Florida Homestead

For a long time people were able to shelter their money by putting all of their money into a personal residence in Florida. They would then claim bankruptcy, keep their home and get rid of all of their creditors and judgments for good. This no longer is the case, but Floridians still enjoy unlimited homestead protection outside of bankruptcy. Your Florida homestead is creditor kryptonite. It can’t be touched.

Generally, creditors cannot force the sale of homestead property to satisfy their outstanding claims. Florida offers one of the most comprehensive homestead statutes in that there is no monetary cap to the amount protected and even non-exempt money can be used to invest into the homestead at any time through purchase or reduction of mortgage principal. The Florida Supreme Court has upheld such rules even where the transfer of non-exempt assets was clearly to evade, or shelter money from creditors. Like with all laws, there are some exceptions: money obtained by fraud, deceit and through other “nasty” means is not protected.

WHAT QUALIFIES AS HOMESTEAD? Homes in Florida come in many varieties. As such, Florida courts have interpreted homestead property liberally enough to include condominiums, manufactured homes, and mobile homes. The Florida Constitution allows homestead to include your principal place of residence up to one-half acre within a municipality and up to 160 contiguous non-municipality acres in any county in Florida. Contiguous property may include lots with separate legal descriptions and separate tax numbers. To qualify for homestead protection, a debtor must be a permanent Florida resident and the homestead property must be his primary place of residence.  You must actually live in the residence and not merely intend to live there. Florida residents are limited to only one homestead. Other than living trusts and land trusts, only walking and talking people may enjoy the unlimited protection of a homestead.

HOW DO I QUALIFY FOR HOMESTEAD? As long as your home and your residence in the home fit the above definition, you needn’t do a thing. There are no papers to file or no forms to fill out.

SO WHAT ARE THE EXCEPTIONS? There are important exceptions to Florida’s homestead protection. The Florida Constitution does not protect homestead property against tax liens (see Rubenstein v. Commissioner where the tax court allowed the IRS to levy against the home of a son whose father owed the IRS over $100,000 before fraudulently transferring the home to his son, hence creating transferee liability on the son), mortgages, homeowner association assessments, or from mechanics liens associated with labor or materials to repair or improve the homestead property. Also you are not protected from civil judgment liens recorded before you occupy your homestead.

BANKKRUPTCY AND FLORIDA HOMESTEAD EXEMPTION – THE FACTS:

Unlimited homestead protection may not apply if the debtor files bankruptcy in Florida.  The Bankruptcy laws changed in 2005 to avoid people protecting large sums of money by moving to Florida, purchasing a home and immediately filing for Bankruptcy protection in Florida. In Bankruptcy, you may still qualify for the Unlimited Florida Homestead Exemption but you must own the residence for 40 months. Or, if you owned your current home for less than 40 months, you must have owned a previous home in Florida for 40 months total. If you have owned a home(s) in Florida for less than 40 months, then you are only allowed to exempt $136,875.00 of equity per person. Also, transfers of cash into homestead (and now a self settled trust, like a Domestic Asset Protection trust) within 10 years intended to defraud creditors may be challenged by the bankruptcy trustee.