Don’t Lose Those Homestead Protections
Florida’ constitution provides broad protection for a homestead. Your homestead is generally protected from creditors, and protected even from bankruptcy courts. A homestead is generally considered a great asset protection mechanism, and there are also very significant breaks on taxes for homestead properties.
A family only gets to declare one homestead (other than those who are legally married but living apart and are financially independent from each other). This seems like a common sense idea to most. The law doesn’t allow someone to have multiple properties that get the protection, and the generally accepted definition of a home implies there’s only one.
Recent Case Challenges Homestead Interpretation
A recent case challenged that interpretation of the Florida Constitution. In it, Broward County withdrew homestead status on a Florida property, because a homeowner’s husband had already declared homestead status on property located outside of Florida.
That property was given up, and the county again re-instituted the homestead status on the Florida property again—but the homeowner had lost the “save our homes” protections. This is a law that says that the taxed (appraised) value of homestead property can only increase by a pre-set, limited amount. Thus, if property is lived in for many years, and the value goes up, homeowners will still have affordable property taxes. But the property must be continuously homesteaded to get that protection.
Here, because of the previously lost homestead status, the appraised value of the property was “reset” to the current value, and was much higher than it would have been had the homestead status been maintained continuously.
Courts Uphold Homestead Restriction
The trial court and the appellate court looked to the plain language of the constitution, which plainly states that there is only one exemption per family unit. Florida statute also specifically says that if someone is getting the benefit of a tax exemption or credit in another state, they can’t get one in Florida.
The homeowners also argued the law was unconstitutional, because it effectively was altering the homestead rights of the Florida Constitution, and the legislature can’t pass laws that alter rights in the Constitution.
The court disagreed with this as well, as the law didn’t limit or alter the homestead protections of the Florida Constitution, given that someone with property in another state was still getting the tax benefit and other protections encompassed by the Constitution.
Be Careful When Transferring Property
Always be careful when giving up homestead status. There are many schemes out there that require homeowners to transfer their properties into real estate trusts, or corporations. Many lenders, seeking to avoid governmental lending regulations in residential mortgage loans, are asking loan applicants to do just this.
But transferring property into an LLC, trust, or corporation, can have serious consequences and jeopardize homestead status. Be very careful before altering your homestead status, or before accepting any homestead advantage that comes from property in any other state.
Make sure your property is protected and that you don’t lose valuable asset and estate planning tools. Contact Tampa business, asset and probate attorney David Toback to discuss a comprehensive estate plan.
