Florida is generally considered one of the best states to retire in, due to its relatively low taxes and pleasant climate. These benefits have drawn many elderly Americans to move to Florida, in addition to many snowbirds who move between colder states, such as Minnesota, and Florida. One of the many tax benefits afforded to Floridians is Florida’s homestead exemption, which can provide tax exemptions of up to $50,000 on the value of their property.
Understanding how Florida’s homestead exemption impacts estate planning may be able to help Florida residents clarify their estate plans. Florida snowbirds may also benefit from understanding what qualifies for a homestead, to maximize the effectiveness of their estate planning efforts.
Consider speaking with a skilled Florida and Minnesota estate planning attorney from Roulet Law Firm, P.A. for more information on Florida’s homestead exemption. Schedule a consultation by calling (941) 909-4644 for the Florida office and (763) 420-5087 for Minnesota. Or you can fill out the form on this page and a member of our team will reach out to schedule your consultation.
Definition of a Homestead Property
A Floridian’s house is often their most valuable asset, therefore increased tax benefits on a house may be able to save them a significant amount. However, not every house is considered a homestead. In order to qualify for Florida’s homestead exemption, the property must meet a certain set of criteria.
To qualify for Florida’s homestead exemption, the property must be the owner’s primary and permanent residence. This means that secondary properties and real estate investments do not qualify for homestead exemption. The property must also be within certain size limitations. If the property is within a municipality, it must be ½ acre in size or smaller. For properties outside municipalities, the limit for size is 160 contiguous acres.
For those incorporating a Florida property into their estate planning process, a Florida appraiser may be able to help assess whether a property is eligible for Florida’s homestead exemption.
Homestead Exemption Benefits
Florida’s homestead exemption has significant effects on estate planning, as it offers numerous unique benefits. Floridians may be able to save up to $50,000 under the exemption, as well as other protections. According to the Florida Department of Revenue, the first $25,000 of the value of the homestead is exempt from all property taxation, the second $25,000 is taxable, the next block of $25,000 is exempt from non-school taxes, and the remaining value is taxable.
Protections From Creditor Claims
In addition to these tax benefits, homestead properties also have significant protection from creditors. Many creditors may be able to seize assets, up to and including real estate, to pay back debts in Florida. However, Florida’s homestead exemption may be able to provide significant protection from these creditors if they attempt to seize assets.
Caps on Property Tax Increases
While the homestead exemption offers tax exemption, it also helps reduce the increase in taxation when the property grows in value. Generally, the increase in a property’s value will lead to higher tax rates and greater costs to the owner. However, Florida’s homestead exemption prevents the taxable value of the homestead from increasing more than 3% annually in most situations. This makes the homestead exemption a helpful tool for estate planning, as it may reduce the rate of property tax increase every year.
For more information on the legal nuances of Florida’s homestead exemption, consider speaking with a skilled estate planning attorney from Roulet Law Firm, P.A.
Legal Limitations of the Homestead Exemption
Due to the nature of Florida homestead laws, certain legal limitations and restrictions apply to these exemptions that may complicate estate planning for some individuals. Most of these restrictions apply to who the property can be left to and other similar matters.
Homesteads in Florida have unique restrictions on who they can be left to. The right of survivorship entitles the individual’s spouse or minor child to the homestead, which means that the owner is not able to bequeath the property to anyone else if either of these parties is eligible to receive the property. This may have a significant effect on an individual’s estate planning process.
In addition to this, according to the Florida Statutes § 196.031, there are chances that the homestead may be considered abandoned and no longer eligible for Florida’s homestead exemption. If the property is damaged and no longer livable, the owner may be required to repair it and resume residence there before the end of five years. After this point, the homestead may be considered abandoned and no longer eligible for tax exemption.
How To File for Homestead Exemption
Once a homeowner and Florida resident has established their eligibility for Florida’s homestead exemption, they must then file the relevant documents with the authorities. The owner must provide certain documents to prove their residency in Florida, such as a valid Florida driver’s license, social security information, and vehicle or voter registration.
The relevant government office may send a request for registration once the deed of the house is registered in Florida, and the applicant may be able to file online, by mail, or in person. However, deadlines may apply to acquire the exemption for the current year.
Incorporating Homestead Laws Into Estate Planning Strategies
Understanding the impact of Florida’s homestead exemption may have significant benefits in estate planning. By incorporating these benefits into estate planning, homeowners may be able to reduce their property taxes significantly. In addition to this, they may be able to decrease the rise of tax amounts on their property due to the protections provided by Florida’s homestead exemption.
Additionally, accounting for the nuances of homestead law by bequeathing the homestead to the surviving spouse or a minor child. Updating wills or trusts to reflect Florida’s homestead law may help smooth out the rough patches of estate planning. Once these documents are updated, the homeowner may then be able to enjoy the benefits of increased protection from creditors and other tax benefits.
Protecting Your Homestead Status With Your Estate Plan
If you have a will, then you may want to consider using a trust to avoid probate upon your passing in Florida. This is especially important if you own real estate and assets in more than one state where setting up a trust can help your family avoid the need for probate in multiple states. If you already have a trust, then it is important that it meets Florida’s requirements for trusts; particularly, Florida’s requirements for homestead.
Florida law requires that trusts contain specific provisions in order to maintain homestead status for your home when it is put into the trust. This can be an unknown trap for many people who are snowbirds, or who have moved to Florida, but have trusts that were created in other states. That is one of the reasons you should have your estate planning documents updated by a Florida attorney if you are a snowbird or have moved here.
Contact a Florida and Minnesota Estate Planning Attorney Today
Florida’s homestead exemption is only one of the reasons the state is such a popular retirement destination. The favorable tax climate provides many benefits to those estate planning in Florida, as well as Minnesota snowbirds looking for a place to retire. For Florida residents or those moving to Florida, taking advantage of the homestead exemption can be a helpful tool to consider incorporating into an estate plan. For those wondering about Florida’s homestead laws, consider speaking with an experienced estate planning attorney from Roulet Law Firm, P.A. for more information. Schedule a consultation today by calling (941) 909-4644 for the Florida office and (763) 420-5087 for the Minnesota office. Or, you can fill out the contact form on this page and a member of our team will reach out to schedule your consultation.
Or, if you are not yet ready to schedule your consultation, and would like to learn more, here are some resources for you:
