Florida Homestead and Asset Protection Part I

Homestead laws are very important from the standpoint of asset protection.  In some states, homesteaded property is completely exempt from the claims of creditors.  In other states, homestead protection exempts a certain dollar amount from the claims of creditors.  We are going to post a series of articles relating to homestead laws.  If you have questions about the best way to take advantage of these laws or how they apply to you, contact an asset protection attorney today.

Florida Asset Protection

Florida homestead laws offer excellent protection for individuals domiciled in Florida.  To take advantage of homestead laws, one only needs to be be a permanent resident of Florida and the property at issue must be his or her primary residence.  That’s it!  Homestead protection attaches immediately.  There is no waiting period.  While Florida statutes do allow for a formal declaration of domicile through the courts, that formality is not necessary.  What really matters is a homeowner’s intent with respect to his or her residence.

Exceptions to Homestead Protection

Some “super creditors” can use homesteaded property to satisfy their claims.  Claims that can defeat a homestead include tax liens, homeowner’s association assessment liens, mortgages, and liens for labor and materials used to improve the homesteaded property.  Also, homesteaded property is not protected from judgment liens recorded before a homestead is created.  In this sense, homestead laws are similar to fraudulent conveyances.

In another sense, homestead laws provide a limited window to get around fraudulent conveyance laws.  The Florida Supreme Court has ruled in the past that a debtor can transfer non-exempt assets into a homestead at any time, even if the transfer is designed to move assets beyond the reach of creditors.  Of course, there are important exceptions to this rule.  Assets obtained criminally or by fraud, for example, will not be protected.

Other Issues Pertaining to Asset Protection

The general rule is that homestead protection is only available to individuals, or “natural persons.”  However, there are important exceptions involving trusts that we will discuss in the next article on Florida asset protection.  Another issue we will discuss is the general availability of homestead protection as it relates to bankruptcy.  Everything discussed up to this point has pertained to creditor claims outside of bankruptcy.  The bankruptcy rules with respect to homesteads, and exempt assets in general, are the same across the U.S., but that doesn’t mean that everyone gets the same benefit of a homestead.  Bankruptcy rules largely look to asset exemptions provided by state laws.  So the homestead exemption available in a Florida bankruptcy proceeding will be very different from the exemption available under California asset protection laws.