A recent amendment to the Florida Probate Code allows surviving spouses to opt out of the automatic life estate that is given to surviving spouses under Florida law. Instead, the surviving spouse can claim a 50 percent tenant-in-common interest in the homestead property. And if the surviving spouse is incapacitated, her guardian can make the elector for her.
The new law provides much-needed relief from the so-called Florida homestead trap. The trap was created by the automatic life estate in homestead property that Florida law provides to surviving spouses.
A life estate can be a useful mechanism in many situations. It assures that the life tenant has property for his or her life, with the remainder passing to other beneficiaries automatically (outside of probate) at the life tenant’s death. But the life estate has a few serious drawbacks, including:
- Impaired Ability to Deal With the Property. The life tenant usually needs the consent of the remaindermen to deal with the property.
- Potential for Family Conflict. The life tenant and remainderman are stuck in a co-ownership relation, with each are responsible for separate categories of expenses. Conflict can result if one of the parties cannot or will not pay his or her respective share.
- Valuation Issues. It is difficult to tell how much the life estate and remainder interest are worth. If the property is sold, there could be an argument over who gets what from the sale proceeds.
But perhaps the most significant drawback of a life estate is that traditionally there has been no escape. This is where the “trap” comes in. The judicial remedy of partition—which allows co-owners to get out of the co-ownership arrangement—is only available to owners with concurrent interests in property (such as tenancy in common).
But with the life estate, the interests of the life tenant and remaindermen are possessory at different points in time. During the lifetime of the life tenant, the remainderman have no possessory interest; after the death of the life tenant, the heirs of the life tenant have no possessory interest. The remedy of partition is not available for this non-concurrent form of ownership. So the life tenant has had no mechanism to terminate the life tenancy. As a result, the life tenant is stuck in a situation where he or she is responsible for increasing responsible taxes, property insurance, repairs, homeowner or condo association fees, or other expenses of homeownership, without the ability to sell the property without the involvement of the life tenants.
The new legislation is designed to remedy this situation. By giving the surviving spouse the option of electing a tenancy in common in lieu of a life estate, the legislation makes the remedy of partition available to the life tenant. If the life tenant does not want to be in the tenancy, he or she can simply elect tenancy-in-common in lieu of the life tenancy and seek partition of the property. The life tenant has six months from the decedent’s death to make this election.