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Can You Lose Your Homestead Protection in a Divorce?

Florida has one of the strongest homestead protections in the nation. It’s written into our Florida constitution, and it protects your homestead from being taken by creditors or anybody who gets a judgment against you (other than foreclosures, where you have specifically mortgaged your property).

The protection even extends to funds that you receive from selling your homestead, assuming your intention is to put those funds back into another homestead property.

Transferring your homestead out of your name, however, can result in losing the homestead protection. This often happens when people transfer their house into a trust or to a relative. You can also lose the protection if you no longer live in the property, unless you have close relatives living in it.

Homestead and Divorces

In many divorces, one spouse is awarded use and possession of the homestead property. The other spouse often retains an interest in it, but is not physically living in the property (the “removed spouse”). The arrangement is often memorialized in a marital settlement agreement (MSA).

But if you’re not careful, an MSA and a divorce could jeopardize the homestead protection of the removed spouse.

In a recent case, Friscia v Friscia, parties had divorced and signed an MSA allowing the former wife and the children of the marriage to live in the property. The former husband retained an interest in it pursuant to the MSA, but did not live there.

The former husband died, and there was a dispute over whether he had waived his homestead property by agreeing to the MSA. If he had, creditors of his estate could take the property to pay the debts.

The court first agreed that the property was homesteaded, because although the former husband wasn’t living there, his children were at the time of his death. The court also noted that although the former wife had exclusive use of the property, the MSA had not transferred the former husband’s rights to the property away.

There was also language in the MSA providing that both spouses had waived any rights in the other’s property. But because the MSA released property in each other’s possession—not their own—there was no waiver of any homestead rights by the former husband.

The court also held that an agreement in the MSA to sell the house upon the children reaching adulthood and to divide the property did nothing to waive the homestead rights of the former husband’s estate.

Be Careful With MSAs After a Divorce

The moral of the story is mixed. On the one hand, homestead protection is strong, and even a divorce will not jeopardize a spouse’s homestead protections. On the other hand, the court looked very carefully at the language of the MSA, meaning that agreements regarding a homesteaded marital home that may be sloppily drawn, done pro se, worded improperly or done without concern for probate issues, may waive your homestead protections, exposing the property to forced sale for the benefit of creditors.

It’s not an issue that people normally think of in divorce; but just like you would plan a will to protect your heirs, it’s important to make sure an MSA doesn’t put a huge asset—your home—in the hands of creditors, instead of your own family.

If you’re getting a divorce, you may want to think about getting some advice from an experienced estate planning attorney before finalizing anything, even if you already have a family law attorney. Contact Tampa asset protection attorney David Toback to discuss your situation.

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