Homestead Protection: How Vulnerable is a Home to Lawsuits?
By: Barry E. Haimo, Esq.
May 18, 2015
BARRY HAIMO: In Florida, the home is afforded the most protection of any asset that you can have. It is protected by the Florida constitution, and it has been protected and will continue to be protected. There are, of course, a few exceptions to that rule, but for the most part, you are very well protected if you own a home, and it is your homestead property.
Under the Florida Constitution, a “homestead” is a way of classifying real estate property. Your homestead refers to your primary place of residence—including the land and buildings.
There are some limitations on the types of real estate property that Florida will consider a homestead, but in general, this can refer to most types of homes. Houses, condominiums, manufactured homes, and mobile homes can all be considered homesteads.
Protecting Your Home from Creditors
Florida’s law is famously “debtor friendly,” with some of the most liberal laws in the country when it comes to asset protection.
Perhaps the strongest and best-known portion of these asset protection statutes is Florida’s Homestead Protection laws. Under these provisions, creditors cannot force the sale of your home in order to satisfy a judgement. What does this mean exactly?
If you have debt when you pass away, your estate will be vulnerable to creditors, who have a vested interest in settling your debts. If they cannot collect from you, the debt does not pass on to your heirs. From their perspective, your estate is the last opportunity for them to recover the value of your open account.
Creditors may file claims against your estate in order to collect on your debt. If they are successful, your bank accounts, property, and other assets you leave may be liquidated in order to settle your debt with them.
In many other states, this could mean that your home and land could also be liquidated—meaning that creditors could force the sale of your home if you owed them a significant enough amount of money.
Florida’s Homestead Protection
Under provisions outlined in the Florida Constitution, however, this is not the case if Florida considers your real estate property to be your “homestead”—your primary place of residence.
There are some specific limitations—the laws protect up to one half-acre if you live within a municipality. If you live outside of a city, 160 acres of contiguous property is protected. This includes lots with separate legal descriptions and tax numbers.
Florida’s Homestead laws only protect property owned by “natural persons.” “Natural Persons now includes revocable trusts if structured properly. Property that is titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships will not qualify for Homestead status.
The debtor in question must also be a permanent Florida resident. Property is not protected until it becomes the primary place of residence, and second homes or investment properties cannot be considered part of your homestead.
In Florida, your homestead will be protected from creditors in most situations. Your other assets, however, may be vulnerable to creditors and other external parties. An experienced and knowledgeable estate attorney will be able to provide counsel on the best ways to protect your estate from the frivolous lawsuits of predatory outside interests.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.