In Florida, if the house that the decedent (person who passed away) lived in at the time of his or her death is passed to a family member (an heir), typically the property is exempt homestead. This means that the property cannot be forced to be sold in order to pay creditors of the probate estate. However, in some situations the homestead exemption goes away or does not apply. In this post, we’ll examine some of the situations where the homestead exemption does not apply or when the exemption is removed. As always, the homestead exemption from creditors in Florida is a complex concept that has been involved in many cases over the years. The specific facts of your situation greatly affect whether or not the protection applies. If you have questions about how the homestead exemption from creditors applies in your particular situation, you need to consult with a Florida probate attorney.
The homestead exemption when property is encumbered by a mortgage or other secured debt.
The homestead exemption from the claims of creditors does not protect a property from all of the claims of creditors in a probate estate. Specifically, Article X, Section 4 of the Florida Constitution states that the protection from forced sale does not apply “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.” This means that the homestead protection from creditors does not apply in instances where there is a mortgage on the property or when there is a lien for the nonpayment of taxes on the property. If the homestead secures a debt of the estate, the homestead protection from forced sale most likely will not apply to that particular creditor.
Homestead protection when the property is directed to be sold in the decedent’s will.
Another complex situation that arises in probate relating to homestead protection is when the will directs the homestead property to be sold by the personal representative. In some instances, the proceeds from the sale of a homestead can lose its protection when the property is sold in a probate administration. This is why it is important to consult with your probate attorney to learn the consequences of a decision to sell homestead property during a probate administration. Additionally, if you are consulting with an estate planning attorney for your estate plan, make sure to talk to the attorney about the consequences of ordering your homestead to be sold in your will.
Typically, a personal representative does not have authority to sell homestead property in probate. “Homestead property, whether devised or not, passes outside the probate estate. Personal representatives have no jurisdiction over nor title to the homestead, and it is not an asset of the testatory estate.” McKean v. Warburton, 919 So. 2d 341, 346 (Fla. 2004). Thus, a personal representative cannot just decide to sell homestead property if the personal representative determines that homestead it would be better for the beneficiaries if the homestead property was sold.
However, a decedent can direct the sale of homestead property in his or her will. In this instance, a personal representative will have authority to sell the homestead property. “When a testator directs that his or her homestead be sold and the proceeds distributed to devisees, the property loses its constitutional protection.” Estate of Shefner v. Shefner-Holdern, 2 So. 3d 1076, 1078 (Fla. 3d DCA 2009). The reason the proceeds from the sale of the homestead property loses the protection is because “the decedent is devising money, not homestead property, and the proceeds may be subject to the claims of decedent’s creditors and administrative expenses.” Id. Therefore, if a will states that homestead property is to be sold, it must be sold by the personal representative, and the proceeds from the sale of the property lose the constitutional protection.
This is a good example of a reason having a good estate planning attorney will be beneficial. If you think it will just be easier to tell the personal representative in your will to sell your homestead property, you may be unwittingly subjecting a large portion of your assets to the claims of creditors, when it can otherwise be protected. Unfortunately, a personal representative is required to follow the direction in the will. So if a decedent instructs the personal representative to sell homestead property, the personal representative must do so and may need to use the proceeds from the sale to satisfy claims of creditors.
Homestead protection when the property is devised to a heir.
If a will does not instruct the personal representative to sell the homestead property, then the personal representative will transfer the property directly to an heir, if the will directs it. Thus, the heirs will receive the property and become owners of the property upon distribution. This may cause problems, if the descendants do not get along. However, the property will likely be protected by the claims of creditors, which can present a large benefit depending on the indebtedness of the estate.
Homestead protection when property is devised to a person who is not a heir.
Homestead property loses its protection when it is devised to a person who is not a heir of the decedent. This is the most simple part of the Florida homestead protection from creditors. Again, this is why consulting with an estate planning attorney for your estate plan is valuable because the attorney will point out that the way the homestead property is being devised will cause it to be subject to the claims of creditors. After a person dies, there is no way to change his or her will.
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As you can probably see, the Florida homestead protection can be quite complex. It can be difficult to understand the effect of your estate plan on the homestead protection. If you are contemplating opening probate for a loved one or have been named personal representative in a will, you may have questions about the homestead protection. An experienced estate planning and probate attorney will be able to advise you on what may happen in the probate case and how the homestead protection will apply. Contact us today to schedule a free consultation with one of our attorneys relating to your estate planning needs or a probate issues.
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