Homestead Protection In Florida
Many Floridians are aware of the legal concept of homestead protection in the State of Florida. Residents of Florida enjoy some of the most generous homestead protections in the United States. However, not all residents understand that Florida homestead actually encompasses three distinct areas of the law. Rooted in the Florida Constitution, the concept of homestead protection encompasses: (1) protection in the form of an exemption from real property taxes; (2) protection from forced sale by creditors; and (3) restrictions on the transfer or devise of homestead property. Each of these protections will be discussed in this article as well as how to obtain them and plan an estate around them.
I. Types of Homestead Protection
A. Homestead Protection From Property Taxes.
Article VII, Section 6 of the Florida Constitution allows for homestead protection from ad valorem real property taxes. The effect of this provision is to exempt the first $25,000 of property value for all purposes and also to exempt another $25,000 of value for homes worth up to $75,000 for all purposes but the property taxes calculated for schools. Thus, a home worth $100,000 would only be considered worth $75,000 for all property taxes and would be considered worth $50,000 for all property taxes except for schools. The Constitution also imposes a cap on the rate at which property values can increase for tax purposes.i Currently, this cap stands at the lesser of 3% or the percent change in the consumer price index (the rate of inflation). Additional exemptions may be obtained under certain circumstances, including:
A 2008 amendment allows for the portability of homestead protection for up to $500,000.viii Thus, Florida residents may transfer their homestead protection from taxes to a new home as long as they establish their new homestead within 2 years of leaving their previous homestead.
B. Homestead Protection From Forced Sale By Creditors.
Perhaps the most well-known aspect of Florida’s Constitutional homestead protection is the Article X, Section 4(a) and 4(b) allowance for protection of the homestead from forced sale by creditors. Unlike many other states, Florida allows for the protection of an unlimited value of homestead property if certain conditions are met. Homestead protection from forced sale is created by satisfying the following requirements:
The property must be owned by a “natural person;”
The person claiming the exemption must be a Florida resident who establishes that he or she made, or intended to make, the real property his or her permanent “residence;”
The person claiming the exemption must establish that he or she is the “owner” of the property; and
The property claimed as the homestead must satisfy the “size and contiguity” requirements, which are limited to one-half (1/2) acre in a municipality or one-hundred-sixty (160) acres outside a municipality.ix
If an individual satisfies all of these requirements, then they are generally entitled to seek protection of the homestead from a forced sale to satisfy creditors. However, there are three important constitutional exceptions:
Taxes, both federal and state, and assessments (including homeowners associations);
Thus, the Florida Constitution will not protect the homestead from forced sale by these types of creditors.
C. Homestead Protection From Transfer Or Devise
Article X, Section 4(c) of the Florida Constitution imposes restrictions on the transfer or devise of homestead property. While living, a husband and wife who own homestead property may transfer an interest in this property only if both of them sign the deed, mortgage, or other conveyance. Upon death, there are limits upon how an individual can devise homestead property that are largely dependent on who survives the decedent. Examples of these limitations include the following:
If the decedent leaves behind a spouse and no children, the only permitted transfer upon death is to the spouse and any other transfer will be invalid.
If the decedent leaves behind a spouse and minor children, then no transfer of the property is permitted at death and the spouse receives a life estate with the remainder to the minor children, per stirpes. Alternatively, the spouse may elect to take a 50% ownership interest in the homestead as tenants in common with the minor children, per stirpes.
If the decedent leaves behind a spouse and adult children, the only permitted transfer upon death is to the spouse. Any other transfer or no transfer will result in the spouse receiving a life estate with the remainder to the adult children, per stirpes. Alternatively, the spouse may elect to take a 50% ownership interest in the homestead as tenants in common with the adult children, per stirpes.
If the decedent leaves behind no spouse but has minor children, no transfer is permitted at death and the minor children receive the homestead property as tenants in common, per stirpes.
If the decedent leaves behind no spouse and only adult children then the homestead may be freely devised to anyone. In the event that no devise takes place, the adult children of the decedent receive the homestead property as tenants in common, per stirpes.
If the decedent leaves behind no spouse and no children then the homestead may be freely devised to anyone. If no devise takes place then the homestead property will pass under the laws of intestacy in Florida.
II. Obtaining Homestead Protection In Florida
A. Homestead Protection From Property Taxes.
Homestead protection from property taxes is obtained by contacting the applicable county property appraiser and submitting the required application. Homestead applications must be received by March 1 of the year after the property becomes an individual’s “permanent residence.” What constitutes a permanent residence is ultimately a matter of facts and circumstances, although the Florida statutes define permanent residence as “that place where a person has his or her true, fixed, and permanent home and principal establishment to which, whenever absent, he or she has the intention of returning.”xi Once the application for homestead protection from taxes is processed and approved, the exemption will be reflected in the taxable value portion of the property tax bill. Florida law does not allow a person to have two homesteads, even if the other property is in another state.xii It is also generally not allowed for a married couple to have two homesteads absent a showing of special circumstances.xiii
The Florida statutes determine the procedure for when an individual has been denied homestead. The Property Appraiser must notify the taxpayer by July 1st if they intend to deny the application for that tax year. The taxpayer then has 30 days to file a petition to the county Value Adjustment Board. If the Value Adjustment Board denies the petition, the taxpayer has 15 days to file an appeal to the circuit court. Alternatively, the taxpayer may bypass the value adjustment board and file an action directly in circuit court within 60 days of certification of the tax roll.
B. Homestead Protection From Forced Sale By Creditors
Any Florida resident who meets the conditions stated above may avail themselves of homestead protection from forced sale by creditors. The Florida statutes allow for the filing of a Declaration of Domicile with the county recorder, which serves as a formal declaration of an individual’s residency.xiv However, the existence or nonexistence of such a declaration is not the determinative factor for concluding whether one is a Florida resident entitled to claim homestead protection from forced sale. Rather, the statutes list numerous factors that may lend to a determination of residency, including:
Formal declaration of residency (Declaration of Domicile);
Designated address for children attending school;
Designated address for bank accounts and statements;
Place of employment;
Termination of previous residency in another state or country;
Proof of registration to vote in Florida;
Holding a Florida driver’s license;
Registration of vehicles in the State of Florida and the presence of Florida license tags on all vehicles;
Filing federal income tax forms from a Florida address; and
Here again, the determination is ultimately one of facts and circumstances, and no single factor is conclusive of the establishment of permanent residence.xvi Thus, the only concrete rule is that the stronger one’s ties to the State of Florida, the better one’s assertion of residency will be received.
It should be noted that homestead protection from property taxes and homestead protection from forced sale by creditors are two distinct legal concepts that have little in common other than their labeling as “homestead.” Thus, in multiple residence situations, the existence of homestead protection from property taxes on one residence will not be determinative of whether that property will be entitled to homestead protection from forced sale by creditors. The facts and circumstances will be the ultimate arbiter in every case.
C. Homestead Protection From Transfer Or Devise
Homestead protection from transfer or devise occurs automatically by operation of law. This element of Florida’s homestead can serve as both a benefit and a detriment. On one hand, many spouses can appreciate the fact that the other spouse cannot transfer the homestead property without their consent or devise the homestead out from under themselves or their children. On the other hand, these restrictions can wreak havoc on estate plans if they have not been taken into consideration at the outset.
The restrictions on the devise of the homestead work hand-in-hand with the protection from forced sale by creditors.xvii The result is that, in most instances, a decedent’s estate cannot be forced to sell the homestead to satisfy the debts of the decedent.
III. Homestead And Estate Planning
Proper estate planning requires the assistance of an experienced professional with in-depth knowledge of the legal effects of homestead protection in Florida. As described above, satisfying the requirements for Florida homestead from taxes will not necessarily extend protection from forced sale by creditors and the restrictions on transfer cannot be avoided simply by making a bequest in a will or even by moving homestead property into a trust. A full description of every estate planning hazard or opportunity that arises as a result of Florida homestead is outside the scope of this article. Thus, it is advisable to consult with a Florida estate planning attorney before undertaking any estate plan.
i Article VII, § 4(d)(1) of the Florida Constitution.
ii Florida Statute § 196.202. For local information, contact your property appraiser.
iii Florida Statute § 196.202. For local information, contact your property appraiser.
iv< Florida Statute § 196.202. For local information, contact your property appraiser.
v Florida Statute § 196.101. For local information, contact your property appraiser.
vi Article VII § 6(d) of the Florida Constitution. For local information, contact your property appraiser.
vii See Article VII § 6(e) of the Florida Constitution; Florida Statutes §§ 196.24, 196.801, & 196.091. For local information, contact your property appraiser.
viii Article VII § 4(d)(8) of the Florida Constitution.
ix See Article X, § 4(a) of the Florida Constitution.
x See Article X, § 4(a) of the Florida Constitution.
xi Florida Statute §196.012(18).
xii Florida Statute §196.031(5).
xiii Article VII, § 6(b) restricts homestead exemption from property taxes to a single “family unit” and most county property appraisers interpret this provision to mean that a married couple can only receive one homestead exemption; although some courts have allowed for separate homestead exemptions under certain circumstances where legal separation or financial independence is shown.
xiv Florida Statute § 222.17.
xv Florida Statute § 196.015.
xvi Florida Statute § 196.015.
xvii Article X, § 4(b) of the Florida Constitution.