Is your homestead protected if title is held in a Roth IRA? That is a question asked by a recent caller. I have not seen a case on the issue directly. I believe the answer will be “yes” if the beneficiary of the IRA lives on the property.
The Constitution limits homestead protection to “natural persons.” A property owned by someone’s corporation or family partnership probably would not be homestead protected. Yet, many Florida court decisions have held that a person claiming homestead need not hold legal title to the property so long as he has a beneficial interest. Several Florida courts have held that ownership through a living trust- where the debtor is settlor and beneficiary- qualifies as ownership by a natural person.
I think a Roth IRA is similar to a living trust because the person who sets up and funds the Roth is usually the primary beneficiary. Like a living trust, a Roth IRA has contingent beneficiaries upon the settlor/owner’s death.
Roth IRAs allow people to invest after tax dollars in assets and avoid future gain on the sale of the asset. I would like to know why a person would title his homestead in his Roth IRA inasmuch as federal tax law gives generous tax exemption upon the sale of homestead properties anyway. It seems that only a person sure of substantial home appreciation would title their residence in a Roth; but if they do, in my opinion the house would qualify for Constitutional homestead protection in addition to the statutory protection afforded to IRAs and other qualified plans.