The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford

One of the basic building blocks of Florida probate law is the "life estate" in homestead property all surviving spouses are entitled to.  The statutory basis for this rule is found in F.S. 732.401, which provides as follows:

(1) If not devised as permitted by law and the Florida Constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and lineal descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the lineal descendants in being at the time of the decedent's death per stirpes.

(2) Subsection (1) shall not apply to property that the decedent and the surviving spouse owned as tenants by the entirety.

Pretty basic stuff for any Florida probate practitioner.  What may not be so simple is explaining the real life practicalities of a life estate to a surviving widow.  Which is why you may want to keep a copy of The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford handy.  In this just published article Ft. Lauderdale attorney Jeffrey A. Baskies does a good job of explaining the costs assumed by surviving spouses/life tenants, a point often overlooked by families and their advisers.

Costs Borne by Life Tenants

F.S. §738.801 provides in part that “the provisions of F.S. §738.701-738.705 … shall govern the apportionment of expenses between tenants and remaindermen when no trust has been created….” In the absence of some agreement, those provisions apply to all life estate/remainder situations created by the Florida homestead laws (created by the constitutional restrictions on devise in art. X, §4 of the state’s constitution and F.S. §732.401).

Taken together, these statutes require the life tenant to pay:

  • All of the ordinary expenses incurred in connection with the administration, management, or preservation of property, including ordinary repairs (including condo or homeowners’ association maintenance charges) and regularly recurring taxes (ad valorem property taxes).
  • The interest portion of mortgage payments, if any, on the property.
  • Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
  • The costs of, or special taxes or assessments for, an improvement representing an addition of value to property shall be paid by the tenant when the improvement is not reasonably expected to outlast the estate of the tenant. In all other cases, a part only shall be paid by the tenant, ascertainable based on the present value of the tenant’s estate (actuarially).

Thus, surviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

While the surviving spouses have borne all of these huge increases in their costs of living, the remainder beneficiaries have seen property values double in most of the state (and increase three to five times in some areas) over the past five to 10 years. One hundred percent of that appreciation inures to the benefit of the remainder beneficiaries, while they are not forced to pay for any of these increased expenses.

Contrast the “rent free” use of the property by the widow with the “free ride” the remainder beneficiaries have had on property values, and ask who is being helped and who is being harmed by our homestead “protections”? The costs of property taxes and homeowners’ insurance have skyrocketed at the same time property values have appreciated at a meteoric pace. This situation has exposed in stark relief the discrepancy in treatment and benefits of surviving spouse life tenants and remainder beneficiaries.

Trackbacks (0) Links to blogs that reference this article Trackback URL
Comments (4) Read through and enter the discussion with the form at the end
Jeffrey S. Goethe - June 4, 2007 8:51 AM

At recent seminars, I have become aware of another complication to the homestead issue. Article X, Section 4, provides that if the decedent is the sole owner of the propery and is not survived by a minor child, the homestead may only be devised to the surviving spouse. Some estate planning practitioners have taken this to mean a fee simple interest to the spouse. In cases where the deceased spouse held the homestead in his or her trust, and trust gives the surviving spouse lifetime use (as is often the case in a QTIP trust or credit shelter trust), the surviving spouse receives something less than a fee simple interest. The result is a violation of Article X, Section 4. Since the trust gives only a life estate to the surviving spouse, the devise is invalid and the spouse gets a life estate (that's logical, isn't it?), with a remainder to the descendant's lineal descendants". There is no consideration for the fact that the decedent did not want his adult lineal descendants to be the remainder persons, or maybe only wanted one of several children to be the owner.

Charles Ian Nash, in the Florida Bar publication, Basic Estate Planning in Florida, points out a good strategy of obtaining a premarital or post-marital waiver prior to the death of the homestead owner. Then, Article X, Section 4, does not come into play, nor does F.S. 732.401. As Mr. Nash has pointed out during seminars, and as further discussed in a past Florida Bar Journal article by R. Craig Harrison, a post-death disclaimer does not fix the invalid devise. The result is that the spouse, who is given the equivalent of statutory protection under a trust (a life estate under the trust or 732.401), is not better off. The only ones to benefit are the decedent's lineal descendants who might not have been remainder benefiaries under the decedent's trust. Jeff Baskies made a good argument for the reform of Chapter 738 with regard to the allocation of expenses between the remainder person(s) and the life tenant. I also think F.S 732.401 is due for reform as well. Where trusts are used for tax planning, or in cases with children from prior marriages, 732.401 no longer reflects modern society.

Thanks for bringing Jeff Baskie's article to our attention. Homestead is not only a trap for the surviving spouse, but the planner, the client, the kids, and everyone involved.

Mark Manceri - June 5, 2007 8:32 AM

A COUPLE OF YEARS AGO I REPRESENTED REMAINDERMEN WHO FORECLOSED THEIR STEP-MOTHER'S LIFE ESTATE IN A 1.5 MILLION DOLLAR APT. SHE COULD NOT AFFORD TO PAY THE CARRYING COSTS, ETC. THE MOST INTERESTING PART WAS THE FORECLOSURE SALE AND THE BEFUDDLED LOOK ON THE ATTENDEES WHEN THE CLERK ANNOUNCED THE SALE WAS FOR A LIFE ESTATE.

Jeffrey S. Goethe - June 20, 2007 10:15 AM

In researching these situations, my research has led me to the conclusion that a partition is not available because the remaindermen don't have a present interest. I presume your clients, as remaindermen, sued under a theory of waste? Jeff Baskies' June 2007 Florida Bar Journal article was very good and addressed both partition and the theory of waste (and provided some good cites confirming my prior research). Jeff pointed out the "trap" for the surviving spouse. I recently tried to settle one case based upon actuarial values, but the remaindermen refused, saying the widow might die the next day and they would be paying a value based upon her 20 year life expectancy, but only increase their ownership by one day. That case was the result of a man who prepared his own will and trust, without funding the trust and with no knowledge or legal guidance regarding Florida homestead.

Jeffrey S. Goethe - September 7, 2007 8:37 AM

The chair of the Probate Law and Procedure Committee of the RPPTL Section, Charles Ian Nash, has created a Homestead Law Subcommittee. This subcommittee is chaired by Jeff Baskies and includes lawyers like Bruce Stone, who has drafted a proposal for revisions to the Partition Statute. I think most of the members on the committee feel that the law currently prohibits partition between a life tenant and remaindermen. I would also think that the surviving spouse's homestead status, if he or she continued to live in the home, would ordinarily prohibit foreclosure. The previous post about foreclosing the surviving spouse's interest probably involved some skillful and creative lawyering. The proposed revisions, which are very, very early in the discussion stages within the subcommittee, could provide some relief. We're also looking at other aspects of homestead, primarily the area of restrictions on devise and descent and the consequences of an invalid devise. There are some great lawyers on the subcommittee, so, hopefully, some proposals for realistic reform will be forthcoming. It's a tough job, however. We konw many lawyers, and probably much of the public, will be resistant to change in homestead laws, even though most planners recognize a need for reform.

Post A Comment / Question Use this form to add a comment to this entry.







Remember personal info?