The Horrors of Homestead at Death

homestead
A little planning can prevent homestead horrors at your death.

Did you know that your Florida homestead could be a problem when you die? Most people don’t, and this results in pretty constant income for probate attorneys. As much as I appreciate having your children pay me for the probate of your home, I’d prefer to help you avoid this (usually) unnecessary hassle and expense.

What exactly do I mean by “homestead”? In Florida, that’s a broad legal term that has different meanings and different ramifications under the laws. Our homestead laws fall into three categories: exemption from forced sale (creditor protection), restrictions on transfer and devise (protects spouses and minor children), and property tax exemptions (reduces property taxes). Once you die, your property tax exemption is not longer applicable – that’s not the homestead law I’ll be discussing here. Exemption from forced sale and restrictions on who you can leave your homestead to are the biggies once you’re dead. They’re both addressed in Article X, Section 4, of the Florida Constitution.*

What qualifies as “protected homestead” under Article X? First, it has to be your primary residence and you have sole ownership (not joint, not in a trust, etc.). If the real estate that’s your primary residence is located within a municipality (within city, town, or village limits) your homestead is limited to one-half acre of contiguous land. If located outside a municipality (such as in a county), your homestead can include up to one hundred sixty acres of contiguous land. If your home fits into one of these categories, you’re covered under Florida homestead laws  – whether you want them or not. So, what does that mean?

First, it means that if you’re the sole living owner of protected homestead and you’re married and/or have a minor child when you die, you can only leave your home to the people Florida mandates. If your Will or Trust gives the property to someone else, the probate judge will void that gift and distribute the home to whoever is entitled under FL law. If you’re not married and have no minor children when you die, you can leave the home to anyone you wish.

Second, assuming that you’ve devised your home to a legally-approved person, and he or she is your spouse or a blood relative who would be entitled to inherit under Florida’s laws of intestacy, then your home will not have to be sold to pay off the debts you died owing (except for a mortgage or home equity loan). The home and any loans against it will go to the heir. However, if you die single, with no minor children, and leave the home to your boyfriend, the homestead will no longer be “protected” and could be forced into a sale to pay off your debts.

Okay, that’s all fine and dandy. But what people don’t realize is that, due to a weird quirk in Florida law, homestead property owned by a sole individual – whether it’s “protected” or not – has to go through the probate process before it can get to the rightful heir. And while a Personal Representative can sell an investment property very quickly (as long as the Will gives him that power), the Personal Representative CANNOT sell the protected homestead. Under the law, the spouse, minor child, or other heirs inherit it as soon as you die, but, due to scam artists and other criminals, our laws now require that a probate judge sign and record an Order declaring who is the rightful owner under the law. A formal probate is a strictly defined process, so it can take 5-6 months from when the probate was opened to get that Order, which allows the heir to sell the homestead. In the meantime, who’s paying the legal fees, mortgage, insurance, property taxes, pool and yard maintenance, etc.? Where’s that money coming from? If your home will land in probate, so should all your other assets so there’s cash to pay your debts and the home’s upkeep for several months until it can be sold.

I often have married couples tell me, “Well, we’re joint owners on the house, so there won’t be a probate. It’ll go right to the survivor.” And they’re correct – assuming they both don’t die at about the same time. Or assuming that the survivor will actually take steps to prevent the homestead horror from happening before he or she dies.

This is all very easily avoidable – the key is planning. Give us a call at 941-444-5958 to make sure you don’t leave behind a homestead horror for your family.

* Mobile homes on rented land aren’t covered under Article X, but they have some protections under Florida Statute 222.05.

Other articles you may find interesting:

What’s the Big Deal About Supreme Court Reform?

Don’t Put Money into Property You Don’t Own

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Using a Standby Minors’ Trust

In this video, Cindy discusses what a standby minors’ trust is and how it works.

Other articles/videos you may find interesting:

Understanding Your Trust Document

Including Pets in Your Estate Plan

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Guns and Dementia: A Difficult Topic

guns and dementia
Families should make a plan for their guns in the event a loved one is stricken with dementia.

I came across this article recently and it really made me think. This is such a difficult topic for families dealing with dementia – it can be even more contentious than taking away someone’s car keys. Of course, possessing and driving a car is not a Constitutional right, whereas possessing a gun for self-defense is. And many people who own guns are far more attached to their guns than to their car.

The article does mention gun trusts as an option. But the article also points out, very honestly, exactly what I tell all my clients about every estate planning document they execute – they only work when everyone is playing nicely. If the allegedly incapacitated person doesn’t acknowledge the situation and fights everything, things can get very messy very quickly.

Please read the article and discuss with your family how you’ll deal with this issue when it comes up.

Other articles you may find interesting:

Are Bump Stocks Legal Again?

Probate Even When There’s a Trust

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

“Protecting” Assets Means Giving Them Away

Protecting assets with Medicaid pre-planning
You may be able to protect some of your assets from nursing home costs through Medicaid pre-planning.

“How can I protect my assets from Medicaid?”

I get this question a lot. The long answer is complicated, but the short answer is that you can protect your assets from being counted or taken away by nursing home or the government only if you’re willing to give them away legally and knowledgeably at least five years before you’ll apply for Medicaid. If you’d be comfortable giving your children the bulk of their inheritance now, and know they’d take care of you if you needed long-term care, then you’re probably a good candidate for Medicaid pre-planning.

I’m going to oversimplify the process so you can get the general idea of what “protecting” assets through pre-planning involves.

In Florida, having too many assets is what disqualifies most people from having Medicaid pick up part of the bill for nursing home care; having too much income is rarely an issue. So, those assets over $2000 (for a single person) have to disappear legally before a Medicaid application is submitted. For forward-thinking people, pre-planning may be an option – it’s less expensive than crisis planning and it generally protects more assets for your spouse or family than crisis planning can.

Medicaid penalizes an applicant for giving away any assets during the 60 months (5 years) look-back period prior to the Medicaid application date, but assets given away 60 months and 1 day prior to submitting an application are invisible to Medicaid; they won’t be counted as assets that are available to you for paying the nursing home bills. So, if your Mom is headed into a rehab facility (the kinder, gentler name for nursing homes) in the next month or two, and she gives away almost all of her assets to you and your siblings, Medicaid won’t pick up the tab until after your mother pays out of her pocket for a calculated number of months. Which means you children will have to pay the nursing home bills, using the assets Mom gave you. Because it’s DIY crisis planning (you didn’t consult with an attorney), unless Mom is dead in a couple of months, it’s unlikely many of her assets will end up with her children.

But suppose Mom read about the 5-year look-back period, and when she was in her 70s she gave away nearly all of her assets to her three children. She lived on her Social Security and believed her children would help her if she needed money for an emergency. One child, Tom, put his share of Mom’s money into a savings account in his individual name; another, Linda, put her share into a joint bank account with her husband; and the youngest, Harry, put his share into a brokerage account in his individual name but named Mom as the Transfer on Death beneficiary. What could possibly go wrong…?

  • Tom dies unexpectedly, and the bank account lands in probate because there was no joint owner or beneficiary. His wife, who never got along with Mom, inherits the account and moves away; or
  • Tom develops a drug or gambling problem and spends all of Mom’s money within a couple of years; or
  • Linda’s husband files for divorce and the joint bank account is considered a marital assets to be split between them; or
  • Harry invests in small-company stocks and other high-risk investments that are appropriate for him, but not his mother. He loses 40% of the money in the first year; or
  • Mom needs nursing home care 7 years after giving her assets to her children. She easily and quickly qualifies for Medicaid and settles into the nursing home. Then Harry dies unexpectedly, and Mom, as the TOD beneficiary, inherits what’s left in the brokerage account.  She’s immediately kicked off Medicaid and will have to pay out-of-pocket until the money runs out, and then re-apply for Medicaid; or…

You get the drift. Bad things happen to good people every day.

But what if Mom had met with an elder law attorney and decided to create an irrevocable trust to give her assets to instead? She named her daughter, Linda, as the trustee (the person who manages the assets), and named all three children as lifetime beneficiaries and also as death beneficiaries. Linda has complete discretion as to if, when, and how much principal to distribute to the three siblings while they’re alive, and she can even distribute interest and dividends to Mom to help make ends meet. (Refresher: Principal is the chunk of money Mom wants to protect, and interest and dividends are generated from that chunk of money). Medicaid doesn’t care what the children do with the principal they receive once it’s in their own bank accounts. If they want to spend it on Mom – or anyone else –  they can. However, Mom can never take the principal back out of the irrevocable trust and Linda, as trustee, can never distribute principal directly or indirectly to Mom; for example, Linda, as trustee, can’t cut a check from the irrevocable trust to the nursing home.

After 5 years, the assets transferred from Mom to the irrevocable trust are invisible to Medicaid, so Mom will qualify easily if she needs nursing home care. If a child dies, there are no issues because the trust document addresses what happens in that event. Linda’s divorce has no effect on the assets in the trust, either, because she doesn’t own them – the trust owns them. If Tom develops a drug or gambling problem, Linda won’t give him money to enable his addictions. The assets stay safely in the trust, and when Mom eventually dies, the assets go to her children without probate.

So, that’s a very broad and oversimplified explanation of what’s involved if you want to “protect” any assets from Medicaid. You must give up that which you wish to protect.

Give us a call at 941-444-5958 if you’d like to learn more about pre-planning for nursing home Medicaid.

Other articles you may find interesting:

Don’t Wait Until it’s Too Late

Workshops Discontinued as of April 2021

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Your Estate Plan is Your Decision, Not Your Lawyer’s

Decisions
A counselor-at-law helps you understand the consequences of your options; only you can make the decision.

Have you ever noticed that some attorneys refer to themselves as “Joe Smith, Counselor-at-law,” instead of Attorney or Attorney-at-law? And, in court, the judge and opposing attorneys refer to attorneys as “Counselor.” When you get in trouble with the law, you’re advised to seek legal counsel. And large companies have “In-house Counsel.” Do you notice a theme there?

We attorneys ARE counselors. That’s our primary job – to advise people of their rights and options, counsel them on the pros and cons of the various options, and then do the best legal job possible once the client has chosen his or her course of action.

Yet, I occasionally talk with people who want me to TELL them what to do. “The attorney I met with ten years ago – I can’t remember his name – asked me a bunch of questions and told me I needed xxxxx. Thirty minutes later I was out the door. Then four weeks later I came back in to sign the documents his paralegal put in front of me. I never even read them until about a year ago when I got sick. I figure it’s probably time to update them. So, tell me what I need.”

Or, after I’ve spent hours explaining the pros and cons of various options, the person looks at me and says, “Tell me what to do.”

No, no, no. That’s not what an attorney is supposed to do. As long as you have the mental capacity to understand what I’m explaining to you, and the ability to make a rational decision, YOU must decide what you’re going to hire me to do for you. Again, I can and will explain the consequences of different options, but ultimately the decision is yours.

You hire attorneys to give you advice and counsel, not to make your decisions for you. Step up and be an adult.

Other articles you may find interesting:

A Health Care Surrogate’s Powers

How To Disinherit A Child

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Get a Damn Prenup!!

In this video, Cindy discusses why everyone who remarries after death or divorce should have a prenup for estate planning reasons.

Other articles/videos you may find interesting:

Should Your Attorney Keep Your Original Will?

Durable Power of Attorney: What You Need to Know

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Estate Planning Checklist, Especially for Procrastinators

Many people don’t think of themselves as having an “estate.” However, a house, car, savings account, life insurance, and all the possessions you own are an estate. If, after years of procrastinating, you finally did the right thing and had an estate plan created with an experienced estate planning attorney, is there anything else you need to do? Yes, says Federal News Network in the article “Good at putting things off? Here’s the last checklist you’ll ever need!”

Where should you keep your estate planning documents? These documents need to be kept in a relatively secure location that is known to the people who will need access to them. An original Will might be kept at home in a fire and waterproof safe, or at your attorney’s office. Each estate planning attorney has his or her own process and can make recommendations. A Will placed in a safe deposit box may create huge headaches if the box is sealed upon death. Remember that people will need easy access to some documents, like a Living Will or a Designation of Health Care Surrogate, so they should be stored somewhere in the home where they can be grabbed in an emergency.

Who should have a copy of my estate plan? This is a personal preference. Some people give a copy to all heirs and to their personal representative (executor) and successor trustee. Others prefer to keep it private. It’s essential that the persons who will be your personal representative and successor trustee knows where your Will and Trust are and can get access to them quickly.

Update beneficiary designations. Many assets are governed not by the Will or Trust, but by the beneficiary designations on the accounts. That may include retirement accounts, annuities, IRAs, life insurance, and possibly bank accounts and investment accounts. Check them every few years, especially if there have been divorces, marriages, deaths, or new members added to the family.

Review how your assets are titled. If there are assets owned as “joint with right of survivorship,” they will not pass through probate and will become owned by the joint owner upon death. Sometimes this works well for large accounts, but sometimes it backfires. Talk with your estate planning lawyer.

How long does my estate plan last? An estate plan does not have an expiration date and must be reviewed periodically.

When should I amend my estate plan? Anytime there is a large change in the law, such as the passage of the SECURE Act at the very end of 2019, the estate plan should be reviewed. The SECURE Act has changed the rules about IRA distributions for heirs. Anyone with a sizable IRA should review their plan.

Any time there is a large event in your life your estate plan should be reviewed. Those events include a death, birth, marriage, or divorce. If the person you had named as your personal representative or successor trustee, or who had been given Power of Attorney or Health Care Proxy is no longer in your life or is no longer trusted, you also want to review and change these documents.

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

What’s the Big Deal About Supreme Court Reform?

In this video, Cindy discusses why the current President’s election promises regarding “Supreme Court reform,” as well as his recent statements and Executive Order, are a big deal.

Other articles/videos you may find interesting:

How Much Money Is Needed for Long-Term Care?

Mind Your Business

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Probate Even When There’s a Trust

funding a trust
Trusts aren’t magical – it takes some work to make sure they work properly.

I came across this article the other day and thought it was worth sharing and discussing because the situation comes up A LOT!

Here’s the beginning of the article:

Dear Len & Rosie,

Mother died and my sisters and I are her co-executors and co-trustees. We were told by the bank that we are unable to open an estate account to access any of her funds unless we put the estate in probate. Why did we have to have a trust if the estate still has to go through probate? When my mother made her trust she was assured that there would be no probate and that she wouldn’t put her children through what she went through when my father died. Are there any banks that will honor the will and trust as she made them?

I don’t want to ask her attorney because it costs so much. Where are my civil liberties if no matter what mother wanted done with her hard earned money, the court gets to make the final ruling? Why are lawyers telling people to set up living wills and trusts if they do not protect our personal rights?

Mimi

The lawyers in the article discuss CA law, not FL law, so disregard any specifics they gave. FL probate laws are very different – if you die with more than $10,000 in your individual name, your estate will likely need to go through the probate process.

But Mimi’s letter shows the confusion that arises when the assets of someone who spent the time and money to create a trust end up in probate. As the lawyers said, we don’t know what was said between Mom and her lawyer. We don’t know what kind of trust she had – was it a cheap 8-page boilerplate trust that a paralegal prepared after a 15-minute conversation with Mom, or a 90-page custom trust that a lawyer spent hours creating just for Mom? Did the lawyer explain the importance of funding the trust (retitling all assets into the name of the trust)? Did Mom think Dad was going to take care of that, but he didn’t? Did Mom understand what she was supposed to do?

Who knows.

The lesson to be learned is that if Mimi had sat down with Mom and her estate planning or elder law attorney, this issue could have been discovered and corrected before Mom died.

As with most everything in life, if you’re not being proactive, you’re going to be forced to be reactive.

Other articles you may find interesting:

Shorter Isn’t Always Better

Why Would I Need a Durable Power of Attorney?

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.

Are Bump Stocks Legal Again?

In this video, Cindy discusses the current state of bump stock law. On the day after Christmas in 2018, the ATF reversed its previous rulings that bump stocks were not covered under the National Firearms Act, and passed a rule that made thousands of people who had purchased a legal gun accessory felons. Lawsuits fighting that rule have been bouncing around the courts. Here’s where things stand now.

Oh, in Florida, the federal rule really doesn’t matter at this moment since our legislators included a bump stock ban in the atrocious knee-jerk reaction known as the Marjory Stoneman Douglas Public Safety Act. If the federal rule is eventually overturned, maybe someone will be able to overturn Florida’s law, but the courts generally allow states to be more restrictive than the feds when it comes to gun laws.

Other articles/videos you may find interesting:

You Can’t Have Your THC-Infused Cupcake and Eat it Too

Why You Might Not Get What’s in Mom’s Will

Ready to make sure everything’s in order for your loved ones in the event you become incapacitated or die? Give Manasota Elder Law a call at 941-444-5958. We’ll help you determine whether you’re all set, or whether there are still some things that need to be done to protect what’s most important to you … your family.