In addition to the annual savings, claiming Florida homestead entitles you to a cap on the annual increase to your home’s assessed value. Even if the value of your residence exceeds a 3% increase, the appraiser’s office can only increase the value by 3%. Over the years, the “Save Our Homes Property Tax Assessment Cap” can save thousands of dollars.
Today, however, I wish to discuss a lesser-known consequence of Florida homestead. This has to do with the “descent and devise” rules found under Florida’s Constitution and our statutes.
Simply stated, if your spouse and/or minor children survive you, you cannot devise your home (through your will or trust) to anyone other than your spouse. If you devise the homestead to any other person or entity then that devise is invalid.
Assume, for example, that you and your spouse purchased your Florida home before you became a Florida resident. In order to “balance out” your estate for federal estate tax purposes (necessary under the old estate tax laws but different since portability implemented in 2012) your attorney up north may have advised to place the Florida homestead in one spouse’s trust and the northern residence into the other spouse’s trust.
The trusts probably contain “credit shelter” and/or “marital trust” provisions for the surviving spouse. Even if the trust of the deceased spouse continues on for the surviving spouse, and if that trust owns the Florida homestead, it is an invalid devise. The devise may have been perfectly fine the day before you became a Florida resident, but once you claimed Florida residency, this problem arose.
When an invalid devise exists, then Florida law does not care what your will or trust says about who is to inherit your homestead. Instead, your spouse may choose between a “life estate” interest in the home or an undivided ½ interest as tenants in common. The rest of the interest of the home is owned by the decedent spouse’s children.
What this means is that the surviving spouse cannot sell the home without the consent of the children, and the children must agree as to the sales price and will share in the sales proceeds. If any one of the children do not consent to a sale or transfer, then it cannot occur. Further, if one of the children has an economic, tax, creditor or divorce issue then the title of the home may become clouded.
Obviously, an invalid devise should be avoided. An update of the estate plan to Florida documents and Florida law is the first step. Sometimes more advanced planning is necessary. Take, for example, the circumstance where husband and wife are in a second marriage, each with children from a prior marriage. Wife owns the home, but if she predeceases husband she wants him to remain in the home rent free for the rest of his life, but also wants the equity of the home to one day benefit her children and not his.
Wife may even want husband to have the opportunity to sell the home and reinvest the proceeds into a new home of his choosing, so long as the equity of the original home ends up with her children.
In order to satisfy wife’s intent, it will be necessary for husband and wife to enter into a valid nuptial agreement waiving the Florida Constitutional and statutory homestead descent and devise rights. Under Florida law, such a nuptial agreement will require each party to have separate legal counsel, as well as full disclosure of their assets, even though the parties presumably don’t wish to waive rights to each other’s assets.
Once the husband and wife satisfy the nuptial agreement/waiver requirement, then wife can direct her attorney to draft an appropriate residential property trust within her will or trust documents.
This is but one example of how the Florida descent and devise laws affect the disposition of one’s homestead. If you own Florida homestead and haven’t updated your legal documents, it may be time to visit with a qualified estate planning attorney to discuss these important issues.