Homestead Asset Protection Strategies

The Best Homestead Asset Protection Strategy For Florida

Do Nothing !!

Real estate “Gurus,” and our colleagues in estate planning or divorce law, will often discuss asset protection strategies and homestead asset protection for various forms of real estate investments. The danger occurs when inexperienced homeowners use these techniques on their Florida homestead property.

Among some of the more popular techniques used to shelter real estate include: Florida Land Trusts; Limited Liability Companies, Limited Liability Partnerships; Corporations; Private Annuity Trusts; Family Land Trusts; and Irrevocable Trusts. This article will not discuss these devices, nor any income tax or estate planning advantages or disadvantages. The purpose of this article is to explain that these other forms of holding property are unnecessary as protection for a Florida Homestead Property.

For purposes of this article, “Homestead Property” is the primary residence. Often people are confused about the homestead tax exemption provided by the local county property appraiser and tax collector. While filing for the “homestead exemption” is one factor to determine that the property is “Homestead Property,” it is not the sole criteria. The other factors for determining “Homestead Property” include: “where you lay your head at night,” address on voter registration, driver license, bills, or simply “where you live.”

Florida’s Constitution provides Florida Homestead Property with protection from forced sale by creditors. Specifically, Section 4, Article X of Florida’s Constitution provides that no creditor may force the sale of homestead property unless that creditor is the county tax collector or tax assessor, a mortgage company, or an unpaid contractor who did work on or to the Homestead Property. This means that judgment creditors – credit cards, hospital bills, personal injury judgments, etc. – cannot foreclose Florida Homestead property to satisfy their judgments, even if those judgments are properly recorded in the county public records.

In addition, Florida’s Constitution extends the homestead protection to the homeowner’s spouse. Therefore, if a husband and wife take title to property “as husband and wife,” a judgment recorded against only one spouse cannot result in a foreclosure (or forced sale) of the Florida Homestead to satisfy that judgment. In 2002, the United States Supreme Court granted an exception to IRS liens recorded against one spouse only, and ruled that those do attach to real property titled in the name of both spouses “as husband and wife.” United States v. Craft, 535 U.S. 274 (2002).

In addition to the Constitutional protections, Florida Homestead Property is also governed by Florida Statutes, Chapter 222 – sections 222.01 and 222.02 provide a statutory framework for removing a judgment lien from Homestead Property by recording a “Notice of Homestead” in the county public records. Once a Notice of Homestead has been recorded and sent to the creditor by certified mail, return receipt requested, the creditor has 45 days to file a lawsuit challenging the validity of the property as homestead. If a lawsuit is not filed, or if the creditor loses the lawsuit, the lien is removed from the Homestead Property (although the lien would still attach to non-homestead property and the debt would still be owed to the creditor). Again, the protection provided by the Notice of Homestead procedure does not apply to county property taxes, home mortgages or construction liens.

Given the protections provided by Florida’s Constitution and State Statutes, it is our opinion that the often effective, but sometimes unconventional protections available to real property are unnecessary when applied to Florida Homestead Property. Furthermore, using some of these other “guru methods” for “protecting” homestead may result in the loss of the true Homestead Exemption. For additional questions or information on Florida Homestead laws or other real estate investment advice, please contact us for a free consultation.