How an Irrevocable Homestead Trust Can Protect Florida Families With Minor Children

The short answer: Florida law generally restricts how a homestead may be transferred at death when the owner is survived by a minor child. A will or ordinary revocable living trust may not override that restriction. In some situations, Florida Statute SS732.4017 permits a properly structured irrevocable homestead trust to transfer the property during the owner's lifetime while preserving defined rights for the homeowner.

Estate planning in Florida has a number of pitfalls for the unwary planner. Florida has a number of rules that creates complications and if you ask any estate planning attorney, the most difficult rule to deal with in estate planning is Florida Homestead laws. And things get even more complicated if you have a minor child.

What is Florida Homestead Property?

When most people think about homestead in Florida, they will generally think about the real estate tax exemption and cap that helps reduce property taxes. But Florida actually has three (3) different types of homestead, which are:

Constitutional Homestead Protection

Article X, Section 4 of the Florida Constitution basically states that a homestead property is exempt from forced sale by your creditors, excluding taxes, mortgages and mechanics liens. The Constitution further prevents devising your home upon your death to someone other than your surviving spouse or minor children.

Homestead for Descent and Devise Under Florida Probate Code

This is Section 732.401 of the Florida Probate Code, basically saying what happens if the homeowner devises the property to someone other than their spouse or minor children. Basically, if you own your home in your own name, if you do not give that home to your spouse when you die in your will or trust, without waiver, then the surviving spouse has the right to either a life estate in the property or 50% of home (if the decedent had children).

Homestead for Tax Purposes

This provides the $25,000 exemption as set forth in Chapter 196, Florida Statutes.

What Happens to a Florida Homestead When an Owner Has a Minor Child?

To review the rule, if a single person owns a home in Florida and dies with a minor child, no will or living trust can devise the homestead property. In essence, your minor child has the right receive the home when you die unless you do the right planning. 

Example: Mom, age 40, has two (2) children, ages 20 and 14. Mom has a will that gives her property to her children, but is subject to a trust so that any child does not receive his or her inheritance until that child reaches age 30. BUT, the Florida Constitution prevents Mom from devising her homestead property, so her last will and testament (or revocable living trust) cannot get around this. 

The Rule: If you have minor children, you cannot devise your homestead property when you die.

Why a Will or Revocable Living Trust May Not Solve the Problem

Normal estate planning cannot devise a homestead property when you have minor children. No matter what an estate planning attorney drafts in normal estate planning - a will or a revocable living trust - the Florida Constitution prevents the devise/bequest. If someone dies with minor children, the minor child will receive the home, no matter what.

This means that if you create a will or trust in Florida and you have minor children, your homestead property will go to your minor children. The most technical way to describe it is that the devise of the homestead will fail, leaving that property to be distributed to your living children. In the above example, no matter what Mom's will says (i.e., she created a trust for the benefit of her young children), her home would go equally to her children. With a minor child, that homestead property will be subject to a guardianship until that child reaches age eighteen (18) and the child will inherit his/her respective share outright at age 18.

How an Irrevocable Homestead Trust Works Under Florida Law

Florida law allows you to place your homestead property into an irrevocable trust that allows a way around the constitutional devise restriction. Under Florida Statutes Section 732.4017, the legislature created a legal way around the devise restriction. The irrevocable trust must features the following aspects:

• The trust must not be revocable by the grantor (the trust creator)
• The grantor of the trust cannot be the trustee of the trust
• The trust can allow the grantor the ability to live in the home and keep their homestead for taxation purposes
• The trust will not interfere with a bank mortgage on the property under Federal law as it is a "Grantor Trust"
  • Note that credit unions are not subject to the Garn-St. Germain Act 
• When the trust grantor dies, because the trust is set up in this particular way, and is irrevocable, the home is not subject to the constitutional devise restrictions
• BUT, the trust can be created so that when the minor child reaches age eighteen, the trust can terminates and gives the home back to the grantor. This way, the grantor will once again have full control of the home

Real Life Example: Homestead Planning for a Parent with a Minor Child

I had a client in her 70s come in recently and she has 6 children. She also legally adopted one of her grandchildren due to family reasons, so now she has 7 children, legally. Since she has a minor child, her last will and testament cannot devise the homestead property. If she were to die, no matter what her last will and testament says, her home must would be distributed equally to all of her children, and her adopted child's 1/7th interest would be subject to a court appointed guardianship until the minor reaches age 18. Further, once the minor reaches age 18, the guardianship terminates and her grandchild inherits what is left in the guardianship account.

Our Solution: Create an irrevocable trust that her responsible son is trustee of. Our client reserves the right to live in the home for her lifetime so her taxes are not affected. If our client dies before the grandchild reaches age 18, the irrevocable trust goes to her intended beneficiaries and the share going to the minor is held in trust until the grandchild reaches age 30. BUT when the minor reaches age eighteen, the trust will terminate and go back to our client, where the client can then do more traditional estate planning, such a setting up a revocable living trust in order to avoid probate for her family.

How Not to do this Planning

The key to understanding this is that estate planning with minor children is difficult if you want the homestead to not be subject to a guardianship if you die before the minor reaches age eighteen. But your last will and testament cannot get around these complicated rules. A revocable living trust cannot get around it. An enhanced life estate deed (a/k/a a "lady bird deed") cannot get around it, either. Only a properly drafted irrevocable trust can get around these devise restrictions.

We can help!

Our estate planning attorneys have experience with revocable living trusts, irrevocable trusts, homestead issues and more. Please contact us if you need help!