Sunday, May 01, 2016

Brokerage Account is a Safe Account to Temporarily Hold Homestead Sale Proceeds for Reinvestment [Florida]

An individual sold his interest in a Florida homestead, and put a portion of the proceeds in two Wells Fargo brokerage investment accounts entitled “Fl. homestead account..” The account was invested in mutual funds and unit investment trusts.

The Florida constitution protects a Florida homestead from claims of creditors of the owner. This has been extended to the proceeds from sale of a homestead if (1) there is  a good faith intention, prior to and at the time of the sale, to reinvest the proceeds in another homestead within a reasonable time; (2) the funds are  not commingled with other monies; (3) the proceeds are kept separate and apart and held for the sole purpose of acquiring another home.

The creditor in the instant case claimed that the owner lost homestead protection due to the investment in securities. The trial court accepted the creditor’s argument, but the district court of appeal rejected it. The Florida Supreme Court took on the case and sided with the owner of the property, holding that the accounts maintained protection as homestead property.

Some particular elements that were helpful to the owner were: (a) the court believed the securities investments were still relatively safe, (b) to hold otherwise would require the taxpayer to hold the funds in a noninterest bearing account, at least in a low interest rate environment, and (c) the owner actually used the funds to purchase a new residence.

By commenting on the safety of the securities investments, the door is still open that more speculative investment of sale proceeds could jeopardize the homestead protection.

JBK Associates, Inc. v. Sill Bros., Inc., Florida Supreme Court (April 28, 2016)

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