An attorney called me to consult about homestead exemption of a property owned by his clients and their two children. The parents purchased the house many years ago and have resided in the house continuously since purchase. A couple years ago they added their two children to the title, The children lived in their own separate houses.
What they actually did was transfer the house to their children reserving to themselves a “life estate.” The life estate gave the parents exclusive right to occupy and otherwise use the property as long as either was alive. When they both died the title passes automatically to their two children The children are considered to have a “remainder interest” in the property. The own what “remains” after the life estate.
One of the children has debt problems, and one of that child’s creditors has gotten a civil money judgment against that child. The attorney was researching whether the child’s creditor could levy upon the child’s future remainder interest in the parents’ house.
I think the answer is that the creditor can levy upon the child’s future interest. Under Florida law, the child with a future interest has no homestead protection because he does not reside currently on the property. However, the creditor could do little with the interest. The child has no present right to use the house, so his interest has little value as long as either parent is alive. A creditor cannot force the sale of the house in a partition action against the remainder interest. Upon the parents’ death the creditor may try to enforce the judgment.
I think there are bankruptcy cases which permit the remainder owner to claim homestead exemption even though he does not live in the property at the time he files Chapter 7 bankruptcy. Bankruptcy law may be more liberal in this regard than state law.
Putting a child on the title to your homestead for “estate planning” is simply bad estate planning. Leave the property to your children as part of your will or living trust. If you have done no estate planning during your lifetime your homestead will probably go to your children anyway.