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Hold The Fort: Homestead Protection Guaranteed

Jul 09 2014

Article written for:  Orlando Regional Realtor Association

One advantage of purchasing a home in Florida is the homestead protection guaranteed by the Florida Constitution. Provided certain requirements relating to property features and ownership are satisfied, any principal residence in Florida is generally protected from forced sale without regard to value. Exceptions exist for the foreclosure of mortgages, construction liens, and tax liabilities but otherwise, whether a client owns a modest abode or a beachfront mansion, the equity is generally protected against creditors.

In the wake of the Great Recession, many people suffered severe losses and some continue to find themselves subject to creditors’ claims. Often, the first instinct is to try to “shelter assets” through transfers to family, friends, or protective structures such as retirement accounts or trusts. Like all states, however, Florida has “fraudulent transfer” laws that prohibit transfers to avoid creditors. Fraudulent transfers generally arise when an individual waits too long to engage in “asset protection.” To be effective, protective planning must be accomplished early — before claims arise.

One exception — and a salvation for debtors who haven’t properly implemented an asset protection plan — is the safe haven offered by Florida’s homestead protection. In the precedent-setting case of Havoco v. Hill, an out-of-state debtor being pursued by a creditor invested unprotected funds in a Florida home and claimed his intent to reside in Florida. The purchase appeared to represent a classic fraudulent transfer. Nevertheless, the Florida Supreme Court allowed the debtor to keep the home and established the principal that fraudulent transfer laws do not apply to homestead purchases.

Although it is more prudent to engage in asset protection before the need arises, for those who have not properly planned, Florida’s homestead protection offers shelter. The services of a REALTOR® in these situations can be crucial since any person subject to a judgment, whether or not a current Florida resident, can shelter liquid assets by purchasing and properly homesteading Florida property.

Hold The Fort - Orlando Regional Realtor Association

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Gary & Eric

Co Authors 
Gary Forster & Eric C. Boughman

Gary is the author of two books. In 2013, he wrote Asset Protection for Professionals, Entrepreneurs and Investors, a guide to asset protection strategies for clients and their financial advisors, now in its second edition. This year Gary finished the first edition of The U.S. Estate and Gift Tax and the Non-Citizen. This new book explains how resident and non-resident foreign nationals are impacted by the U.S. Estate and Gift Tax.

Eric also volunteers as a Guardian ad Litem with the Orange County Legal Aid Society. He is rated AV – Preeminent by Martindale-Hubbell and regularly publishes articles and makes presentations in the areas of asset protection and real estate law.

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