Florida’s Homestead Protection & Benefits of a Lady Bird Deed

Posted by CSG Firm on

Homestead protection in Florida is a crucial aspect of the state’s legal framework, offering residents significant safeguards in terms of creditor protection, tax exemptions, and transfer restrictions. The following is a breakdown of these key protections:

  1. Homestead Protection From Creditors:

    • Florida’s Constitution, Article X, Section 4, exempts homestead properties from creditors, meaning creditors cannot force the sale of a homestead to satisfy a judgment.
    • The definition of homestead has been expanded to include diverse types of residential properties, including houses, condominiums, manufactured homes, and mobile homes.
    • To qualify for creditor protection, the debtor must be a permanent Florida resident, and the homestead property must serve as the primary place of residence. Property purchased as a future residence is not protected until it is physically occupied as the primary residence.

  2. Homestead Tax Exemptions:

    • The Florida Homestead tax exemption reduces the taxable value of real property by up to $25,000 for individuals and $50,000 for married couples.
    • This ad valorem tax exemption is available to Florida residents who own and reside in the property as their primary residence.
    • The exemption does not apply to properties used for businesses, rental purposes, or as second homes, providing considerable savings on property tax bills for residents.

  3. Transfer Restrictions:

    • Florida’s Constitution prohibits the devise of a homestead property through sale, transfer, or conveyance if a spouse or minor child survives the owner.
    • Similarly, upon the owner’s death, the homestead cannot be devised or left through a Last Will & Testament, Trust, or other means if survived by a spouse or minor child, except to the surviving spouse and minor child.
    • These transfer restrictions, outlined in Florida Statute 732.4015, aim to protect surviving spouses and minor children’s rights to homestead property.

It is important to note that this overview provides a general understanding of homestead protection in Florida. For specific legal advice and guidance on how homestead protection can work within one’s estate plan, it is advisable to consult with experienced estate planning attorneys who can navigate the technical details and ensure one’s interests are protected.

Lady Bird Deeds

Lady Bird Deeds in Florida offer several significant benefits for estate planning purposes, making them a valuable tool for property owners. The following is a summary of the key advantages of using a Lady Bird Deed in Florida and does not adversely affect homestead protections:

  1. Probate Avoidance:

    • A Lady Bird Deed allows property owners to transfer their property to beneficiaries without the need for probate court proceedings.
    • Upon the death of the property owner, the property automatically passes to the remaindermen, or remainder beneficiaries named in the deed, avoiding the probate process.

  2. Preservation of Homestead Benefits:

    • By using a Lady Bird Deed, property owners can retain their homestead benefits, including protection from creditors and eligibility for homestead tax exemptions.
    • The property remains exempt from creditors’ claims and qualifies for the Florida Homestead exemption, even after the transfer through the Lady Bird Deed.

  3. Preservation of Medicaid Eligibility:

    • Lady Bird Deeds allow property owners to maintain eligibility for Medicaid benefits.
    • Since the property transfer occurs outside of probate and does not affect the property owner’s ability to live on the property, it does not impact Medicaid eligibility.

  4. Step-Up in Basis at Death:

    • Upon the death of the property owner, the property receives a step-up in basis to its fair market value at the date of death, which can result in potential tax savings for beneficiaries if the property is later sold.
    • This step-up in basis can help minimize capital gains tax liability for beneficiaries when they sell the property.

Additionally, Lady Bird Deeds in Florida do not incur documentary stamp taxes upon execution, providing further financial benefits for property owners. This means that property owners can transfer property to beneficiaries without incurring additional tax liabilities.

It is important to note that while Lady Bird Deeds offer numerous advantages for estate planning, they may not be suitable for every situation. Property owners should consult with experienced estate planning attorneys to determine if a Lady Bird Deed aligns with their specific goals and circumstances.

The foregoing is a brief and general overview of the topic.

If you have any additional Questions regarding the foregoing or have any legal issue or concern, please contact the law firm of CASERTA & SPIRITI in Miami Lakes, Florida.