Florida’s “Wildcard” Exemption – An Update

Florida Homestead in Probate – Recent Changes

A homestead cannot be devised by Will in Florida if the decedent is survived by a spouse or minor child. Most married couples with a minor child avoid this problem by placing the home in joint names. If the homestead is not in joint names, Article X, sec 4(c) of Florida’s Constitution allows a homestead to be devised to a spouse if there are no minor children. When a homestead can not be devised, its inheritance is controlled by Florida Statutes sec. 732.401. Until recently, a surviving spouse would always receive a life estate, with the children receiving a remainder interest. If the surviving spouse and children do not get along, the obligations between a life tenant and the remaindermen can create conflicts. There is no partition rights between the life tenant and the remainderman, so neither the surviving spouse nor the children can force a sale of the property. Recent changes in legislation have provided a solution to this problem for the surviving spouse.

Florida Statute sec 732.401 now gives a surviving spouse an alternative to receiving a life estate. For 6 months after the death of the owner of a Florida homestead, the surviving spouse can file an election to take a half-interest instead of a life estate. The election is made by recording a form, included in the statute, in the public records of the county where the property is located, within 6 months of the spouse’s death. This election is not tied to a probate. The election is instead filed in the public records.

Florida Constitution Article X, sec. 4(c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.

Florida Statutes sec. 732.401 Descent of homestead.—
(1) If not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent’s death per stirpes.
(2) In lieu of a life estate under subsection (1), the surviving spouse may elect to take an undivided one-half interest in the homestead as a tenant in common, with the remaining undivided one-half interest vesting in the decedent’s descendants in being at the time of the decedent’s death, per stirpes.
(a) The right of election may be exercised:
1. By the surviving spouse; or
2. With the approval of a court having jurisdiction of the real property, by an attorney in fact or guardian of the property of the surviving spouse. Before approving the election, the court shall determine that the election is in the best interests of the surviving spouse during the spouse’s probable lifetime.
(b) The election must be made within 6 months after the decedent’s death and during the surviving spouse’s lifetime. The time for making the election may not be extended except as provided in paragraph (c).
(c) A petition by an attorney in fact or guardian of the property for approval to make the election tolls the time for making the election until 6 months after the decedent’s death or 30 days after the rendition of an order authorizing the election, whichever occurs last.
(d) Once made, the election is irrevocable.
(e) The election shall be made by filing a notice of election containing the legal description of the homestead property for recording in the official record books of the county or counties where the homestead property is located. The notice must be in substantially the following form:
ELECTION OF SURVIVING SPOUSE
TO TAKE A ONE-HALF INTEREST OF
DECEDENT’S INTEREST IN
HOMESTEAD PROPERTY
STATE OF
COUNTY OF
1. The decedent, , died on . On the date of the decedent’s death, The decedent was married to , who survived the decedent.
2. At the time of the decedent’s death, the decedent owned an interest in real property that the affiant believes to be homestead property described in s. 4, Article X of the State Constitution, that real property being in County, Florida, and described as: (description of homestead property) .
3. Affiant elects to take one-half of decedent’s interest in the homestead as a tenant in common in lieu of a life estate.
4. If affiant is not the surviving spouse, affiant is the surviving spouse’s attorney in fact or guardian of the property and an order has been rendered by a court having jurisdiction of the real property authorizing the undersigned to make this election.

(Affiant)
Sworn to (or affirmed) and subscribed before me this day of (month) , (year) , by (affiant)
(Signature of Notary Public-State of Florida)
(Print, Type, or Stamp Commissioned Name of Notary Public)
Personally Known OR Produced Identification
(Type of Identification Produced)
(3) Unless and until an election is made under subsection (2), expenses relating to the ownership of the homestead shall be allocated between the surviving spouse, as life tenant, and the decedent’s descendants, as remaindermen, in accordance with chapter 738. If an election is made, expenses relating to the ownership of the homestead shall be allocated between the surviving spouse and the descendants as tenants in common in proportion to their respective shares, effective as of the date the election is filed for recording.
(4) If the surviving spouse’s life estate created in subsection (1) is disclaimed pursuant to chapter 739, the interests of the decedent’s descendants may not be divested.
(5) This section does not apply to property that the decedent owned in tenancy by the entireties or joint tenancy with rights of survivorship.

Recent Bankruptcy Rule Amendments

Bankruptcy practitioners should be aware of the amendments to the Bankruptcy Rules which became effective on December 1, 2010. Several changes are worthy of note.
Amendments to Bankruptcy Rule 1019 make it clear that interested parties (usually the Chapter 7 trustee) get a new time period to object to a debtor’s claim of exemptions in a case case converted to Chapter 7 from another chapter, with a few exceptions. Courts have been divided over this issue. The Southern District of Florida has one published decision, In re Ferretti, 230 B.R. 883 (Bankr. S.D. Fla. 1999), which held that a conversion from Chapter 13 to Chapter 7 did not create a new time period for the trustee to object to the debtor’s claim of exemptions. The Middle District of Florida has several published opinions on this issue, including In re Booth, 259 B.R. 413 (Bankr. M.D. Fla. 2001), a well written opinion (as usual) by Judge Williamson which noted the conflict among courts on this issue. Prior to the recent amendment to Bankruptcy Rule 1019, the only rule addressing the deadline to object to exemptions was Bankruptcy Rule 4003, which sets the objection deadline at 30 days after the conclusion of the meeting of creditors.
Another change allows an objection to a Chapter 7 or Chapter 13 discharge by motion instead of by adversary proceeding if the objection to discharge is based on 11 U.S.C. secs. 727(a)(8), (a)(9) or 1328(f). These sections provide that a debtor cannot receive a discharge if he received a discharge in another bankruptcy within certain time periods. A debtor cannot receive a Chapter 7 discharge if the debtor recieved a previous Chapter 7 or 11 discharge in a case filed in the previous eight years or a Chapter 12 or 13 discharge in a Chapter 12 or 13 filed in the previous six years (with some exceptions if creditors were paid at least 70% of their claims). A debtor cannot receive a Chapter 13 discharge if the debtor received a previous Chapter 7, 11 or 12 discharge in a case filed in the previous four years or a Chapter 13 discharge in a Chapter 13 filed in the previous two years. The reason for this rule change is obvious. There is no need for the formalities of an adversary proceeding when the time a previous bankruptcy was filed can be easily proven.
The recent amendments contain several other important changes. All bankruptcy practitioners should familiarize themselves with the rule amendments.

Amendments to Florida’s Probate Code

Recent amendments to Florida’s Probate Code became effective on October1, 2010.  Chapter 2010-132, Laws of Florida, should be required reading for all Florida lawyers whose practice includes probate.  Some of the changes only clarify existing law, such as the changes relating to formal notice.  Other changes are significant, including new section 732.805 which deals with marraiges procured through fraud and changes to section 731.119 which allow an interested party who is not a creditor to file a caveat before someone dies.

Other changes that are impotant include changes to section 732.4015, which affect disclaimer of the homestead and 732.4017 which may affect an intervivos transfer of a homesead.

The most significant changes in these amendments affect the surving spouse’s homestead rights.  Article X, section 4 of Florida’s constitution restrict a person’s ability to devise their homestead if survived by a spouse or minor child.  If a person’s homestead is not jointly owned with their spouse and he or she is survived by a spouse and minor child, the homestead will pass to the spouse for life, with a remainder interest in the decedent’s children.   The recent amendment to section 732.401, Florida Statutes, allows a surviving spouse to elect to take a one-half interest instead of a life estate.  This election must be made within 6 months of death and is made by filing an election in the public records.  The form for the election is set forth in the statute.

Amendments to Probate Rules

Amendments to Florida’s Probate and Guardianship Rules become effective January 1, 2011. There are numerous changes intended to clarify the existing rules. At least three changes should be brought to the attention of all probate practitioners.
F.P.R. 5.030 allows attorneys to file a limited appearance in a probate case. Upon completion of the limited appearance, the attorney files a notice of completion so that he or she is no longer an attorney of record.
F.P.R. 5.110 requires a personal representative or guardian to notify the court of a change of address within 20 days.
F.P.R. 5.340(f) requires the personal representative to give each non-residuary beneficiary notice of their right to receive a written explanation of how the value of any asset they are to receive was valued.

A copy of the amended rules is available at http://www.floridasupremecourt.org/decisions/2010/sc10-171.pdf