution, the following described property: (Legal description) The undersigned certifies, under oath, that he or she has applied for and received the homestead tax exemption as to the above-described property, that is the tax identification parcel number of this property, and that the undersigned has resided on this property continuously and uninterruptedly from (date) to the date of this Notice of Homestead. Further, the undersigned will either convey or mortgage the above-described property pursuant to the following: (Describe the contract of sale or loan commitment by date, names of parties, date of anticipated closing, and amount. The name, address, and telephone number of the person conducting the anticipated closing must be set forth.) The undersigned also certifies, under oath, that the judgment lien filed by you on (date) and recorded in Official Records Book, Page, of the Public Records of County, Florida, does not constitute a valid lien on the described property. YOU ARE FURTHER NOTIFIED, PURSUANT TO SECTION ET SEQ., FLORIDA STATUTES, THAT WITHIN 45 DAYS AFTER THE MAILING OF THIS NOTICE YOU MUST FILE AN ACTION IN THE CIRCUIT COURT OF COUNTY, FLORIDA, FOR A DECLARATORY JUDGMENT TO DETERMINE THE CONSTITUTIONAL HOMESTEAD STATUS OF THE SUBJECT PROPERTY OR TO FORECLOSE YOUR JUDGMENT LIEN ON THE PROPERTY AND RECORD A LIS PENDENS IN THE PUBLIC RECORDS OF THE COUNTY WHERE THE HOMESTEAD IS LOCATED. YOUR FAILURE TO SO ACT WILL RESULT IN ANY BUYER OR LENDER, OR HIS OR HER SUCCESSORS AND ASSIGNS, UNDER THE ABOVE-DESCRIBED CONTRACT OF SALE OR LOAN COMMITMENT TO TAKE FREE AND CLEAR OF ANY JUDGMENT LIEN YOU MAY HAVE ON THE PROPERTY. i. c. An Affidavit no longer adequate i. Unless: 1. Tenancy by entireties. A continuous marriage affidavit can be used to establish that the parties were married without interruption from a date prior to the creation of the judgment lien and through the date of the closing. A judgment agains tone spouse will not attached to property owned by both as T/E, but a divorce will create T/C. Remarriage will not restore. 2. Not the same person. If the person closing is not the judgment debtor, this fact may be established factually by an affidavit. d. Similar to residential eviction, where clerk mails the notice to the creditor e. Creditor must act within 45 days III. Homestead tax exemption a. A person who, on January 1, has the legal title or beneficial title in equity to real property in this state and who in good faith makes the property his or her permanent residence or the permanent residence of another or others legally or naturally dependent upon him or her, is entitled to an exemption from all

4 taxation, except for assessments for special benefits, up to the assessed valuation of $25,000 on the residence and contiguous real property, as defined in s. 6, Art. VII of the State Constitution i. Beneficial Title includes an interest in a trust, where the person holds a right to live in the property under the trust document. ii. The residence may be that of a dependent. iii. The type of residence may vary: 1. Cooperative Apartment 2. Condominium 3. Mobile Home iv. No Snowbirds! A person who is receiving or claiming the benefit of an ad valorem tax exemption or a tax credit in another state where permanent residency is required as a basis for the granting of that ad valorem tax exemption or tax credit is not entitled to the homestead exemption provided by this section. b. Trust: A person who otherwise qualifies by the required residence for the homestead tax exemption provided in s shall be entitled to such exemption where the person s possessory right in such real property is based upon an instrument granting to him or her a beneficial interest for life, such interest being hereby declared to be equitable title to real estate, as that term is employed in s. 6, Art. VII of the State Constitution; and such person shall be entitled to the homestead tax exemption irrespective of whether such interest was created prior or subsequent to the effective date of this act. c. Co-settlor and co-beneficiary. This evidences a clear beneficial interest and if the person is the sole income beneficiary they would be entitled to sole possession. d. Right to reside contained in the trust: This is an important drafting consideration for estate planning lawyers. e. Life Estate: persons residing on real estate by virtue of dower or other estates therein limited in time by deed, will, jointure, or settlement; (1) f. Present Possessory Interest. The remainder-persons are not entitled to exemption. g. Leasehold in excess of 98 years. h. Taxpayer must file the papers to qualify for the exemption. This will also affect the SOH cap.

5 i. SOH limits increases to 3% or CPI. j. Transfers of title: i. Basic rule: The property shall be re-assessed following a change of ownership, so that the former SOH discount re-sets to the current value. ii. Change of ownership means any sale, foreclosure, or transfer of legal title or beneficial title in equity to any person. iii. Exceptions: IV. Descent of Homestead 1. The same person is entitled to the homestead exemption as was previously entitled and: a. The transfer of title is to correct an error; 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; c. The change or transfer is by means of an instrument in which the owner is listed as both grantor and grantee of the real property and one or more other individuals are additionally named as grantee. However, if any individual who is additionally named as a grantee applies for a homestead exemption on the property, the application is considered a change of ownership; or d. The person is a lessee entitled to the homestead exemption. 2. Legal or equitable title is changed or transferred between husband and wife, including a change or transfer to a surviving spouse or a transfer due to a dissolution of marriage; 3. The transfer occurs by operation of law to the surviving spouse or minor child or children under s ; or 4. Upon the death of the owner, the transfer is between the owner and another who is a permanent resident and who is legally or naturally dependent upon the owner. a. Follow the law: the homestead shall not be subject to devise if the owner is survived by a spouse or minor child, except the homestead may be devised to the owner's spouse if there be no minor child."

6 b. Devise to spouse must be the entire interest. This means that a person may not leave one third to another person. c. If the decedent is not survived by a spouse or minor child, the homestead property is freely devisable in a will, even if it excludes some or all adult lineal descendants. d. If not devised, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent s death per stirpes. ALTERNATIVE: Spouse may take one half interest at T/C. e. 49 F.S (1) further states that [i]f not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more 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. Alternatively, the spouse may make an election to take an undivided one-half interest in the homestead as tenants in common, with the remaining one-half interest vesting in the decedent s descendants in being at the time of the decedent s death, per stirpes. f. A trust must be executed with the formalities of a will to have any effect at death (2) (b). The testamentary aspects of a revocable trust, executed by a settlor who is a domiciliary of this state at the time of execution, are invalid unless the trust instrument is executed by the settlor with the formalities required for the execution of a will in this state. For purposes of this subsection, the term testamentary aspects means those provisions of the trust instrument that dispose of the trust property on or after the death of the settlor other than to the settlor s estate. g. Putting the homestead into a trust does not circumvent the law governing homestead. h. On 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. BUT!! Real property owned in tenancy by the entireties or in joint tenancy with rights of survivorship is not protected homestead. V. Acquisition by Purchase a. A married person may convey the homestead property with the joinder of the spouse.

7 b. If the property is then titled as tenants by the entireties, or if it is held with a nonspouse as joint tenants with right of survivorship, then there is nothing to devise or to have pass by intestate succession. c. While a life estate qualifies for tax exemption and creditor protection, it also leaves nothing to devise or to pass. d. Lady Bird Deed: a conveyance of a remainder, retaining both a life estate and a right to divest the remainder holders without their consent. A vested remainder subject to divestment! e. The acquisition by purchase defeats all of the protections regarding devise and descent. For example, (5): This section does not apply to property that the decedent owned in tenancy by the entireties or in joint tenancy with rights of survivorship. VI. Special Situations: a. Dual Homesteads Estranged married couple entitled to separate homestead exemptions. In re Colwell, 208 B.R. 85 (Bkrtcy. S.D. Fla. 1997), rev d, 226 B.R. 714 (S.D. Fla. 1998), aff d, 196 F.3d 1225 (11th Cir. 1999), held that husband and wife were entitled to claim separate homestead exemptions in property on which either resided, in absence of any evidence to suggest that they had implemented their living arrangements to defraud creditors. The District Court s decision was later affirmed by the Eleventh Circuit Court of Appeals. b. What is a Spouse? The law is very unsettled and a hot topic. Until there is a definitive decision on the subject of gay marriage, consider the position of one leading national title underwriter: i. There is the question as to the likelihood of Florida courts giving full faith and credit to legal same sex marriages in other states. At this point, the best we have is conjecture and a few cases at the circuit court level from Monroe county (and maybe one other) holding that denying same sex couples the right to marry violates the due process clause of the US Constitution and the 5 th and 14 th Amendments (more or less). ii. The bottom line is that without definitive holdings by either the US Supreme Court or the Florida Supreme Court, the company will underwrite by covering all bases. For instance, in transfers and mortgages, require joinder of the spouse where we know the owner has a same sex spouse and that the Florida land is or could be the homestead of the owner. iii. In the case of decedent s estates, analyze devise and descent as if the out of state marriage of the same sex decedent could be recognized by a Florida court and as if it might not be recognized. In other words, where

8 title might have passed to the spouse, require a deed from the spouse and from the heirs at law. If title might have only passed to the heirs at law, require a deed from the spouse as well. iv. How should the deed be prepared and how should title be insured when same sex couples legally married in Minnesota buy Florida land? Currently, Florida does not legally recognize the marriage. So, it may be that taking title as tenants by the entirety would result in a tenancy in common.