The Florida homestead exemption exempts homestead property from levy and execution by judgment creditors. In Florida, our home is truly our castle, a castle that is impenetrable by creditors as established by Article X, Section 4 of the Florida Constitution. This means that a creditor cannot force the sale of your homestead to satisfy a judgment. Florida courts have liberally expanded definitions of homestead property to include more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Florida Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality. Contiguous property may include lots with separate legal descriptions and separate tax numbers.
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” qualify for homestead protection, so properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify as homestead property. Property owned by a living trust can be homestead property according to several court rulings, and a Florida Statute provides that a land trust may own homestead property.
What makes Florida’s homestead protection such a powerful asset protection tool is its unlimited monetary protection and its exemption from fraudulent conversion. 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 her 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 creditors. There are limited exceptions to the fraudulent conversion rule applicable to money obtained by deceit, fraud, or other egregious means and subsequently traced to a debtor’s homestead. A creditor may impose and foreclose an equitable lien on a Florida homestead if the creditor can prove that a debtor obtained money fraudulently or in breach of a fiduciary duty and subsequently invested the same funds in a homestead property.
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, no forms to fill out. There is a Florida statute pertaining to a “declaration of domicile” which may be filed with a court, but this declaration is not required in order to qualify for homestead asset protection. Your intent to occupy a homestead permanently is more important than any declaration you sign or file.
Co-ownership of a homestead can jeopardize the homestead exemption when one of the co-owners does not reside on the property. A judgment creditor of the non-resident co-owner can force the property to be sold. For example, assume a married couple puts their child on the title to their homestead for “estate planning” purposes so that the child is a one-third owner. If the child resides elsewhere in his own residence, he is not entitled to homestead protection of the parents’ residence. A judgment creditor of the child can levy upon the child’s one-third ownership share of the parents’ house and force the house to be sold at auction.
Exceptions To Homestead Exemption
There are exceptions to Florida’s homestead protection that are written in the Florida Constitution. The Florida Constitution does not protect homestead property against tax liens, mechanic’s liens associated with labor or materials to repair or improve the homestead property, and voluntary liens including mortgages and homeowner association liens. For example, a contractor can place a lien on your homestead to enforce payment for labor and materials furnished to your house, and your membership in a homeowner association subjects your homestead to liens for unpaid dues or assessment.
If a civil judgment is recorded in the county of your residence before you occupy your homestead, your subsequent occupancy may not protect the home from the prerecorded judgment lien. Therefore, you should not purchase a homestead in any county where a creditor has previously recorded a judgment without careful planning as the prior judgment may take precedence over your purchase and occupancy of a homestead in that county.
Florida’s constitutional homestead provision does not apply to a mobile or modular home situated on a leased lot. However, Florida Statute 222.05 protects mobile homes from judgment creditors. The statute provides that mobile home owners and occupants whose home is on leased land may claim the mobile home as their homestead exempt from levy and forced sale.
Different rules apply to homestead for purposes of creditor protection and property tax exemptions related to homestead and Florida residency. For example, the homestead tax exemption requires that you occupy your home on January 1 and that you must file papers with the county tax assessor or property appraiser to claim homestead exemption. These tax exemption requirements are irrelevant for asset protection of the homestead. There are state income tax principals that require some people to live in Florida more than 180 days per year to avoid income taxation in another state. Florida’s homestead law does not impose a minimum annual residency requirement.
Homestead Exemption In Bankruptcy
Homestead protection may not apply if the debtor files bankruptcy. Under bankruptcy law, homestead protection is available in bankruptcy up to $146,450 unless the debtor occupied her current Florida homestead property and previous Florida homestead properties for a continuous 40-month period. Joint bankruptcy debtors can protect $292,900 of a jointly-owned homestead. These numbers increase from time to time so debtors must get the current limits from their bankruptcy attorney. Also, a debtor’s transfer of cash into his homestead within 10 years of filing bankruptcy that is intended to defraud creditors may be challenged by the bankruptcy trustee if the transfer was intended to defraud creditors. Bankruptcy law has no effect upon Florida’s unlimited homestead exemption in state court proceedings.