Prior to 2013 under the existing Florida Homestead Law for Surviving Spouses, a spouse was often left with a life estate in homestead property. A life estate is when an individual can live in the property for the duration of their life. The life estate is limited to the fact that you can only possess the property but do not own it out right. Often the spouse was either not able to afford the homestead or may not have wanted to be responsible to maintain the property for someone else’s benefit. Florida legislators are trying to alleviate this problem by changing the law to allow surviving spouses to convert the life estate into a one-half tenancy in common. What that means is that the spouse can elect to be one-half owner of the interest that the descendant may have had in the home. The new law allows the surviving spouse to make an election, within six months from the date of death, to take a one-half interest as a tenant in common in the homestead property instead of a life estate.
This one-half tenant in common interest gives the surviving spouse an ownership interest in the homestead property, which allows the surviving spouse to bring a partition action to sell the property. A partition action could be done in one of two ways. A partition can be where a half owner petitions the court to laterally split the property in half. The other and most common partition action is where a party asks the court to force a sale on the property. Typically, this is the most common form of partition used in probate. If the property is sold, the surviving spouse will generally receive one-half of the proceeds of any sale.
Prior to the enactment of the revised Florida Homestead statute, if the homestead were not devised to the surviving spouse in any way then Florida law would permit that the surviving spouse automatically receive a life estate in the property. If there were minor children, then the minor children receive a vested remainder in the property. This means that the minor child would be able to own the property once the surviving spouse has either relinquished their rights to the life estate or the surviving spouse has died. The life estate interest would not be partitioned, which requires the surviving spouse and children of the deceased to negotiate a sale of the Homestead. If there was no agreement between the children (or their guardian/trustee) then the property could not be sold. These rules have strained many family relationships especially those that involved spouses in subsequent marriages. The Florida Principal and Income Act governs the allocation of expenses between the life estate and vested remainder interest (heirs).
The surviving spouse is typically responsible for any interest payments on the mortgage, property taxes, property insurance and repairs and the children are generally responsible for principal mortgage payments on the residence and any substantial capital expenditures. To make things more complicated if the surviving spouse wanted to downsize then the surviving spouse would have to negotiate with the children to allow a sale. As part of the sale, the parties would have to create a formula to determine the value of the surviving spouse’s life estate. Although there are many benefits to the new law it is also important to note that it is to the disadvantage of the decedent’s minor children in a lot of cases.
The law is constantly going through development and restructuring thus making it extraordinarily complex. Therefore, estate planning becomes trickier with all the little nuances. With the new law in place estate planning will require additional planning at the beginning to take into consideration this new contingency. This also leaves room for additional issues to consider during the estate administration process.