Minors and Homestead…Don’t Mix Well!

Last week in my blog,  I discussed minors as beneficiaries of retirement plans, life insurance and other assets in an individual’s name. I used the example of Sheila and Joe dying together in a car crash and their minor children, Amanda and Dakota, receiving assets.

If assets are distributed outright to minors then, under Florida Statute 744.3021, a minor guardianship is necessary. Instead of a guardianship, I advised setting up a trust for these minors so a trustee could distribute assets to the minors over their lifetimes or at certain ages. Can you do the same with homestead? Unfortunately, in the majority of instances, NO! Further, the minors MUST receive the homestead at age 18!

Under Section 4 (c), Article X of the Florida Constitution, if an owner of homestead is not survived by a spouse and is survived by ANY minor child, then the owner can only devise the homestead to the owner’s children.  If, however, there is a surviving spouse, the homestead can be devised life estate to spouse and remainder to the owner’s children. As both Sheila and Joe have died, the homestead can only be devised to Amanda and Dakota pursuant to the Constitution and Section 732.401 of the Florida Statutes and Section 732.103 of the Florida Statutes.

Because the devise is outright to Amanda and Dakota, a minor guardianship is necessary and the guardianship ends at age 18 at which time the minor child receives their share of the homestead. In most cases this works because the parents have named a guardian and know that someone will be “overseeing” the homestead until the minor reaches age 18.

What if the minor is already showing signs of being a spendthrift, drug addict, etc? DOESN’T MATTER. The homestead MUST be distributed to the minor if the owner dies with a minor child AND the homestead MUST be devised to ALL the children. Thus, even if you have a wonderful minor and a drug addict older sibling,  the older sibling would receive a portion of the homestead.

Unfortunately, currently there is no provision permitting a minor’s share of the homestead to continue in a trust, only making it available to the minor when they reach certain ages. I have worked with a guardianship attorney petitioning the court to keep the homestead proceeds in a trust under Section 744.441(19) of the Florida Statutes for estate, gift and other income tax planning and other estate planning. This legal proceeding is expensive and time consuming but it may be available for a minor child.

Suppose Joe and Sheila had divorced prior to Sheila’s death, Sheila owned the homestead in her name alone, and her ex-spouse, Joe, survived Sheila? What happens? Joe, as long as fit as a parent, will be handling the homestead in the guardianship. This is true no matter how much Sheila dislikes Joe.  (How many spouses even like their ex-spouse, much less trust them with money or a hometead!) I have provided in my documents names of alternative guardians of the homestead, but it is highly unlikely that a biological parent will be denied the guardianship, unless extenuating circumstances exist such as a drug problem of his or her own.

What can a person do before they die? Section 732.4017 of the Florida Statutes  was enacted to enable individuals to transfer their homestead into a trust BEFORE they die to avoid some of the homestead restrictions but the provisions of the trust have to track the statute exactly and there are no court cases confirming that this statutory trust will avoid or alleviate the minor homestead issue. If, however, the homestead is valuable enough, this statute needs to be considered.

ADVICE; ANYTIME you are dealing with homestead, pay particular attention! Discuss thoroughly with your attorney the homestead issues and how you want the homestead distributed. Understand the repercussions if you have minor children and how you may want to alleviate the issue or deal with the issue.

New Word…Intestate…To die intestate is to die without a will. There is a common misconception that if one dies without a will then the individual’s assets will “go to the State of Florida”. Generally that is not the case. Under Sections 732.101, 732.102 and 732.103 of the Florida Statutes, Florida, in effect, writes a will for us. These statutes direct how assets are to be distributed. Basically the distribution is along the blood line, first to spouses, lineal descendants, ascendants and collateral heirs. It is very unusual that property “goes to the State of Florida”.

GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY! Cool

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