Florida’s homestead property law, FL Statute 732.401, was amended effective October 1, 2010. If you are the sole owner of homestead property and wish to leave the home outright to your spouse, you may still do so. The law does NOT impact on that aspect of your planning.
Impact on spouse’s life estate
However, if you are planning to leave your spouse a life estate, the law may affect you. The change in the law may have particular impact on those involved in a second marriage who have children from a prior marriage. The new law applies to anyone who dies after Oct. 1, 2010, regardless of the date of marriage.
Prior to Oct. 1, if you owned homestead property in your name alone and did not have a valid prenuptial or postnuptial agreement to the contrary, your surviving spouse was automatically entitled to use, occupancy and possession of the homestead for the rest of his/her life (a “life estate”). The surviving spouse was required to pay for the upkeep and maintenance of the property, including mortgage interest, property taxes, etc. When the surviving spouse died, the property reverted to the first decedent’s children.
Although this arrangement was intended to protect the surviving spouse, it also created problems for some. Some surviving spouses found themselves unable to pay for the upkeep of the home. It also created potential for conflict between the survivor and the late spouse’s children. Tax evaluation issues and selling the home could also be problematic during the time period the survivor had the life estate. The new law is intended to provide financial relief for the surviving spouse, and to address some of these other problems.
Surviving spouse can now choose between life estate and 50% ownership
Effective October 1, 2010, the surviving spouse has a choice: Keep the life estate OR become a 50% owner of the homestead property, with the decedent’s children owning the other 50%. This creates “tenants in common.” The survivor has up to six months from the date of the spouse’s death to choose either a 50% ownership or the life estate. Once made, the choice is irrevocable.
Moreover, under the new law, if the surviving spouse chooses 50% ownership, the survivor or the deceased spouse’s children may be able to force the sale of the homestead property, regardless of what the other party desires. The surviving spouse and the decedent’s children will then split the proceeds equally.
The impact of the new law will depend on a family’s specific circumstances, goals and estate plan. Some families will find the new law beneficial. Others will find that it throws a monkey wrench into their estate planning and foments family conflict. Therefore, anyone with an existing estate plan who intends to leave a spouse a life estate should revisit his/her plans. Below is a concrete example of how the new law could negatively impact on an estate plan:
Example of of how the new law works
Let’s say Jim, 80, is married to Gina, 76. This is a second marriage for both, and they have been married for 10 years. Both have grown children from prior marriages and all of them get along reasonably well. Jim is the sole owner of the home in which they reside. Jim intends for his wife to have a “life estate” if he predeceases her. There is no prenuptial or postnuptial agreement to the contrary. Jim also desires that his two children from his prior marriage inherit the house after he and Gina pass away. His estate plan is predicated on these desires.
Jim dies first. In a few months, Gina decides she cannot handle the expenses and the responsibility of maintaining the house. Therefore, she elects to become half-owner of the homestead property and decides to force the sale of the home — even if Jim’s children do not agree – and divide the sale proceeds with his children. Obviously, this is inconsistent with Jim’s original plan for his children
A further potential complication of the new law: If Gina chooses not to sell the property, at her death she may leave her half-ownership to anyone she pleases – including her children from her first marriage, not Jim’s children. Under this scenario, Gina’s children and Jim’s children would become co-owners. They would have to coordinate the sale of the home, including hiring a broker, deciding on a sale price, and a method to maintain and pay for the property expenses (taxes, electric, mortgage, homeowners association fees, etc.) until it is sold. This situation can become highly complicated.
If you do not yet have an estate plan in place, the new homestead law should be carefully considered within the context of your overall planning. If you have a plan predicated on the old homestead law that envisions leaving your spouse a life estate, you should have it reviewed, even if you have a prenuptial or postnuptial agreement. Contact the attorneys of The Karp Law Firm.
