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We All Dream in Gold ®

We All Dream in Gold ®

Homestead Exemption

Personal TJ Fisher dispatch and reflections:

Current non-Florida resident?

It is always a good time to shake up the status quo and protect yourself and your family with a new all-important Florida domicile. For purposes of jurisdiction, “domicile” means a legal residence which is the place where a person has a fixed dwelling with an intention of making it his/her permanent home. This is paramount to a Florida HOMESTEAD asset protection.

Make note. Move here to the Town of Palm Beach (or West Palm Beach), Florida ASAP. Get a new lease on life. Change your home-base. Alter your M.O. Protect yourself, your assets, and your family, with a Florida HOMESTEAD property. You won’t regret it.

Come on down. Fly South.

Of utmost importance, the golden sunshine state of Florida has unlimited “Homestead” protection. Local residency required. No other state offers this. Yes, I am taking to you. Do you see the big picture, read between the lines? What makes the Florida Homestead protection such a powerful asset protection tool is its unlimited monetary protection (and its exemption from so-called fraudulent conversion of assets, i.e. the movement of non-exempt assets $ into a Homestead).

If your eyes have not been opened, they should be.

There is a reason that titans, captains of industry, hedge-funders, media moguls, rogues, pirates, misfits, villains, bad boys, shady persons, socialites, hipsters and the legally-challenged of all types tail-it to Florida. The noble and ignoble, the famed and infamous, alike, gravitate to Florida.

Pull up stakes and head South.

A Florida bona fide resident can invest tens of millions of dollars in a large estate home and protect the full value of this luxury residence. No waiting period required. Just the requirement to purchase a “Homestead” property and establish immediate residency, i.e. get a Florida driver’s license and voter registration. Welcome to Florida! Voila! And there you have it.

Yes, Palm Beach is the perfect strong safe-haven refuge, in more ways than one.

Practice foresight, not denial. Not hindsight.

The Homestead is protected from creditors and lawsuits, and the protection survives to carry through to heirs. The Homestead exemption is the highest form of asset protection because it is embodied in Florida’s Constitution and statutes, and it has been rigorously and consistently upheld by the courts.

This Florida-domicile Homestead exemption shields/safeguards the primary home from levy and execution by (actual and potential) judgment creditors.

A judgment creditor cannot force the sale of the Homestead to satisfy a money judgment. I.e. Article X, Section 4 of The Florida Constitution states that Homestead property in Florida is “exempt from forced sale under process of any court.” This means that judgment creditors cannot levy and execute on property that falls within the definition of a Florida Homestead.

Florida Homestead protection is a shield against not just a State of Florida Judgment but also the domestication/enforcement of a “Foreign Judgment” (a judgment obtained in another state or country). The Homestead exempt asset cannot be attached or sold.

To qualify for Homestead protection in Florida, a (hypothetical) debtor — such as someone who for instance lose a high-stakes lawsuit with a judicial monetary award being granted in the opponent’s favor — must be a permanent Florida resident and the Homestead property must be his or her primary place of residence. The full value of the home is protected. Likewise, adult family members can also each have a Homestead. The acquisition of a Florida Homestead, and Homestead properties for family members, can be an ultimate “estate planning” tool.

Property that is not occupied by the owner (for ½ of the calendar year) is not protected under Florida’s Homestead laws. Homesteaded property must be owned by a “natural person,” so property titled in the name of a corporation, a limited liability company, a partnership, or any form of irrevocable trust doesn’t quality.

Under a Florida Supreme Court ruling, a person can transfer unprotected, non-exempt assets to his or her Homestead at any time by either buying a new home or reducing the principal balance of an existing mortgage and protect this money under the Homestead umbrella, even if the asset transfer was clearly designed to hide money from creditors.

The unlimited Florida Homestead protection extends to Bankruptcy Court as well, on a personal petition, however only after the home was bought and owned for at least 1,215 days prior to a filing; whereas, technically, for instance, a resident could theoretically own a $50 million home for a little over three years and then file Chapter 7, with the Homestead being protected, if business undertakings/lawsuits were to fail.

Those luckiest enough to live near the ocean are lucky enough.

When relocating here, there is really no reason to look back.

Many Californians and Arizonians are just now discovering what New Yorkers, Europeans, South Americans and others have known for years…Florida is the best state in which to put down roots and plant your flag.

Similarly, on top of the Homestead status, Florida has no state income tax. It is a tax favorable and business-friendly environment, a land of top-ranked infrastructure. Florida is also strategically situated in the global market and has a talented workforce. The state also ranks top for business start-ups.

Although an LLC is not a “natural person” that qualifies for Homestead protection, buyers may sometimes 2-step purchase via an LLC, then quick claim deed the property, to avoid detection of their identity for as long as possible, so to become established. Court rulings appears to be mixed, murky and a bit dicey, in different Florida jurisdictions as to whether or not a Florida Land Trust (Trustee and beneficiaries) may claim Homestead protection, with success. Florida’s Attorney General issued an opinion on the matter.

Coincidentally, when it comes to the purchase of a Florida Homestead, here in Palm Beach County, Buyer’s closing costs are typically 2% – 5% of the purchase price of the home. The Palm Beach Seller customarily pays the majority of the closing costs, including Title Insurance. (Just the opposite is true in Fort Lauderdale/Broward County and Miami/Dade County; there the Buyer typically pays for Title Insurance.)

Title insurance premiums are promulgated in Florida, so there is no shopping for a deal.

Who choses Title Company? The Party that pays for Title Insurance is typically the one who gets to choose the service provider.

Since Title Insurance benefits the Buyer, the Buyer often wants to select the agent, however in Palm Beach County transactions, the Seller chooses the Title Insurance Company. The Seller also pays for the Florida Documentary Stamp Tax on the Deed (“Doc Stamps”), @ $0.70 per $100 of sales price. However, Sellers and their attorneys will often attempt to shift costs and many other nominal charges to the Buyer, determined by the terms of the Purchase Agreement.

Most Buyer’s costs are associated with a Mortgage, including Doc Stamps on financing, @ $0.35 per $100 of the face value of the promissory note, and Intangible Tax on the Note and Mortgage, calculated at a rate of $0.20 per $100 of the value of the mortgage. In commercial transactions, everything is negotiable.

So much goes on in a real estate transaction that it can sometimes become confusing, to even the most sophisticated. You deal with agents, brokers, inspectors and appraisers when buying or selling a home. It can be unclear what you are responsible for and who you can trust to have your best interests in mind throughout the process.

Again, the title company is important for the closing to go as smoothly as possible. The last thing anyone wants is a title challenge to hold up the transaction and delay closing.

Most parties to a real estate transaction are indifferent about what title company is used. They shouldn’t be. A title company can greatly influence whether a home purchase or sale closes successfully or not. A depth of closing experience to identify and resolve issues as early as possible is crucial, so they don’t affect closing.

RECAP AND MORE FLORIDA HOMESTEAD INFORMATION:

The March 1st deadline to apply for a Florida Homestead exemption rolls around annually. If you moved to a new home within the last year, this is a deadline you do not want to miss. There are two deadlines which to meet in order to benefit from the Homestead exemption: 1. In order to meet the qualification deadline for exemption, you must be a Florida resident and own and occupy the property as your permanent residence on January 1st of the year you claim the exemption.

A wealth of online articles, from attorneys, municipalities and others, serve to explain the various benefits of the Florida Homestead exemption, the requirements for an exemption, how to apply for an exemption, and what to do if your application is denied. There are also thornier issues to address, such as rental of Homestead property and claiming multiple exemptions per family.

Benefits of a Homestead Exemption.

There are numerous financial benefits to having a Homestead exemption on your property. On the most basic level, the Homestead exemption itself entitles most homeowners to a deduction of $25,000 off of their property’s assessed value, which can result in several hundred dollars in tax savings. If your home is worth at least $75,000, you will receive an additional $25,000 deduction from your assessed value ($50,000 total), although that additional deduction will not apply to school tax levies. Once you establish your right to a basic Homestead exemption on your property, you may also qualify for additional Homestead exemptions if you are over 65 years old or have a disability. But perhaps most importantly, receipt of a Homestead exemption means that, pursuant to the Save Our Homes Amendment to the Florida Constitution, the assessed value of your homestead property cannot increase more than 3% per year or the percent change in the Consumer Price Index. Moreover, in many cases, this tax savings can now be transferred to a new Florida residence if you move. Thus, while the basic Homestead exemption may only save you a few hundred dollars per year, the rights that come with a homestead exemption can be extremely valuable.

How to Apply for a Homestead Exemption

Homestead exemption applications must be filed with the county Property Appraiser by March 1st of the tax year for which the exemption is sought. Thus, in order to receive a 2018 Homestead exemption, you must apply by March 1, 2018. If you acquired or moved into your new home after January 1, 2018, then you would not qualify for a 2018 Homestead exemption, but you can go ahead and apply now for a 2019 Homestead exemption. If you already have a Homestead exemption, you probably do not need to re-apply, as most counties use an automatic renewal process, whereby you only need to notify the Property Appraiser if you are no longer entitled to the exemption.

What property qualifies for a homestead exemption?

Pursuant to Fla. Stat. 196.031, in order to qualify for a Homestead exemption, as of January 1st of the tax year in question, you must have either legal or beneficial title to the property for which you are seeking an exemption, and the property must be the permanent residence of either yourself or someone who is legally or naturally dependent on you. Thus, the property can be owned by a trust, as long as the applicant retains beneficial title and a possessory interest in the property. However, the homestead exemption may not be claimed by a corporation.

The property must also be you or your natural dependent’s “permanent residence,” which is defined by Fla. Stat.196.012(18) as “that place where a person has his or her true, fixed, and permanent home and principal establishment to which, whenever absent, he or she has the intention of returning.” In determining whether the property is your permanent residence, the Property Appraiser may consider a number of statutory factors, including but not limited to the existence of a formal declaration of domicile, where your children are registered for school, your place of employment, residency in another state, the address where you are registered to vote, the address on your driver’s license or identification card, vehicle registration, the address on your federal income tax returns, the address on your bank statements, and proof of payment for utilities at the subject property.

Also, the homestead exemption only applies to that portion of the property that is classified and assessed as owner-occupied residential property. Thus, mixed-use properties may only receive the homestead exemption benefits on a portion of the property.

Can a taxpayer claim more than one homestead exemption?

No. In fact, Fla. Stat. 196.031 prohibits anyone who receives the benefit of a residency-based property tax exemption or tax credit in another state from also receiving a Florida homestead exemption. Thus, not only can you not claim two Florida homestead exemptions, but you also cannot claim an additional residency-based exemption in another state.

Can my spouse claim a separate homestead exemption on property that they own independently?

Possibly. The Florida Constitution only allows for one homestead exemption per family unit. While the proper interpretation of “family unit” could, and likely will, take up an entirely separate article, most Property Appraisers interpret this provision to mean that a married couple can only receive one homestead exemption. The Attorney General’s office and some trial courts have interpreted this provision to occasionally allow for separate homestead exemptions where the couple is separated or can prove financial independence. However, not all Property Appraisers agree with this interpretation and this issue continues to wind its way through the courts. Anyone who plans to try to obtain separate homestead exemptions should seek the advice of an attorney in order to avoid potentially costly penalties in the future.

Some courts have rejected the (a) Property Appraiser’s contention that a married couple can never receive separate homestead exemptions, and instead held that “in the unique circumstances presented in this case, where the husband and wife have established two separate permanent residences in good faith and have no financial connection with and do not provide benefits, income, or support to each other, each may be granted a homestead exemption if they otherwise qualify.”

Can I still receive a homestead exemption if I rent my property?

Possibly. Fla. Stat. 196.061 provides that the rental of an entire dwelling constitutes the abandonment of that dwelling as a homestead. However, under the Florida Constitution, the ultimate issue is whether the property was your permanent residence on January 1st of that tax year. In recognition of that fact, the statute contains an exception, which states that abandonment of a homestead after January 1st of any year shall not affect that year’s homestead exemption as long as the property is not abandoned after January 1st for two consecutive years. Thus, a snowbird who heads up north for the summer could conceivably rent their property every other year during the warmer months without losing their homestead exemption.

But isn’t it okay to rent homestead property, as long as you don’t rent it for more than 6 months?

No. The confusion on this issue came about because, pursuant to Florida Statutes 196.081, 196.091 and 196.101, certain disabled veterans and other totally and permanently disabled persons are entitled to a complete exemption from all property taxes for their “real estate that is used and owned as a homestead.” Florida Statute 196.012(13) then defines this phrase “real estate used and owned as a homestead” as the person’s homestead property, less any portion thereof used for commercial purposes. The statute then states that “property rented for more than 6 months is presumed to be used for commercial purposes.”

In effect, if a permanently disabled veteran used a portion of their homestead property for commercial purposes, such as by renting a room or using a portion of the property for a home office, they would not receive a complete tax exemption on that portion of the property, although they would arguably still be entitled to the homestead exemption on the entire property. In the author’s opinion, this definitional statute applies only to the total exemption for certain disabled persons, and not to the basic homestead exemption. However, some Property Appraisers apply the 6-month rental limitation in their homestead exemption determinations, and a recent appellate decision may add fuel to that argument.

Conversely, just because the property is presumed to be used for commercial purposes if rented for more than 6 months does not mean that you can safely rent your property for less than 6 months without losing your homestead exemption. As discussed above, your right to a homestead exemption is determined as of January 1st. Thus, rental of homestead property on January 1st of any tax year, even for a few months, is a risky move.

Appealing a Denial of Your Homestead Exemption Application

The Property Appraisers are required to notify taxpayers by July 1st if they plan to deny their application for a homestead exemption for that tax year. Fla. Stat. 194.011 then gives the taxpayer 30 days to file a petition to the county Value Adjustment Board. Please note that if the Value Adjustment Board denies your petition, you have only 15 days in which to file an appeal to the circuit court. See Fla. Stat. 196.151. If you do not want to file a petition to the VAB, you can file an action directly in the circuit court, but such a lawsuit must be filed within 60 days of certification of the tax roll.

Disclaimer: Please note that nothing expressed in this letter should be construed as nor relied upon as a “legal opinion.” I am not a licensed lawyer and do not practice law. Everyone needs and is best-serviced by proper counsel and legal representation.