FLORIDA ASSET PROTECTION - Homestead Protection

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In Florida, our home is truly our castle, a castle that is impenetrable by creditors. The Florida Constitution exempts homestead property from levy and execution by judgment creditors. Florida courts have liberally expanded definitions of homestead property which includes more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres in any county in Florida. Contiguous property may include lots with separate legal descriptions and separate tax numbers.

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To qualify for homestead protection, a debtor must be a permanent Florida resident and the homestead property must be his primary place of residence.  Property purchased as a future residence is unprotected until the property is occupied as a principal residence.  A second home or investment property cannot be considered a Florida homestead.  Only "natural persons" quailfy for homestead protection so properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify.  Property owned by a living trust can be homestead property. A newly-enacted Florida Statute provides that property owned by a land trust may be homestead property.

What makes Florida’s homestead protection such a powerful asset protection tool is its unlimited monetary protection. A Florida resident can invest millions of dollars in large estate homes and farms and protect the full value of these luxury residences under Florida’s homestead law.  Under a Florida Supreme Court ruling, a person can transfer unprotected, non-exempt assets to his homestead at any time by either buying a new home or reducing the principal balance of an existing mortgage and protect this money under the homestead umbrella, even if the asset transfer was clearly designed to hide money from creditor claims. There are limited exceptions to this general rule pertaining to money obtained by deceit, fraud, or other egregious means.

There is no waiting period for homestead protection. The protection attaches the day you first occupy the property with the intent to make it your permanent Florida homestead. There are no papers to file and no forms to fill out. There is a Florida statute pertaining to a "declaration of domicile" which may be filied with a court, but this declaration is not required in order to qualify for homestead asset protection. Your intent to occupy a homestead is more important than any declaration you sign or file.

There are important exceptions to Florida's homestead protection. Florida Constitution does not protect homestead property against tax liens, mortgages, homeowner association assessments, or from mechanics liens associated with labor or materials to repair or improve the homestead property. Also, if a civil judgment is recoreded before you occupy your homestead, your subsequent occupancy will not protect the home from the pre-recorded judgment lien.

The asset protection benefits of homestead should not be confused with the homestated tax exemption; the tax exemption and creditor exemption are similar but different rules can apply to each. For example, the homestead tax exemption requires you occupy your home on January 1 and you must file papers with the real estate tax department. These tax rules are irrelevant for asset protection of the homestead.

Homestead protection may not apply if the debtor files bankruptcy.  Under the new bankruptcy law, homestead protection is available in bankruptcy up to $137,000 unless the debtor occupied his current Florida homestead property and previous Florida homestead properties for a continuous 40-month period. Joint bankruptcy debtors can protect $274,000 of jointly owned homestead. Also, transfers of cash into homestead within 10 years intended to defraud creditors may be challenged by the bankruptcy trustee.  The new bankruptcy law has no effect on Florida's unlimited homestead protection outside of bankruptcy.