Florida’s Homestead Protections Affirmed in Recent Case
By now it should be clear that in Florida, a homestead is protected by creditors. But what happens when money from the sale of a homestead is placed in a bank account? The issue of whether these funds get the same protection as the homestead itself was the subject of a recent court decision.
Homeowner Has Funds Threatened by Creditor
The case is one of bad timing. The homeowner was going through a divorce, and had to sell the homestead property as a result. As the homeowner was looking for another property, and while the money from the sale was in his bank account, a creditor obtained a judgment against him, and tried to take the homestead money to satisfy the judgment.
The homeowner of course argued the money was protected under the homestead exemption. The creditor contended the money wasn’t a home, and shouldn’t get the protection. The creditor also argued that because the homeowner had used some of the money for investment, it wasn’t being treated as money from a homestead, and thus, should lose its protection.
Homestead Money and Intent
Generally, if a homeowner shows an intent to use proceeds from the sale of a homestead to buy another homestead, that money will get the protections. Often, money from the sale of a homestead will be placed in a separate account, not commingling them with any other funds, and will not be used for any other purposes, to demonstrate that intention. That money is safe—but only to the extent that is intended to be reinvested in a homestead.
For example, if someone sells a homestead for $200,000, then contracts for the purchase of a new homestead for $160,000, the balance–$40,000—may not be protected.
Court Finds Money is Protected
The court here did not feel that investing some of the money from the sale voided the protections. The court noted that it is quite normal for anybody with money in an account to try to invest it to get more return than a standard bank account provides. In fact, the court noted that if it held otherwise, it would be requiring that homestead money not make any interest return at all. The court (somewhat sarcastically) noted that it would be akin to requiring homestead money be placed “in a jar under one’s bed.”
In addition to keeping the money in an account specifically earmarked only for the purchase of the new homestead, the owner even did subsequently purchase a homestead, again evidencing his intent to use the money for the repurchase of a home.
The case is a good one when it comes to the asset protection vehicle that a homestead can provide. Still, anytime you are selling a homestead, special care should be taken with those funds. Sellers should do their best not to use the funds for anything other than a homestead and to separate the money from any other funds while waiting for the purchase.
Be safe with your assets and your homestead. Make sure that you are safeguarding them from potential creditors. Contact Tampa business, asset and probate attorney David Toback to discuss a comprehensive asset protection plan.