Homestead Account Funds Intended For New Home Improvements

Money from the sale of a Florida homestead is exempt in a bank account if owner is saving the money to buy a replacement homestead. One of my clients wanted to know if money remaining in the account after the purchase of a replacement homestead remains protected if the homeowner is holding the funds to make required improvements to the new homestead.

In this case, my client sold his free and clear homestead, and purchased within one month a new home. However, the new home needed a lot of improvements. He bought the home as a “fixer upper.” My client said the new home was barely livable without improvements. The client spent about ½ of his homestead proceeds buying the home (about $100,000) and he retained approximately the same amount in his homestead account to pay for the work. He thinks the remaining money in the account should be protected because it was earmarked for improvement of the new home.

Money from the sale of a homestead is protected in the bank until such time as the debtor buys his next homestead. Once the debtor buys and moves in to the new house any money left in the homestead account loses its homestead protection. In his case, I believe all money left in the client’s homestead account lost its homestead protection when the client bought the new house and moved in. Money is not exempt just because the debtor intends to use the money to improve a homestead. Therefore, even though the funds in the account came from the sale of the first homestead the money was not covered by a homestead exemption after the purchase and occupancy of the new home.

Page last updated on May 22, 2020

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