The distribution of homestead property in a probate estate is governed by the Probate Code, the Constitution and Florida decisional case law. Even though there is firm statutory, constitutional and judicial precedent dealing with homestead issues, there is always yet another novel issue or unanswered question to which there appears no clear answer. The Florida Fourth District Court of Appeals issued an opinion on April 29, 2009 answering the question whether real property that is facing foreclosure during the probate administration process may be distributed to the decedent’s surviving spouse.

What is Homestead Property?

Homestead property was recognized by the Courts long ago as the place where the owner and his or her family reside, the place where the home or the house is, and adjoining land, where the family dwells. The Florida Probate Code defines homestead property as the property described in such constitutional provision on which at the death of the owner the exemption inures to the owner’s surviving spouse or heirs under the constitution. This refers to Article X section 4 of the Florida Constitution.

Why is this Property Protected? As a matter of public policy, the purpose of the constitutional homestead exemption is to promote the stability and welfare of the state by securing to the householder a home, so that the homeowner and his or her relatives and loved ones may live beyond the reach of financial misfortune and the demands of creditors who have extended credit to the now deceased property owner. Callava v. Feinberg, 864 So.2d 429 (Fla.DCA 2003). There are, however, a few exceptions to homestead protection: consensual liens (mortgages); taxes and assessments (homeowners associations) debts for improvement (mechanics liens), and fraud.

What if the Property is in Foreclosure? The question of whether the homestead protection is afforded to the surviving spouse for property owned by decedent in order to protect it from foreclosure was recently answered in Bayview Loan Servicing v. Giblin, —So.2d—, 2009 WL 1139236 (April 29, 2009) an opinion issued by the Fourth District Court of Appeals.

The facts of Bayview involved the marriage of Decedent and Mrs. Giblin who married in 1959, had one child, and separated (but never divorced) in 1981. In 2000, decedent purchased a piece of residential property in Broward County. Title to the property was placed in the decedent’s name. The wife and daughter lived in the home, but decedent never did. Decedent died in 2001.

Decedent bequeathed his estate to his children and grandchildren. While probate was pending, the personal representative of the estate took out a mortgage on the property with the lender, Bayview Loan Servicing. Later, the Lender brought a foreclosure action against the estate. The wife filed a petition to determine the homestead status of the property.

After an evidentiary hearing, Broward County Probate Judge Mel Grossman found that the property was decedent’s homestead within the meaning of article X, section 4 of the Florida Constitution. As such, the court ordered that “the title to the Property descended and the constitutional exemption from the claims of decedent’s creditors inured to the decedent’s surviving spouse, Nivia Giblin, as to a life estate, with a vested remainder in the descendents of the decedent in being at the time of the decedent’s death.”
Article X, section 4 of the Florida Constitution provides, in relevant part:

(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:
(1) a homestead, . . . if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family;. . .
(b) These exemptions shall inure to the surviving spouse or heirs of the owner.
(c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child. . . .

The Fourth District Court of Appeals agreed with Judge Grossman:

“The language of article X, section 4 is clear and unambiguous. Here, decedent was a natural person who owned property occupied by his wife and child at the time of his death; thus, the property is homestead. Because decedent died leaving a spouse, the descent of his property is controlled by section 732.401(1), Florida Statutes (2001). As such, the wife is entitled to a life estate in the homestead with a vested remainder to the descendants. § 732.401(1), Fla. Stat.”

This decision by Judge Grossman at the trial court and appellate court is consistent with the purpose of Florida Constitution’s homestead exemption, which is to preserve the home as shelter for the family so as to prevent a family from becoming a public charge.

Under the common law doctrine of exoneration, an heir or devisee is generally entitled to have encumbrances upon real estate paid by the estate unless the will directs otherwise.

The Florida Probate Code abrogates this common law doctrine and directs that the specific devisee of any encumbered property is entitled to have the encumbrance paid at the expense of the residue of the estate only when the will shows that intent. Fla. Stat. §733.803.

At least nineteen states have abrogated the doctrine of exoneration by enactment of Uniform Probate Code §2-607, which provides for “default non-exoneration”: “A specific devise passes subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts.”

But what happens when the real property is jointly held by the testator and the beneficiary? A Georgia probate court recently addressed the doctrine of exoneration under the circumstances where real property is jointly held by a testator and the beneficiary. In Manders v. King, 667 S.E.2d 59 (Ga. 2008) the Georgia Supreme Court dealt with the estate of Pearl Manders, the deceased mother of siblings William Manders and Janice King. Janice was named the executrix of the estate. In her Last Will and Testament, the testatrix Manders bequeathed all her real and personal property to her three children in equal shares per stirpes, and directed that “all my just debts be paid without unnecessary delay by my Executrix….”

William Manders is the owner of a condominium formerly held by him and his mother as joint tenants with right of survivorship. He became the sole owner of the condominium upon the death of his mother. The problem is there was a mortgage on the condo taken out by Pearl when she originally purchased it several years ago. When the executrix refused Mr. Manders’s request that the estate pay the outstanding balance of the note as a debt of the estate, Mr. Manders filed an action in probate court and the case proceeding through the court system all the way to the Georgia Supreme Court.

Georgia is one of several states adhering to the common-law doctrine of exoneration, which provides that, unless a Last Will and Testament specifically provides otherwise, an heir or devisee of real property may look to the decedent’s personal property for satisfaction of liens on devised real property, at the expense of the residuary legatees or distributees of the decedent’s personal estate.

The Georgia high court observed that Mr. Manders received the property at issue not by means of descent or devise but as the surviving tenant of a joint tenancy with right of survivorship and concluded that the common-law doctrine of is not applicable to property passing by right of survivorship. The court reasoned that title to said property vests in the survivor immediately at the moment of the death of the joint tenant and is never a part of the estate. As a result, the decedent’s personal representative never has title and cannot use the property to discharge the debts of the decedent.

Next, the Georgia high court noted that Mrs. Pearl’s directive in her last will and testament that “all [her] just debts be paid without unnecessary delay” is not a clear expression of the testatrix’s intent that the estate pay the note secured by the deed to secure debt on the property received by Mr. Manders. The court said it was “a generic phrase relating to the payment of debts routinely included in a will and most likely reflects the testatrix’s intent to leave the world with her accounts paid and to be remembered as an upright and respectable person.” Therefore, the court held that the Will did not require the estate to discharge the mortgage.

This case is a reminder to probate practitioners to ensure that when drafting a last will and testament, include language that leaves no doubt as to the testator’s expectations that encumbered real property will pass to the beneficiary either with, or without, any debt secured by the property.