As discussed in previous Wealth Preservationist posts, one of the most significant forms of asset protection offered in Florida is the Homestead protection.
As a matter of background, your homestead is defined as your primary place of residence (assuming you are a permanent resident of Florida). Furthermore, homestead is limited to up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality. If you have more than 1 home in Florida, you can only declare one of the properties as your Homestead property.
Although this seems like a very strong protection tool, there are three scenarios in which the Homestead Protection will not prevail, IRS tax liens, mechanic’s liens associated with maintenance or construction of the specific homestead property, and liens related to mortgages and Home Owners Association dues. These classes of creditors can attack your Homestead property and force a sale to satisfy a judgement.
In a recent case (Dejesus v. A.M.J.R.K. Corp.) the Florida District Court of Appeals provided some clarity on the issue of ownership of a homestead. The main issue of the case was whether the beneficial homeowner could receive Homestead protection of a residence owned in a corporation. The court concluded that in order for a property to receive Florida’s homestead protection, it must be owned by a natural person. Furthermore, the court came to this conclusion even though the beneficial homeowner was the sole shareholder of the corporation.
This decision in Dejesus further clarifies the understanding that a business entity cannot qualify for homestead protection. In order to receive such protection, a property must be owned by an individual or a land trust.
Please do not hesitate to contact Morris Law Group should you have any questions about Florida’s Homestead protection.