Homestead Devise Restrictions… Have you Inadvertently Waived Them?
I have previously discussed homestead in this blog and the subject can be very confusing. There are 3 areas of homestead protection… the homestead tax exemption (and the corresponding save our home cap discussed in the last blog), creditor protection during lifetime, and the restrictions on descent and devise upon death (the Devise Restrictions). I will currently be discussing the Devise Restrictions.
Under current law, if an owner of homestead is survived by a spouse or a minor child, then the homestead can NOT be devised other than a life estate to spouse, remainder to all the children, or if no minor children, then outright to the spouse. These Devise Restrictions can complicate many estate plans. So how do you get around this?
If a surviving spouse wanted to waive or disclaim this restriction so the homestead could be devised as a decedent desired, then the spouse would have to sign a waiver as provided in Section 732.702 of the Florida Statutes (you can NOT waive rights of a minor child) or execute a disclaimer as provided in Chapter 739 of the Florida Statutes.
An example will help: Bob and Sally are married with 3 minor children. The homestead is titled in Bob’s name. (Note that if homestead is titled in joint names the homestead will automatically be distributed to the spouse upon death and the Devise Restrictions do not apply). Upon Bob’s death if he does not devise the homestead life estate to Sally (she receives the full use for her lifetime) with a remainder interest to all 3 minor children, then the devise would be invalid. Note that, if there were no minor children, then Bob could devise the homestead outright to Sally.
Now assume Bob and Sally are in their second marriage and the children are Bob’s from a prior marriage and he wants the homestead to be distributed to ONLY his children and not Sally. He could NOT make that devise absent a waiver or disclaimer by his spouse permitting Bob to distribute the homestead ONLY to his children. What constitutes a valid waiver? A recent case provides that a waiver may not be what practitioners used to think.
In Stone v. Stone, Jerome and Alma engaged in estate planning and each of them signed a deed first transferring their homestead from joint names to their names as tenants in common and then transferring their one-half tenants in common interest to each of their qualified personal residence trusts (“QPRT”). A QPRT is an irrevocable trust that may provide estate tax savings if the transferor survives the term of the QPRT. Jerome died prior to the end of the term of his QPRT and under the terms of the QPRT Jerome’s one -half interest in the homestead reverted to Jerome’s estate.
Jerome’s estate plan provided that Alma would have the benefit of Jerome’s assets during her lifetime and then at her death, the assets would be distributed to their daughter, Nancy, OMITTING their son, Ross. Alma asked the court for instructions and Ross, the omitted son, argued that the distribution of Jerome’s one-half interest in the homestead was an invalid devise and thus the homestead would descend life estate to Alma and remainder to BOTH Ross and Nancy.
The court analyzed the transfers in 2 contexts finding that the (1) transfer to the QPRT was not subject to the Devise Restrictions and (2) transfer of the one-half interest at Husband’s death WAS subject to the homestead Devise Restrictions.
Because Jerome’s one-half interest in the homestead was subject to Devise Restrictions, Ross asserted his homestead rights in the one-half interest. However the court determined that Alma had waived her rights in the homestead by signing the deed splitting the homestead into 2 one-half interests and then transferring her interest into the QPRT. Surprisingly, the court agreed because the deed had stated that Alma “grants, bargains, sells, aliens, remises, releases, conveys, and confirms…” the transfer of the property. The court determined the language in the deed constituted a waiver of the Devise Restrictions. Even though Alma waived her rights in the homestead such a waiver is binding on Ross as provided in prior case law in City National Bank of Fla. V. Tescher and Hartwell v. Blasingame.
ADVICE: Homestead is a deceptive area of law. While appearing easy, the legal concept of homestead is complicated. Prior to signing ANY document regarding your homestead, consult with an attorney to be sure that you are not waiving any rights. If you already have signed deeds transferring your homestead, then make sure to discuss with your attorney whether you have waived the Devise Restrictions and, if so, whether you can rectify the situation.
HAVE A GREAT THANKSGIVING!
GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY!