March 2019

Protecting your family starts with a phone call.

Call 954-580-3690 or email [email protected] today.

What’s Mine is Mine and What’s Yours is Mine – The Homestead Trap

Jane and Harry decide to marry. Both Jane and Harry have been married previously, each owns assets that he/she acquired prior to this marriage and, each have children from prior relationships. Jane and Harry both agree that they will pass their respective estates to their own children (i.e., nothing will pass to Jane/Harry as surviving spouse). Jane and Harry each execute a Last Will and Testament leaving everything to their respective children. After they marry, Jane and Harry will live in a beautiful house in Plantation, Florida that Jane owned prior to their marriage.

Jane and Harry have a beautiful wedding in Boca Raton, Florida and are living happily ever after – for one day – and then sadly Jane is in a terrible car accident with a Broward County bus and dies. After Harry grieves for 3 months, he consults with a Trust & Estate lawyer to discuss administering Jane’s estate. Harry’s lawyer advises him that he has rights to Jane’s house and also to part of her estate. Harry explains to his lawyer that he and Jane were only married for 1 day, and besides, they agreed they wouldn’t leave anything to each other and that they even have a Last Will and Testament stating such. Harry’s lawyer says it doesn’t matter how long they were married or what their wills say, under Florida law Harry (as a surviving spouse) automatically gets a life estate in Jane’s homestead; alternatively, Harry can make an election to take a 50% tenant-in-common (“TIC”) interest in the homestead. The TIC election MUST be made within 6 months of death (this is a strict deadline). But is the TIC election really important to make? It certainly can be! Although a life estate is nice, it’s very restrictive. Neither the life tenant nor the remainderman can really do much with the property without the other’s consent. The main advantage of the TIC interest is that it allows either owner to force a sale of the property (through a process called “partition”). This can be a crucial benefit when the life tenant and remainderman don’t get along.

In addition to the homestead interest, Harry’s lawyer tells him that he can also take an elective share, which is 30% of all of Jane’s assets. Harry tells his lawyer that Jane named beneficiaries on all of her financial accounts, so nothing will pass through probate. The lawyer explains to Harry that it doesn’t matter, the elective share applies to ALL of Jane’s assets (with some exceptions), including her $2,000,000 Fidelity account which should have passed directly to her children. Harry is shocked by this information. But the elective share is not automatic like the homestead interest. If Harry decides he wants to pursue his elective share rights, then he has to file an election in Jane’s probate administration (if there is no probate administration, he would have to initiate one).   The good news for Jane’s children is that the elective share is inclusive of the homestead rights, so in simple terms (because the elective share calculation can be quite complex), if the homestead is worth $1,000,000, then Harry is deemed to have received $500,000 (i.e., ½), so he would only be entitled to $100,000 from the Fidelity account.

What did Jane and Harry do wrong? Was there any way to accomplish their goal of their respective children inheriting their estates? There sure was. Jane and Harry could have executed a marital agreement (either before or after their marriage), or they could have signed a simple waiver of rights under Florida Statute 732.702 (such a waiver requires financial disclosure). Marriage is a significant legal step. If you are thinking of getting married and you have assets or children from a prior relationship, I strongly suggest you meet with your lawyer before getting married. The Law Offices of Samantha J. Fitzgerald has counseled numerous clients on how to protect their estates from unintended consequences.