Individuals commonly believe that if they own a piece of real property then they can sell it when they want, transfer it to whomever they want, or devise it through their estate planning documents however they choose. But that is not always the case if the owner has a spouse and/or minor children when it comes to Florida real estate that meets the definition of homestead property. The concept of homestead and how it is taxed, exempted, transferred, devised and otherwise dealt with is one of the most complicated concepts in Florida law.
First, what is homestead? The Florida Constitution defines homestead as real property to the extent of no more than one half of an acre of contiguous land in a municipality, owned by a natural person, and the improvements on it. Art. X, §4(a), Fla. Const. The owner must “have made or intend to make the real property his or her permanent residence or that of his family”. Aronson v. Aronson, 81 So.3d 515 (Fla. 3d DCA 2012). Additionally, it is not always necessary that the owner reside on the property at the time of his or her death for the property to be considered homestead. That may sound relatively straight forward, or not, but there is extensive case law about what exactly constitutes homestead, but that is beyond the scope of this article. For purposes of this article, homestead is the dwelling and attached land where the individual or their family reside as their home. This article will focus on the restrictions that the Florida Probate Code and the Florida Constitution impose on homestead property to limit the ability of the owner to transfer and devise the property when they are survived by a spouse or minor child.
Failing to be aware of these restrictions can lead to extensive litigation over the issue of who owns the homestead upon the owner’s death. Some facts that seem relatively well settled can quickly become hotly contested. Issues such as whether the property was the decedent’s homestead, did the spouse waive his/her rights, was the homestead abandoned, was the property properly transferred during life, and many others can result in protracted litigation. Technically homestead property passes outside of probate “in a twinkle of an eye” to the proper beneficiaries. That quote comes from the Aronson case cited above, but the owner of the property died in 2001 and the Court did not finally decide who the proper owners of the property were until 2012. So eleven years is “in a twinkle of an eye”?
Restrictions on how a person may transfer or devise their own property may sound like a bad concept, but there are also protections for homestead property provided by the Probate Code and Constitution. Both the protections and restrictions are aimed at protecting families by providing a creditor exemption and restrictions on devise and transfer when the owner is survived by a spouse or minor descendants.
Probably the most common thought about homestead in Florida is related to the favorable tax exemption granted to homeowners. But there are also creditor exemptions and protections from a forced sale, resulting in the property often being referred to as “protected homestead”. This is based primarily on the language of Article X, Section 4(a) of the Florida Constitution. Of course, there are exceptions to these exemptions. Generally, the exceptions are for obligations related to property taxes (i.e. lien for unpaid property taxes), assessments on the property (i.e. homeowner’s association assessments) and costs related to the purchase, improvement or repair of the property (i.e. mortgage, line of credit or mechanic’s lien). These exemptions also transfer to the owner’s surviving spouse or heirs upon the owner’s death.
The protections and exemptions discussed above protect the owner during their lifetime, as well as the owner’s surviving spouse and heirs once the owner dies. But there are restrictions on what the owner can do with regard to the property that are solely aimed at protecting the surviving spouse and heirs. These restrictions are set out in Article X, Section 4(c) of the Florida Constitution which states: The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child. 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. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law. The Florida Probate Code offers some clarification by defining certain terms that appear in the Section 4(c) restrictions. Under Florida Statute §732.4015, the term “owner” includes the grantor of a Trust and the term “devise” also includes the disposition of the homestead through a trust. These definitions basically mean that having a property pass at death through a testamentary or revocable trust is the same as it passing from an individual and carries the same restrictions. Stated simply, what are the restrictions on the devise and transfer of homestead? They are as follows:
- If an owner is survived by minor child or children, they cannot devise (transfer at death through a will or trust) the homestead to anyone other than the children, even a spouse.
- If there is a surviving spouse but no minor children, the homestead can only be devised in fee simple (100% ownership) to the spouse.
- A married owner may not mortgage, sell or gift the homestead to anyone other than his spouse or to themselves and the spouse, unless the spouse also signs the deed or mortgage. This is true even if the spouse doesn’t have an ownership interest in the property.
These are the restrictions on homestead that are aimed at protecting the owner’s family, but if the owner is not married (or the spouse has waived, disclaimed, etc.) and does not have minor children, they are free to transfer and devise the property however they wish.
The Florida Constitution, Article X, Section 4 provides restrictions on devise, but does not address how property descends upon the death of the owner, or what happens if homestead is devised or transferred in violation of the restrictions. These default provisions are provided by the Florida Probate Code in §732.401. Section (1) provides the surviving spouse, if any, with a life estate in the decedent’s homestead, if the homestead is not devised as authorized by law and the constitution, and a vested remainder to descendants. This is all descendants, whether they are all beneficiaries of the decedent’s estate plan or not because homestead passes outside of the estate. While this may provide protection to some surviving spouses, it can present a hardship to many. The life estate creates a duty in the surviving spouse to maintain the property for the benefit of the remainder interest holders. He/she would be responsible for all carrying costs on the property. Then, because there is not unity of possession, the surviving spouse does not have the ability to force the property sold through a partition action. The Florida legislature tried to fix this potential problem recently by creating section (2) to provide the surviving spouse with an alternative to dealing with a life estate they may not want or be able to afford. The surviving spouse can elect to take the life estate provided for in Section (1) or to take a one-half interest in the homestead. An election by the surviving spouse to take the one-half interest gives her/him unity of possession with the descendants so that a partition action to force the property sold is available. It also causes the surviving spouse to only be responsible for half of the maintenance costs. Although this election does give the surviving spouse an “out” and prevents them from being stuck with maintaining a property that they cannot afford, there are some cons. The surviving spouse does not have protection to keep him/her in the home as the descendants/co-owners can force the property sold. If the surviving spouse desires to stay in the home, this may not be the best choice.
While these restrictions are meant to protect the surviving family, they can have some unintended consequences that will frustrate a person’s intent when they have not properly planned. One example is if a husband and wife separate, live apart but do not get divorced, and either of them purchases a home, they are not free to transfer that home without the estranged spouse’s consent or devise it to anyone other than the estranged spouse. This is true regardless of how long the couple is separated. See Estate of Scholtz, 543 So.2d 219 (Fla. 1989).
There are ways to avoid the unintended consequences of the homestead restrictions. Under Florida Statute §732.401(5), homestead restrictions/protections do no apply to property owned by the Decedent as tenancy by the entireties or in joint tenancy with right of survivorship. This means that if a person owns their homestead jointly with another person in a way that their interest terminates on death, the co-owner can inherit the decedent’s share regardless of whether the decedent had a spouse or minor child. This is because homestead protections only apply to the beneficial interest in property and the decedent’s would extinguish at death so there would be nothing to protect. Also, the three restrictions on the devise and transfer of homestead listed above do not include a restriction on the lifetime transfer of homestead if that owner has minor children. That restriction is only present with a spouse. This is helpful because a person can make certain lifetime transfers into a trust to prevent their ex-spouse from inheriting their property as the guardian of the minor children.
The only mechanisms to allow a persons to freely devise their solely owned homestead when they are married is a spousal waiver, either before or after marriage (pre-nuptial or post-nuptial agreement) or disclaims the property after the owner’s death. Waivers by a spouse of elective share, intestate share, pretermitted share, homestead, exempt property, family allowance, and preference in appointment as personal representative are controlled by Florida Statute 732.702. The waiver must be signed by the waiving party in the presence of two subscribing witnesses. Fair disclosure is required if signed after marriage, but no disclosure is required if signed before marriage.
However, a surviving spouse’s valid disclaimer will not “save” an invalid devise. A disclaimer will only cause the remainder interests in all descendants to vest rather than save an invalid devise. For example, if an owner devises her homestead to one of her two daughters, but she is survived by a husband and two daughters, this is an invalid devise because she could not have devised the property to anyone but her spouse. If the spouse disclaims, the property will not pass to the daughter who was devised the property in the owner’s will, but will pass directly to both daughters equally. The disclaimer will only cause the remainder interest to vest in all descendants rather than “save” the invalid devise.
Although the restrictions on devise and transfer are meant to protect, they can also cause unwanted results as to the disposition of an individual’s property. It’s important to think about what you want to do with your property, both during your life and at your death. Then you need to determine if the homestead restrictions will allow you to dispose of your property the way that you want. You want to benefit from these protections, but not become a victim of the restrictions that could frustrate your intentions