Someone domiciled in Florida would not merely own the primary Florida residence, that person would own a Homestead. Under the Florida Constitution the Homestead is very special in at least three respects: real estate taxation; creditor protection; and descent and distribution. Estate planning is all about “descent and distribution.” So if a Florida domiciliary owns a home in Florida, the estate planning rules are quite different and can be very complex. The Homestead is one of those assets that has its own estate plan built into it. To bring that plan in line with what the owner may want to do with the over-all estate, that person must take great care.
A client of mine so far in his life had been very successful in building his business, but less so in building his marriage. The couple had divorced. They had two little children, who continued to live with their mother in what had been the family’s residence. Life went on. The father built his business further. He bought a new home for himself and moved into it. He found someone new, they married, and she moved into his new home.
But he was careful about this new marriage. He required his new wife to enter into a prenuptial agreement well before the wedding date. In that agreement, among other things, she waived her Homestead rights in his estate. As he put it to me, he had been “burned once.” Furthermore, he did not intend to put his new wife “on the deed” to his Homestead. It would remain in his sole name.
However, he told me, the new marriage was going very well. He wanted his new Will to give the residence to his new wife, if he predeceased her. He could always change the Will, if things turned rocky.
That would work, I told him, but only if, at his death, he had no children then living under the age of 18. With a child under the age of 18 at his death, despite what the Will might say, his wife would get a life-estate only, with the Homestead going to his children, per stirpes, at her death, regardless of how old the children might be at that subsequent death. Furthermore, before my client married his new wife, she had talked to him about wanting to have children by him and he agreed with that idea. In fact, she was already pregnant with the client’s child. So it looked like it could be quite a long time before all of my client’s children would be over the age of 18.
(Furthermore, I advised the client to amend the prenuptial agreement so that the new wife did not waive her Homestead right to a life-estate. I did not know – and still do not know – whether that was necessary, but I was taking no chances.)
Owning merely a life-estate and not full title would be complicated for the new wife. She would have to deal with the ownership interests of the children until she died. As to the children of my client’s first marriage, she would have to deal with the client’s former wife with respect to their interests until they reached 18. As a child reached 18, then she would have to deal directly with that child. By “dealing” with the former wife and those children I refer to matters of Homestead maintenance, repairs, loans, insurance, and other aspects of home ownership that would affect the value of the house after the new wife died. Having to deal with such co-owners is beyond unhappiness in many cases.
(In 2012, Florida revised its laws in an attempt to address the unhappiness by giving the surviving spouse an election to take a one-half interest in the decedent’s property, in lieu of the life estate. See F.S. 731.401(2). This is, obviously, a half-a-loaf solution. Further discussion of that revision is beyond the scope of this post, however, which is already complicated enough.)
A way out of this mess, however, sounds fairly simple and often is. The husband could “put his wife on the deed,” that is, he could, by recording the right kind of deed, a deed that would name himself and his new wife as the new co-owners, fix it so that the two of them would own the house together, as tenants by the entireties. (“TBE”) See F.S. 432.401(5). This is a way that a Florida couple can own Homestead in Florida so that, if one spouse dies, the surviving spouse takes complete ownership – no remainder interests to children, whatever their ages.
But that is not what the client really wanted, of course. Furthermore, that solution creates its own problems if the new wife, now a widow, marries again. But welcome to Homestead.