Estate planning gives you vital control over your assets and how they will be distributed upon your death. This can provide immeasurable peace of mind and relief; you have the details ironed out, and you can live life to the fullest without worrying about how your death will impact your beneficiaries in terms of their finances and living situation. With that off your mind, you can grasp every day! Now, the process can be complex and it is understandable that you have a lot of questions racing through your mind. One of the biggest relates to what is likely your biggest asset: your house. What do you need to know about Florida living trusts and how they may impact your Florida homestead exemption?
Revocable Living Trust: Florida Homestead Exemption
A revocable trust is one that you can change and amend as you see fit. Life changes, circumstances change, and so can your trust. Now, when considering whether to put your home into a trust, it is important to look at all the implications. One concern is that putting your home in a trust will forfeit your homestead exemption.
Now, when we talk about revocable living trusts and the Florida homestead exemption, we are not talking about a homestead tax break. Instead, this refers to the protection you are granted from creditor judgments, liens, or attachments. To back up for a moment: in Florida, a “homestead” is a real property no larger than 0.5 acres of contiguous land in a municipality or up to 160 acres outside a municipality-owned by a “natural person.” To qualify as a homestead, you (and/or your family) must live or intend to live in the home permanently. You don’t necessarily have to be living in the home at the time of your death.
Most states cap homestead exemption protections. In Virginia, for example, the allowable exemption is just $5000. Value beyond that is not protected from creditor claims. Florida is different: there is no cap on the value of the property.
As mentioned, under Florida law, the homestead exemption is for properties owned by natural persons. So, is a trust a natural person, and will it be able to take advantage of the homestead exemption?
Good news: the law considers a revocable living trust as an “alter-ego” for you. When you live in your home and retitle it (or transfer it) into a trust, your homestead protections remain in place. It can get more complicated, which is why it is essential to have an experienced estate lawyer draw up or review your revocable living trust. You want to retain all of the protections to which you are legally entitled.
Do not hesitate to contact Elder Laws West Palm Beach Trust Attorneys to ensure your last wishes are honored and that you remain protected during life.
When a Florida residence qualifies as a “homestead,” it can’t be attached (i.e., sold or liened to satisfy a debt) by most creditors. And, in bankruptcy, a trustee can’t liquidate a protected homestead to satisfy creditor claims.