Florida’s Unlimited Homestead Exemption Does Have Some Limits, Part I

Florida’s unlimited homestead exemption allows debtors to shield their assets by purchasing a new home in the state and establishing residency. Recent articles have raised concerns about this loophole being used by high-profile individuals to avoid creditors. However, there are requirements that must be met to benefit from this exemption, and not everyone may qualify. This article will discuss the limits of Florida’s homestead exemption for asset protection. In Part II, we’ll talk about federal limits on the homestead exemption, fraudulent transfer issues, and proposed federal bankruptcy laws that would limit homestead protection for people moving to Florida to avoid creditors. We’ll also discuss conflicting advice from advisors about owning a homestead with a large or small mortgage. The Florida Constitution says that a person’s homestead is protected from being sold to pay debts, up to a certain size of land and home. The courts in Florida consider three main requirements to determine if a person’s home is protected from being sold to pay off debts. These requirements are the size of the property, how long the person has lived there, and who owns the property. The purpose of this exemption is to help families stay in their homes, so the law is applied in favor of the homeowner. The burden is on the creditor to argue against the home being protected. This is because the law is meant to make sure that families have a place to live and are not left with nothing. In Florida, the extent of homestead protection for a residence is generally limited to one-half acre if the residence is within a municipality. A court case in 1997 clarified that a debtor cannot claim homestead exemption for a portion of a property that surrounds a nonexempt portion, making it valueless. The court decided that the property should be sold and the proceeds divided between the debtor and creditors. Another case in 1999 reaffirmed this decision for a debtor with a large oceanfront property in Palm Beach. In Florida, if your home is larger than the constitutional limit for homestead protection, the court can order it to be sold. To avoid this, you should buy a home outside a city on 160 acres or less, or a home within a city on no more than one-half acre. If you already own a home within a new city that was previously unincorporated, you can keep the larger homestead protection as long as you owned the home before the city was established. Otherwise, the usual one-half-acre limit applies. To get the benefits of the homestead exemption in Florida, you have to live there and plan to stay there permanently. If you’re not a U.S. citizen, you can only meet the permanent residency requirement if you have a green card. If you lose your right to stay in the U.S., you can’t claim the homestead exemption in Florida. If you want to protect your home from creditors in Florida, you have to show that you intend to make it your permanent home. If you’re new to Florida, you have to live here for at least 180 days before you can file for bankruptcy protection. To prove that Florida is your permanent home, you can file a sworn statement with the county clerk, saying that this is your main home and you plan to stay here. You also have to actually live in Florida more than in any other state. If you own a home, you can file a notice with the court to protect it from creditors, giving them 45 days to challenge your homestead status. If a married couple separates and each lives in a different home, they can both claim a homestead exemption for their respective homes in bankruptcy. However, in order to claim the exemption, the person must be the legal owner of the home. Make sure to own the home as an individual or as a married couple, and not through a trust or business entity, to ensure the homestead protection. Basically, a homestead can be any type of residence – from a big house to a small cottage, from a farmhouse to a beach villa, and even a mobile home or a co-op apartment. The law protects all types of homes from being forced to be sold to pay off debts. If you own a structure like a motor coach or travel trailer and you live in it permanently, you can claim it as your homestead and get some protections from creditors. But if it’s just a vacant lot or a boat, it’s not considered a homestead unless you actually live there. Some courts have allowed a few exceptions, but in general, you have to actually be living on the property to claim it as your homestead. If someone wants to claim a property as their homestead, they have to actually live there and show that they intend to make it their home. In one case, a person tried to claim a condo as their homestead even though they were still living in a rented apartment. The court said they couldn’t claim the condo as their homestead because they hadn’t actually moved in and had done things like getting a voter’s card and driver’s license at their rental address. So, to claim a property as your homestead, you have to actually live there and show that you intend to make it your home. In Florida, homeowners can protect their primary residence from creditors through the homestead exemption. Once a home is designated as a homestead, it stays that way until it is abandoned. There are specific reasons for leaving a home that do not count as abandonment, such as financial problems or health issues. However, taking out a loan to buy another home does not qualify for the homestead exemption. The rules for the homestead exemption are not always straightforward, so it’s important for homeowners and their advisors to understand them carefully. In the next part, we will talk about more rules for the homestead exemption and a new bankruptcy law that could make it harder to protect your home from creditors. We will also talk about making plans for your home and the potential problems that can come up when a lawyer, accountant, and financial planner give you advice about it. In Florida, bankruptcy courts have different opinions on what happens to a home if it is sold. Some say that when a home is not divisible, the trustee can sell it and the court will split the money. Others say that if the home is divisible but can’t be sold because of zoning laws, the whole property is exempt. The Florida Supreme Court has ordered the sale of a property when part of it wasn’t being used as a homestead. The length of time a person has lived in Florida before filing for bankruptcy can affect whether they get homestead benefits. There are specific laws about how much of a person’s home can be protected from creditors in a bankruptcy case. This is a list of court cases and legal articles that discuss the requirements for establishing residency in Florida for the purpose of claiming a homestead exemption. It includes information on activities that can help establish residency, as well as cases that address the legal requirements for claiming a homestead exemption in Florida. In Florida, to claim a property as a homestead and get exemption from creditors, you have to actually live in the house and use it as your main residence. Just intending to live there isn’t enough. Other cases have shown that just putting stuff on the property or planning to move there in the future isn’t enough to claim homestead exemption. This excerpt discusses the rules for claiming a homestead exemption when selling a home and buying a new one. It also mentions the importance of accurately stating your domicile in legal documents. The authors are lawyers who specialize in tax and estate law. The column is submitted on behalf of a legal section. The mission of The Florida Bar is also mentioned.

Source: https://www.floridabar.org/the-florida-bar-journal/floridas-unlimited-homestead-exemption-does-have-some-limits-part-i/