Florida's Homestead protections are actually three distinct protections under Florida law, each with a different purpose and effect: asset protection, reduced property taxes, and protection of surviving spouses and minor children. Each is explained below.
The Florida Constitution exempts homestead property from levy and execution by most creditors. So long as the property qualifies as homestead, the amount that can be protected is not limited, which makes the Florida Homestead an excellent asset protection vehicle. Even if the purchase of the homestead was designed to defeat creditors, the protection still applies.
Under the Bankruptcy Reform Act of 2005, however, debtors in bankruptcy may lose all or a portion of the homestead protection. In bankruptcy, homestead protection is capped at $125,000, unless the debtor occupied the Florida homestead property and previous Florida homestead properties for 1215 days prior to the bankruptcy filing. Also, transfers into Florida Homestead within 10 years intended to defraud creditors may be challenged by the bankruptcy trustee.
Federal creditors, such as the Internal Revenue Service, mortgage holders, and persons holding mechanics liens on Florida homestead property are not restricted by the Florida homestead provisions.
Under Florida's Save Our Homes Act, the assessed value of a Florida Homestead is restricted to an increase of no more than 3% per year.
If a Florida resident passes away owning a Florida Homestead in his or her own name, if the resident had minor children, the minor children are entitled to the entire property, or, if the resident was married, to no less than a remainder interest in the property. A surviving spouse is entitled to no less than a life estate in Florida Homestead property. The homestead provisions can be a trap for the unwary, especially for those with estate plans drafted while a resident of another state. For example, a person owning a house in New York and a condominium in Florida may have decided, while a New York resident, to leave the house to his spouse and his condominium to a daughter from a first marriage. If the person retires to Florida as a resident and then passes away, his spouse will inherit the house under the terms of the will and then be given a life estate in the Florida condominium.