Moving to Florida? Three Things You Should Know About Florida Homestead Law

Spring 2009The AdvisorAttorney: Gary A. Phillips

Florida’s homestead law has three important components.  First, homestead property is generally protected from claims of creditors.  Second, homestead property enjoys a limit on annual increases of property tax assessments.  Third, Florida law imposes certain restrictions on transferring homestead property.

To qualify as homestead property, the property must be the primary residence of a Florida resident.  If the residence is located outside of a municipality, a homestead includes up to 160 acres of property.  If the residence is located within a municipality, a homestead is limited to a one-half acre of property.

Protection from Creditors.  Florida law broadly protects homestead property from creditors – so much so that Florida residents are generally not prevented from investing large sums of money in their homestead property as a way of shielding assets from creditors.  In other words, a Florida resident can invest otherwise unprotected assets into his homestead property (by purchasing a large estate, substantially improving a residence or paying off a mortgage) and still protect those assets from creditors.  This rule does not apply, however, if the contributed funds were obtained by fraudulent means. 

Florida law also permits a resident to sell a homestead property and reinvest the proceeds in another homestead property within a reasonable period of time without losing homestead protection.

While Florida homestead protection is one of the broadest in the U.S., it does have limitations.  Homestead property is not protected from tax liens, mortgages or contract obligations relating to repair or improvement services performed on the property.

Cap on Assessed Value Increases.  Florida residents also enjoy a limit on any increase in the assessed value of a homestead property.  Increases in assessed value for property tax purposes are capped at the lesser of (i) 3% of the prior year’s assessed value or (ii) the percentage change in CPI (which was 3.8% in 2008 and 2.8% in 2007).  While the cap is less valuable in today’s economic climate where values are not appreciating, it has been very beneficial in appreciating markets.    

Restrictions on Transfer.  Florida homestead law limits an owner’s ability to transfer homestead property both during lifetime and at death.  Generally, if a Florida resident is married, restrictions apply to lifetime transfers, as the spouse must consent to a sale, mortgage or gift of the property.  If a Florida resident dies and is survived by a spouse or a minor child, restrictions apply to testamentary transfers. 

If a Florida decedent is survived by a spouse and minor issue, the surviving spouse is entitled to a life estate in the homestead, with the issue taking a vested remainder interest; an outright transfer to the spouse is prohibited.  It should be noted that if homestead property is jointly owned by spouses as tenants by the entirety, the homestead property passes at death to the surviving spouse, and the above restrictions do not otherwise apply.  If a decedent has no spouse, but has minor issue, the decedent cannot devise the property to another person, even if the person is an adult child.  If, on the other hand, a decedent has no spouse and adult children, he may transfer the property any way he desires.  In short, homestead issues must be considered in any estate planning review.

Florida law allows a person to waive his homestead rights.  For example, if a Florida resident is married for the second time and wants to devise the residence to his children or to any other beneficiary, the resident may enter into a marital agreement through which the second spouse waives her rights in the homestead property.

People who are relocating to Florida should have a general understanding of the benefits and burdens of Florida homestead law. 


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