To qualify for protection and exemption of a homestead, a debtor must be a permanent Florida resident and the homestead property must be his primary place of residence.
Property purchased as a future residence is not protected until the property is occupied as a principal residence. A second home or investment property cannot be considered a Florida homestead.
Only "natural persons" qualify for homestead exemption protection. Properties titled in the name of irrevocable trusts, corporations, limited liability companies, or partnerships do not qualify. Property owned by a living trust or a revocable trust can be homestead property. A new Florida law provides that real property owned by a land trust may be homestead property.
What makes Florida's homestead protection such a powerful asset protection tool is its unlimited monetary protection. A Florida resident can invest millions of dollars in large estate homes and protect the full value of these luxury residences under Florida's homestead law just like O.J. Simpson and Scott Sullivan have done!
Under a Florida Supreme Court ruling, a person can transfer unprotected, non-exempt assets to his homestead at any time by either buying a new home or reducing the principal balance of an existing mortgage and protect this money under the 'homestead cloud', even if the asset transfer was clearly designed to hide money from a creditor's claims. There are limited exceptions to this general rule pertaining to money obtained by deceit, fraud, or other egregious means.
The Florida Constitution does not protect homestead property against tax liens, mortgages, homeowner's association assessments, special assessments or from mechanic's or contractor's liens associated with labor or materials to repair or improve the homestead property. Also, the asset protection benefits of homestead should not be confused with the homestated property tax exemption. The property tax exemption and creditor exemption are similar but different laws and different rules apply to each scenario.
Homestead protection may not apply if the debtor files bankruptcy. Under the new bankruptcy laws, homestead protection is available in bankruptcy up to $137,000 unless the debtor occupied his current Florida homestead property and previous Florida homestead properties for a continuous 40-month period.
Joint bankruptcy debtors can protect $274,000 of jointly owned homestead equity. Also, transfers of cash into a homestead within 10 years which was intended to defraud any creditors, may be challenged by the bankruptcy trustee. The new bankruptcy law has no effect on Florida's unlimited homestead protection outside of bankruptcy court.
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