Florida Homestead Protection Explained
Florida homestead law protects a Florida resident’s primary home from levy and execution by their judgment creditors. Article X, Section 4 of the Florida Constitution states that a judgment creditor cannot force the sale of your home to satisfy the creditor’s money judgment. A recorded judgment does not attach to or become a lien on a debtor’s Florida homestead.
Courts have liberally expanded definitions of the Florida unlimited homestead exemption to include more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection from judgment creditors in Florida.
The protection of the Florida homestead is one of the strongest asset protection tools in the country. The law protects unlimited amounts of value in the debtor’s Florida home. Some judgment debtors living in other states will move to Florida and purchase a Florida homestead to protect their hard-earned money from collection by a creditor. The law protects not only real estate, but also recreational vehicles, mobile homes, co-ops, and even long-term leases.
The homestead exemption cannot be waived by a debtor unless accompanied by a mortgage, sale, or gift.
The Florida homestead protection against a judgment is especially strong compared to other states because it stems from the state’s constitution rather than a state statute. It is much harder to convince voters to repeal an important constitutional benefit than to change a state statute through legislation. Additionally, future laws enacted by the Florida legislature cannot override or diminish protections provided by the Florida Constitution.
Lot Size Limits
The Florida Constitution defines a Florida homestead property as one’s principal place of residence subject to lot size limitations. Homestead protection is afforded to residences within a municipality on lots up to one-half acre and residences outside a municipality up to contiguous 160 acres. All contiguous property up to 160 acres is included in homestead even if the contiguous property has separate legal descriptions and tax numbers. No matter whether the homestead is in the city or the county, there is no restriction on the square footage of the physical residence or on the value of the property.
If your homestead is on a lot that exceeds the ½ acre or the 160 acre size limitations, then the homestead protection will be allocated pro-rata to the total property value.
For example, consider a debtor that lives on a one acre lot within a city where protection is afforded only to ½ acre. The homestead protection would apply to 50% of the total value of a one-acre homestead property. The debtor is not permitted to survey the lot and allocate the protected portion to the physical dwelling and allocate the unprotected portion to the less-valuable back yard.
Frequently Asked Questions about Florida Homestead
How do you qualify for homestead exemption in Florida?
Any person can be eligible for the Florida homestead exemption. To qualify, the debtor must be be a permanent Florida resident and the homestead property must be the debtor’s primary place of residence.
A second home or investment property cannot be considered a Florida homestead.
Only debtors who are natural persons qualify for Florida homestead protection, so properties titled in the name of corporations, limited liability companies, irrevocable trusts, or partnerships do 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 does a Florida homestead protect you from?
A Florida homestead protects your house from forced levy and sale by a civil judgment creditor. In other words, if you owe money on a judgment, the creditor cannot take away your home.
There are exceptions to what a homestead protects you from in Florida. The Constitution states that homestead is not protected from the following debts:
-Liens on the homestead voluntarily given to secure a loan, such as the mortgage to purchase your home or a home equity loan.
-Mechanics liens for goods and services provided to build, repair, or improve your homestead.
-Liens recorded prior to homestead acquisition to secure payment of homeowner association dues and special assessments.
-Property taxes, state taxes, and IRS tax liens.
How do you claim the Florida homestead exemption?
For asset protection purposes, nothing needs to be done to claim the exemption. The exemption applies the moment you occupy the home with the intent for the home to be your permanent residence. However, people seeking the homestead tax exemption may have certain filing requirements to claim the tax exemption.
What happens to a Florida homestead after death?
Homestead protection continues after the owner dies. A person’s homestead is not included in probate and it cannot be liquidated to pay a decedent’s creditors. If the decedent’s heirs or trustees sell the homestead after death the sale proceeds will pass to the decedent’s probate heirs and trust beneficiaries.
A creditor of the decedent has no additional remedies against the debtor’s homestead after the debtor’s death.
Are mobile homes protected under Florida Homestead Law?
The Florida Constitution’s homestead law 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 homeowners and occupants whose home is on leased land may claim the mobile home as their homestead and exempt it from levy and forced sale.
Can creditors put a lien on your house in Florida?
A Florida homestead property is generally exempt from civil judgment liens. However, you can always voluntarily place a lien on your homestead property. The most common example is your home mortgage. When you buy your homestead with a mortgage, you are voluntarily giving the lender a lien on your homestead property.
What does homestead mean in Florida?
For asset protection purposes, a Florida homestead is the place that you intend to be your primary, permanent residence.
The Homestead Act refers to Florida’s constitutional response to the expiration of the federal Homestead Act of 1862, which granted any U.S. citizen 160 acres of land if they agreed to live on and improve the land. The purpose of the federal Homestead Act was to encourage U.S. citizens to expand out west and other underdeveloped parts of the country.
Although the Homestead Act was passed in 1862, its benefits did not apply to people wishing to settle in Florida until 1873. But from that time until the Homestead Act was repealed, U.S. citizens could acquire land in Florida from the government in exchange for living on and improving it.
The current Florida Constitution, which was ratified in 1968, used this same number of 160 acres as a basis for the Florida constitutional homestead protection against forced sale and levy. In other words, the Florida Constitution ensured that those federal grants of up to 160 acres were protected.
Jointly Owned Homestead
Joint ownership of a homestead can jeopardize the Florida homestead exemption when one of the co-owners does not reside on the property. A judgment against the non-resident owner will be a lien placed on the debtor’s interest in the property. A judgment creditor of the non-resident co-owner can force the property to be sold.
For example, assume a married couple adds their child on the title to their homestead for estate planning purposes because they want ownership to pass to the child when the parents die. If the child resides elsewhere, he is not entitled to homestead protection of his interest in the parents’ residence. A civil judgment against the child would become a lien placed on the child’s interest in the home. The child’s judgment creditor in that situation could levy upon the child’s ownership interest in the parents’ house and force the house to be sold at auction. The auction proceeds would be allocated between the child’s creditor and the parents. The parents would lose their home.
Waiting Period for Homestead Protection
There is no waiting period for protection under Florida homestead law. 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.
Facts showing intent to occupy a homestead permanently, such as your drivers license and vehicle registration addresses, are more important than a declaration you sign or file with the court.
Fraudulent Conversions to a Homestead
A key feature of Florida homestead protection is the homestead’s exemption from fraudulent conversion allegations brought under Florida’s fraudulent conversion statute. Even after a lawsuit has been filed against them, 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.
According to a key Florida Supreme Court ruling, a person can convert 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. A Florida resident can always protect his money under the homestead umbrella even if the asset transfer was clearly designed to protect the money from existing creditors.
There is an exception to the fraudulent conversion protection in cases where the debtor obtained money by deceit, fraud, or other egregious means and then used the money to purchase or improve the debtor’s homestead. A creditor may impose and foreclose an equitable lien placed on a Florida homestead if the creditor can prove that the debtor obtained money fraudulently or in breach of a fiduciary duty and then subsequently invested the same funds in a homestead property.
This does not mean that a monetary civil judgment for common law fraud supersedes homestead protection. A debtor’s homestead is exempt from collection of a money judgment founded on fraud or deceit. The equitable lien exception applies only where fraudulently obtained funds were invested in a homestead property. A transferee, or recipient, of a judgment debtor’s fraudulent transfer of assets who subsequently invests the assets received into the transferee’s own homestead may be denied homestead protection because the debtor’s transfer was intended as a fraud against creditors.
Homes Under Construction or Under Contract
A property is not exempt under Florida Homestead law just because you intend to occupy the property some time in the future. Property held for a future residence cannot be homestead property until occupied. Future homes under construction are not exempt homestead properties. The homestead law requires that the debtor must actually reside in the property as a primary residence to have homestead protection.
If a civil judgment is recorded in the county where you own a house you intend to live in, or a lot upon which you are building a future home, the judgment lien will attach to the property. Your subsequent occupancy of the home as a homestead will not erase 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.
Homestead Tax Exemption vs. Creditor Protection
The rules for homestead creditor protection are different than the rules for the homestead property tax exemption. For example, the homestead tax exemption requires that you occupy your home on January 1 and that you file papers with the county tax assessor or property appraiser. These tax exemption requirements are irrelevant for asset protection of the homestead. You do not have to file any documents with courts to qualify for homestead protection from judgment creditors.
In addition, 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 in Bankruptcy
Florida homestead protection may not apply if the debtor files bankruptcy. Under bankruptcy law, homestead protection is available up to approximately $160,000 unless the debtor occupied his current Florida homestead property, plus any previous Florida homestead properties, for a continuous 40-month period. Joint bankruptcy debtors can protect approximately $320,000 of a jointly-owned homestead. These exemption limits 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 may be challenged by the bankruptcy trustee as a fraudulent conversion if the transfer was intended to defraud creditors. Bankruptcy law has no effect upon Florida’s unlimited homestead exemption in state court proceedings including state court allegations of fraudulent conversion into a homestead.
The simplest way to avoid probate of homestead property is to use a lady bird deed, or enhanced life estate deed. A lady bird deed allows the property owner to retain a life estate in the property with full control, use, and enjoyment of the property. Upon the owner’s death, title to the homestead will go to the holder of the remainder interest (often the children of the property owner). No probate or court proceeding needed.
Under section 196.031 of the Florida Statutes, the remainder interest should still qualify for homestead creditor protection as well as the tax exemption.
Florida residents can also put their homestead into a living trust, but a lady bird deed is much simpler.
Proceeds from Sale of Homestead
Proceeds from the sale of a residence that qualifies as a Florida homestead may be protected after the sale if the debtor demonstrates an intent to reinvest the proceeds in a replacement homestead. However, the judgment debtor must meet several requirements.
First, the debtor must show that he is actively looking for a new home. Also, the debtor must not co-mingle the homestead proceeds with funds from other sources. In order to keep homestead sale proceeds separate, many debtors deposit homestead money into a new and separate bank account. These accounts are referred to as “homestead accounts.”
There is no express time limit on investing the proceeds into a new Florida homestead. The Florida Supreme Court has only said that “whether funds received from the sale of a homestead are invested in another homestead within a reasonable time must be determined from the facts and circumstances of each case.” Courts have founds in some cases for a timeframe of four months to be reasonable, and even one or two years to be reasonable given the facts of particular cases. However, courts have also found that timeframes of four years and ten years to be too long in some cases.
A debtor should be wary before transferring proceeds from a homestead into other exempt property. Courts in several cases have found that the transfer of proceeds from an exempt homestead into other exempt assets can constitute a fraudulent conveyance. But courts in other cases have suggested that such a transfer is not fraudulent. For example, in In re Goldberg, a Southern District of Florida bankruptcy case, the Court considered a situation where a debtor refinanced his homestead and then transferred the cash from the refinance to his non-debtor spouse. The Court held:
The Debtor retained no interest in the funds generated by the loans against his homestead and never had possession of the funds since they were delivered directly to [his fiancée]. Moreover, the Debtor did not sell his homestead. The Debtor merely mortgaged and refinanced his homestead, encumbering the Real Property with liens that must be satisfied upon its sale. Mortgage and refinance proceeds are not the functional equivalent of sale proceeds. Thus, the fact that the Debtor did not reinvest the proceeds or have the requisite intent to reinvest the proceeds into another homestead within a reasonable period of time is irrelevant. The Court finds that no creditor could have forced the Debtor to mortgage his homestead to satisfy its claims. Thus, the Debtor’s creditors were not harmed and there was not, nor could there be, any fraudulent intent on the part of the Debtor.In re Goldberg, 229 B.R. 877 (S. D. Fla. 1998).
The same analysis might apply to transfer of funds from a homestead refinance or sale.
Last updated on July 30, 2021