Living Trust Homestead Exemption

Gideon Alper Estate Planning, Homestead Exemption

When I am preparing a living trust for estate planning clients I am often asked to advise whether or not it is wise to title homestead properties in the name of the living trust. Trustmaker clients are concerned that conveying their homestead to their living trust may forfeit their Constitutional homestead exemption from creditor judgments. The Florida homestead exemption applies only for property owned by “natural persons.” The issue is whether a living trust is a “natural person” entitled to homestead benefits.

Florida law treats a fully revocable living trust as the alter-ego of the trustmaker. There have been several appellate court decisions that have agreed that a revocable trust is the alter-ego for the natural person who made or settled the trust. An individual who resides in a qualifying homestead property is entitled to homestead protection even after he transfers title to a living trust.

I recommend that married estate planning clients keep their jointly owned homestead in their own names. The basic reason is that the homestead will pass by operation of law to the surviving spouse, and the surviving spouse is guaranteed a life estate in the couples homestead under the Constitution. If the client is not married, or after the death of a spouse, I recommend conveyance to the family’s estate planning living trust. Otherwise, upon the death of the second spouse homestead will pass equally to surviving children, whereas the trustmakers may have a trust plan with different terms and conditions of inheritance.

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Alper Law is a Florida law firm focusing on asset protection for businesses and individuals.