Homestead Protection in Florida

The benefits provided to homestead property under the Florida Constitution are often confused or misunderstood by property owners. These protections can be divided into three categories:

  1. Exemption from taxation – When most property owners think of the benefits of homestead property the think of the exemption from ad valorem real property taxes that is afforded to homestead property. For most owners of homestead property this exemption will equate to a $50,000.00 reduction in the valuation of your property for the purposes of calculating non-school related ad valorem property taxes and a $25,000.00 reduction in the valuation of your property for the purposes of calculating non-school related ad valorem property taxes. If you own a homestead property that is valued at $200,000.00 then you will pay property taxes based on a valuation of $150,000.00 for the non-school portion of your bill and a valuation of $175,000.00 for the school related portion of your bill. In addition to the foregoing exemptions the annual increase in property taxes on homestead property is capped at the lesser of three percent or the rate of inflation. Over time this can create significant tax savings for a homeowner.
  2. Protection from forced sale by creditors – Creditors cannot force the sale of homestead property to satisfy the debts of or judgments against the homeowner. This means that if someone obtains a judgment against you for money owed or because you caused an accident they cannot force you to sell your homestead in order to pay the judgment debt. There are a few important exceptions to this rule. A property owner can be forced to sell homestead to: 1) pay past due property taxes; 2) pay a mortgage holder of the property; 3) pay someone who is owed money for repairing/improving the property; 4) Liens against you that pre-date your establishment of homestead (often including condo and HOA liens that relate back). It should also be noted that this protection is extended to the proceeds of a sale of homestead property if the homeowner intends to use those proceeds to purchase a new homestead within a reasonable time. Finally, this protection is subject to acreage limitations of one-half acre within a municipality and one hundred sixty acres outside a municipality.
  3. Restriction on Alienation/Devise – A homeowner cannot convey title to homestead property without the joinder of their spouse. This is true even when the property is entirely in the name of one spouse or purchased with the funds of one spouse. Additionally, a homeowner cannot devise homestead property by will to a third party if that homeowner is survived by a spouse or minor child.

The forgoing is just a brief summary of the benefits provided to homestead property under the Florida Constitution. If you have any questions or concerns about how homestead laws apply to your situation please do not hesitate to contact us.

Enhanced Life Estates

Enhanced life estate deeds have become a popular instrument in estate planning and to understand why it is important to first understand how they differ from a standard life estate.

In a standard life estate deed the grantor typically conveys the property to another person (the remainderman) and retains a life tenancy for themselves (the life tenant). This allows the allows the grantor to convey the property to the remainderman but retain the full use of the property for the benefit of the life tenant during their lifetime. The life tenant in a standard life estate cannot convey an interest in the property without the approval and joinder of the remainderman.

An enhanced life estate differs from a standard life estate in that it only not only allows life tenant the full use and enjoyment of the property during their lifetime, but also reserves in the life tenant the right to sell, convey, lease, mortgage or otherwise manage and dispose of the property during their lifetime without the joinder of the remainderman. For obvious reasons, many individuals find the ability to retain these powers during their lifetime very desirable.

If you have any questions about enhanced life estates or any other estate planning or probate matters please do hesitate to give us a call at (305) 445-5351.

FIRPTA increase in withholding rate

Effective as February 16, 2016 the general withholding rate under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) was increased from 10% to 15%. FIRPTA is a tax law that imposes income tax on foreigners disposing of real property interests in the United States.

Until recently, 10% of the sales price was withheld from the sale by a foreigner to cover potential tax liability. The general withholding rate has now been increased. The 10% withholding rate will still apply in certain instances if specific exemption criteria are met but the general withholding going forward will now be 15%.