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Descent of Homestead
by Lawrence W. Thomas, Esq.

A common situation which estate planning attorneys and real estate practitioners encounter is that of the descent of homestead real property. Many people in Florida only think of homestead in terms of the exemption that they can claim for ad valorem property taxes, and are either unaware or forget that there are other forms of homestead that can dramatically impact their property. Florida’s intestate succession code addresses homestead with respect to both devise and descent. This article will focus on descent.

Part IV of Chapter 732 Florida Statutes, Section 732.401, “Descent of Homestead” may affect title to one’s real property with unintended consequences. Many times we encounter clients that have worked on their estate plan extensively, but neglected to properly focus on their homestead. Often, couples, either as a result of prior marriages or other circumstances, hold title in their homestead real property in the sole name of one of the parties.

Prior to expansive changes in the law, the above section provided that descent of one’s solely owned homestead, if not devised as authorized by law, went as other intestate property. But, if the decedent was survived by a spouse or one or more descendants, the surviving spouse took a life estate in the homestead with a vested remainder to the descendants in being at the date of the decedent’s death. The revisions to this section provided that in lieu of the life estate, the remaining spouse could elect to take an undivided one half interest in the homestead with the decedent’s descendants as tenants in common. The right to exercise the election is vested in the surviving spouse, or with the approval of the court having jurisdiction over the real property, in an attorney-in-fact or guardian of the surviving spouse. The election is required to be made within 6 months of decedent’s death and during the lifetime of the surviving spouse. Once made, the election is irrevocable.

This statute has some specific filing requirements and the notice must contain the legal description of the homestead property. A form is included outlining the elements necessary and the notice must be sworn to (affirmed) and subscribed before a notary public. This section of the law applies to property solely owned by the decedent and not to property that the decedent owned in tenancy by the entirety or as a joint tenant with right of survivorship.

As one can see, this part of Chapter 732 can have adverse effects on the descent of homestead real property, which may not be what was intended by the parties. Remedies for this potential problem are as simple as a spousal waiver and a visit with your attorney.

Do Married Couples Still Need Trusts?
by Jeffrey S. Goethe, Esq.

Many legal and financial advisors advocate the use of revocable trusts. Experienced attorneys understand the benefits of a trust, including probate avoidance, protection from the beneficiaries’ creditors, management for incapacitated individuals, estate tax planning, and second-marriage planning. They also understand the disadvantages of a revocable trust from working with surviving spouses and trust beneficiaries who are impacted by trust planning.

In the past, estate tax planning has been a primary reason for creating a revocable trust. From 1987 to 1997, the estate tax exemption was $600,000.00, with the top tax rate at 55%. This means that, without proper planning, everything in a surviving spouse’s taxable estate above the estate tax exemption amount would be subject to a harsh tax. The taxable estate includes just about everything owned at death: life insurance, personal property, stock, retirement accounts, and real estate, in addition to investments and bank accounts. Planners frequently used a two-trust plan to make sure the full exemption for each spouse was utilized. These trusts were referred to as “A-B trusts,” credit shelter trusts, and family trusts. To be effective, the surviving spouse can not have complete ownership and control over the assets in the trust of the deceased spouse. The survivor cannot alter or amend the trust. In addition, the beneficiaries who are in line to inherit upon the surviving spouse’s death are entitled to a copy of the trust and annual accountings to show the trust income, expenses, and distributions to the surviving spouse. Annual tax returns are required for these trusts, so there are ongoing legal and accounting fees.

Today, each living person, as long as they are a permanent resident or U.S. citizen, has an estate tax exemption of $5.43 million. The exemption is adjusted annually for inflation. Recent changes to the law allow for “portability,” a feature that lets the surviving spouse claim the unused portion of the $5.43 million exemption of the first spouse to die by filing a federal estate tax return. As a result, a married couple can now shelter $10.86 million from estate taxes without restricting the surviving spouse’s access to assets in the deceased spouse’s trust. This gives the surviving spouse more privacy and control over the couple’s estate.

A two trust plan is still better suited for some situations. For others, combining the husband’s and wife’s separate trusts into a single trust can simplify the process and reduce accounting and legal expenses during the survivor’s lifetime. The surviving spouse has greater control, and maintains privacy because there is no requirement that the future beneficiaries receive copies of documents or annual accountings.

This change in the law is yet another reason to have your estate plan reviewed regularly. If you have not reviewed your plan with your estate planning attorney recently, you should do so now.

Collections - You Snooze, You Lose
by Andre R. Perron, Esq.

I have practiced collection law for nearly thirty years and have found one truism—first in line is most likely to collect on his/her debt. This is because the claimant who obtains a judgment from the court first can put his judgment lien on the debtor’s real property, equipment and other personal property before the debtor’s other creditors. Also, the creditor with a judgment in hand can garnish bank accounts and seize personal property or other assets before the creditors who have not obtained a judgment.

The bottom line is don’t wait; debtors typically stall for time, which will only prejudice you in your collection efforts. The collection process can work if you are proactive and assert your legal rights. Don’t let a deadbeat beat you. Take action now.

What to Expect with Mortgage Modification Mediation in the Middle District of Florida Under the Bankruptcy Rules
by J. Kenneth McIntyre, Esq.

There have been some changes that will effect consumers pursuant to the District-wide Mortgage Modification Mediation Procedures that became effective August 15, 2014. The Bankruptcy Court for the Middle District of Florida adopted uniform district-wide mortgage modification mediation procedures (MMM). The following general terms may apply to your situation:

1. MMM is available in all cases and for any type of real property.

2. Counsel for the Debtor(s) seeking MMM must file an appropriate motion with the Middle District Court.

3. Lenders may seek reconsideration for cause within 14 days of entry of an order directing MMM.

4. A motion seeking MMM must be filed within 90 days of the filing or conversion of the case.

5. The parties will conclude the MMM process within 150 days of the filing or conversion of the case, unless that time is enlarged by written consent, stipulation of the parties, or by Court order.

6. Parties have 14 days after the entry of the order directing MMM to jointly select a qualified mediator.

7. Both Debtor and Lender will be required to pay $250 directly to the mediator.

8. An order approving a permanent MMM agreement must be recorded in the public records of the county where the relevant property is located, and it should be recorded by the Debtor within 90 days of the entry of the order, unless the parties agree otherwise.

9. In Chapter 12 and 13 cases, Debtors seeking MMM must provide adequate protection to the lenders.

10. For homestead properties, the Debtor must pay the Chapter 12 or 13 Trustee the lesser of (1) 31% of their gross disposable income (after deducting homeowner association fees), or (2) the normal monthly contractual mortgage payment.

11. For non-homestead property, the Debtor must pay to the Chapter 12 or 13 Trustee 75% of all rental income generated by the property. The Trustee must hold the funds pending either further order of the Court or a joint stipulation of the parties.

As with every issue in bankruptcy, the best advice is to sit-down with a qualified attorney and discuss the specifics of your situation. Every person or family has unique situations that need to be analyzed by a professional in order to afford the highest level of protection that is available.

IMPORTANT NOTE: The information contained in the preceding newsletter is summary in nature and is given for educational purposes only. The contents of this newsletter should not be considered as legal advice for your situation, if any, nor is it intended as specific or detailed advice, as we do not have any information specific to your situation. Further, the articles in this newsletter are not intended to be an all-inclusive discussion of their respective subjects, but a guide to the same, and there may be other matters not described in the articles of this newsletter which may impact your particular situation. Therefore, always seek legal advice regarding your own, unique situation.