FLORIDA ASSET PROTECTION - Homestead Protection
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
.
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.
The 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, 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.
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.
