Is Homestead in Living Trust Protected?
There has been much debate among estate planning attorneys about the pros and cons of deeding your homestead to a living trust. One benefit often mentioned is avoidance of probate upon death. But, because homestead is exempt from creditors, the homestead passes quickly through any probate proceeding. Also, homestead jointly owned between spouses automatically passes to the surviving spouse
The biggest issue in asset protection is that the Florida Constitution only protects homestead properties owned by "natural persons." The legal question is when a homestead is owned by the trustee of a living trust is the homestead still owned by a natural person and therefore eligible for creditor protection. The courts are split. There is one Florida decision which denied creditor protection to a homestead owned by the grantor's living trust even though the settlor resided in the property; a subsequent decision from a different court upheld homestead asset protection for a living trust. Until this legal issues is resolved, there is an asset protection risk in transferring your primary residence to a living trust. People vulnerable to lawsuits should beware.
I was wondering if anyone had thoughts on TBE trusts, from an asset protection and estate planning standpoint. Do such trusts allow h and w to retain the TBE nature of property contributed to the trust? Are the interests, where beneficial title is held by h and w in their capacity as such, but legal title is held by h and w in their capacity as trustees, similar to holding interests in an LLP as TBE property?
Do we have authority for the asset protection of property held by such a trust?