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Wednesday, February 08, 2006

HOMESTEAD PROTECTION AND THE REVOCABLE TRUST [FLORIDA]

One legal concept relating to payment of expenses and claims of a decedent’s estate is that a Florida homestead is protected against claims of creditors of a decedent, when the homestead will pass to the heirs of the decedent. This is based on Florida’s Constitution. Another legal concept is that assets held in a revocable trust of a decedent must generally be used to pay expenses and claims against a decedent’s estate, to the extent that a probate estate has insufficient assets. This is based on Florida statutory provisions.

What happens if the homestead (which will pass under the trust to heirs of the decedent) is held in a revocable trust - can the probate estate require that the homestead be used to pay probate estate expenses? One would expect that the homestead protection, which is under the Constitution, will trump the merely statutory provision requiring the use of revocable trust assets for probate expenses.

Okay, but what happens if the revocable trust has an explicit provision in it that generally provides for the use of revocable trust assets to pay expenses of and claims against the probate estate - has the constitutional protection been waived or lost? This is a provision found in many revocable trust agreements.

No, the constitutional protection also trumps such an explicit clause in the trust, according to the 4th District Court of Appeals in Engelke v. Engelke (4th DCA 2006). In that case, the 4th DCA provided that the general payment of expenses and claims clause will not act to override the constitutional homestead protections.

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