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Florida Irrevocable Grantor Homestead Trust: Having Your Cake and Eating It Too — First Course

Real Property, Probate and Trust Law

Real Property, Probate & TrustThe popular idiom, “you can’t have your cake and eat it too,” is used to convey the concept that in certain circumstances it is not possible to simultaneously retain two benefits (if you eat the cake, then you no longer have the cake). On its face, it would seem that this idiom applies equally to Florida homestead because it is generally not possible to have homestead benefits without homestead burdens. However, it may be possible to have your cake and eat it too by using a Florida irrevocable grantor homestead trust (FIGHT) to retain homestead benefits while simultaneously avoiding homestead burdens.

The FIGHT requires a lifetime conveyance of the homestead to the trustee of an irrevocable trust. To understand how a FIGHT may be able to provide homestead benefits without burdens, an initial fundamental understanding of Florida homestead is necessary. Florida protects homestead in three ways, each with its own rules and requirements: 1) tax benefits, 2) creditor exemption, and 3) alienation restrictions.[1]

If real property qualifies as homestead for tax purposes, it is eligible for certain tax exemptions[2] and the Save Our Homes assessment limitation, which limits the increase in value for tax assessment purposes to no greater than 3% per year[3] (collectively, the tax benefits). To qualify for the tax benefits, a person must have legal or equitable title to real property and the real property must be the permanent residence of the person or the person’s family.[4] However, for creditor exemption and alienation restriction purposes, homestead is defined as property that is the permanent residence of a person or a person’s family, which does not exceed one-half acre within city limits or 160 acres outside of city limits, and in which the person has an ownership interest.[5] Homestead is exempt from the claims of creditors and not subject to forced sale unless the claim is for taxes, loans related to the homestead, or improvements related to the homestead.[6] The homestead exemption inures to the surviving spouse or heirs of the homestead owner.[7] If property meets the definition of homestead, the owner may freely alienate the real property during life (but if married, only with the consent of the spouse).[8] However, the owner of the homestead may not devise[9] homestead when he or she is survived by a spouse or minor child (the devise restriction).[10] The devise restriction does not apply if there is no spouse or minor child, and if there is no minor child, the owner may permissibly devise a fee simple interest to a spouse.[11]

This article is served in two courses. The first course discusses F.S. §732.4017 and analyzes the intended purpose of the FIGHT — avoiding the devise restriction while maintaining the tax benefits and creditor protection. The second course explores items to consider when contemplating using a FIGHT, including federal tax implications, mortgage acceleration clauses, future transactions with homestead, property tax reassessment, Florida documentary stamp tax, self-settled trust treatment, common law and statutory powers to revoke or amend, married couples with minor children, and alternatives to using the FIGHT. Finally, the second course will conclude with some comments regarding the drafting of a FIGHT.

Inter Vivos Conveyance of Homestead Property

The Real Property, Probate and Trust Law Section of The Florida Bar noticed the confusion regarding what constitutes a permissible lifetime alienation or conveyance of homestead property that does not trigger the devise restriction as opposed to a devise under a will or trust that takes place at the owner’s death and proposed §732.4017 to “clarify the law in this area and provide guidance to the residents of Florida and various practitioners working in this area.”[12] Section 732.4017 intends to make “clear that an inter vivos conveyance of an interest in homestead property will not be [subject to the devise restriction] provided certain conditions are met.”[13]

Section 732.4017 is comprised of four subsections. Subsection (1) provides that a lifetime conveyance, including a conveyance in trust, is “not a devise…if the transferor fails to retain a power, held in any capacity, acting alone or in conjunction with any other person, to revoke or revest that interest in the transferor.”[14] Subsection (2) provides that a transferor of a trust may possess a power “to alter the beneficial use and enjoyment…within a class of beneficiaries identified only in the trust…[provided] the power may not be exercised in favor of the transferor, the transferor’s creditors, the transferor’s estate, or the creditors of the transferor’s estate or exercised to discharge the transferor’s legal obligations.”[15] Subsection (3) explains that a conveyance will not be considered a devise or power to revoke or revest “even if: (a) [t]he transferor retains separate legal or equitable interest…through a trust…[or] a term of years, life estate, reversion, possibility of reverter, or fractional fee interest; (b) [t]he interest transferred does not become a possessory interest until a date certain or upon a specified event…including…the death of the transferor; or (c) [t]he interest transferred is subject to divestment, expiration, or lapse upon a date certain or upon a specified event…including…survival of the transferor.”[16] Subsection (4) states the intent of the statute is to clarify existing law.[17]

Purpose of the Florida Irrevocable Grantor Homestead Trust

The intended purpose of the FIGHT is to provide a mechanism to avoid the devise restriction during the period that the transferor has a minor child,[18] while simultaneously maintaining homestead creditor protection and tax benefits for the transferor. Assuming that the property being conveyed to the FIGHT would otherwise qualify as homestead if owned directly by the transferor, can the FIGHT accomplish its intended purpose?

Avoiding Devise Restriction

Section 732.4017 is the guidepost for avoiding the devise restriction via a FIGHT. Provided there is a valid lifetime conveyance of an interest in the homestead to one or more beneficiaries (other than just the transferor) and the transferor does not retain powers that equate to retention of the entire beneficial interest of the homestead (such as the power to revoke or revest), then a FIGHT may be used to avoid the devise restriction.[19] However, it should be noted that the devise restriction is based in the Florida Constitution, and a Florida statute cannot supersede the Florida Constitution. The enactment of §732.4017 was intended to clarify existing law, meaning that the prevailing belief was such a conveyance was already permissible under the Florida Constitution and the statute is intended merely to provide guidance. The key principle is that a lifetime conveyance is not a devise. The earlier caselaw of concern centered around transferors retaining the equivalent of the entire beneficial interest, which then equated to a devise of the homestead subject to the devise restriction at the transferor’s death.[20] The FIGHT does not alter the characterization of property as homestead but instead provides a vehicle to avoid the conveyance being deemed a devise subject to the devise restriction upon the transferor’s death.

The only current published opinion that involves §732.4017 is Stone v. Stone, 157 So. 3d 295 (Fla. 4th DCA 2014), which considered whether the devise restriction was applicable to property titled in the trustee of an irrevocable trust known as a qualified personal residence trust (QPRT).[21] In Stone, husband and wife established separate QPRTs and each funded their QPRT with a one-half, tenants-in-common interest in their homestead. Husband’s QPRT had a five-year term at the end of which the property would pass to daughter. Husband passed away before the end of the QPRT term, and, under the QPRT provisions, husband’s interest in the homestead reverted back to his estate to be disposed of according to his pour-over will and revocable trust (which held husband’s interest in the homestead in further trust for wife). The issue before the court on appeal was “whether the transfer of [husband’s] interest in the property to [daughter] after [husband’s] death was an impermissible devise of homestead property”[22] because wife had survived husband and received less than a fee simple interest in the homestead.

The court concluded that because the homestead’s disposition occurred through husband’s will and not pursuant to the terms of the QPRT, the homestead was subject to the devise restriction. The court then found that wife had validly waived her homestead rights because the deed she signed included the “hereditaments” as one of the property rights conveyed by the deed. The fatal aspect with regards to the devise restriction in Stone was not the use of an irrevocable trust, but the failure of the trust terms to directly control the ultimate disposition of the homestead property and instead using the transferor’s will to control the disposition of the transferor’s interest in the property upon his death. The court, in its analysis, rightfully determined that “property owners may give away or dispose of homestead property during their lifetimes, including by transfer to a trust,” that the “initial transfer was not a devise subject to [the devise restriction],” and that had husband survived the term of the QPRT, the subsequent conveyance to daughter would not have been considered a devise.[23] Stone affirms that a transferor may use a FIGHT to avoid the devise restriction[24] while also serving as a warning to be mindful that the terms of the trust should control the ultimate disposition of the homestead and not direct the homestead back to the transferor’s estate upon his or her death.

Maintaining Homestead Creditor Protection — During the Transferor’s Lifetime

Whether homestead conveyed to a FIGHT may maintain its exemption from creditors of the transferor depends on whether the transferor still maintains a qualifying ownership interest in the property. This raises the question: what kind of interest must the transferor have to be considered a qualified ownership interest for homestead creditor protection purposes? According to the Florida Supreme Court, the Florida Constitution “does not define or limit the estates in land to which homestead exemption may apply”[25] and “the right of possession, or any beneficial interest in land [gives] the claimant a right to exempt it as his homestead.”[26] Moreover, actual fee simple ownership of the property is not required, as clearly illustrated in Geraci v. Sunstar EMS, 93 So. 3d 384 (Fla. 2d DCA 2012). There, the court held that even a lessee can qualify for homestead if the “leasehold estate includes the right to use and occupy the premises for a long term.” Additionally, there is ample caselaw support for a transferor’s homestead in a revocable trust continuing to qualify for the homestead creditor exemption.[27]

However, a FIGHT is not a revocable trust, and the transferor does not retain the ability to revoke or revest himself or herself with the homestead as the transferor does in a traditional revocable trust. If a transferor conveys his or her entire homestead interest to the FIGHT and maintains the right to the use, possession, and occupancy of the homestead for life, will that be enough to be a qualifying ownership interest in the homestead? In Cutler v. Cutler, 994 So. 2d 341 (Fla. 3d DCA 2008), the decedent conveyed her homestead to the “Cutler Irrevocable Land Trust”[28] and reserved a life estate for herself. The court found that the remainder interest titled in the “trust was correctly determined by the lower court to qualify for homestead protection.”[29] Unfortunately for the trust beneficiary, the trust directed distribution of the homestead in accordance with the transferor’s will, which specified that properties should be used to satisfy the transferor’s debts. As a result, the inurement of the protection from claims of the decedent’s creditors was lost.[30] In Cutler, the original 2007 opinion was withdrawn on a grant of rehearing en banc. Interestingly, the withdrawn opinion of the court contained an analysis of the continuation of the homestead exemption when property is titled in a trust and found “no reason to limit the holdings of [the revocable trust cases] to revocable trusts” and that it is “immaterial that legal title to the residence…was held in an irrevocable trust during [transferor’s] lifetime.”[31]

Like in the Stone case, the court determined that homestead property conveyed to a QPRT was subject to the devise restriction. The court held “that when a homeowner transfers property to a QPRT pursuant to section 732.4017 and the property later reverts back to the homeowner’s estate because the homeowner fails to survive the term of the QPRT, a subsequent disposition of the property pursuant to the homeowner’s will is a devise.”[32] If the property was no longer the transferor’s homestead, then there would not have been any restriction on how the property could be devised. The devise restriction would only have been applicable at the transferor’s death if the real property subject to the QPRT otherwise qualified as the transferor’s homestead at the time of his or her death. This factor is important because the definition of “homestead” for the devise restriction and homestead creditor exemption is identical;[33] meaning if property is homestead for purposes of the devise restriction, it is also homestead for creditor exemption purposes. Thus, Stone appears to support the proposition that homestead conveyed to a properly drafted irrevocable trust may continue to be deemed homestead while titled in the trust. Accordingly, a life interest in or a right within the trust to possess and occupy homestead property conveyed to a FIGHT should constitute a qualifying ownership interest in homestead and allow for the continuation of the homestead creditor exemption.

Maintaining Homestead Creditor Protection — After the Death of the Transferor

If the transferor retains a life estate in the deed to the trustee of the irrevocable trust, then his or her homestead creditor exemption should be maintained as discussed above. However, will the homestead creditor exemption inure to the FIGHT’s remainder interest in the transferor’s homestead? In Hubert v. Hubert, 622 So. 2d 1049 (Fla. 4th DCA 1993), the court found that a devise of homestead, with a life estate interest to a non-heir and a remainder interest to an heir of the decedent, maintained the homestead creditor exemption inurement from the decedent’s creditors. However, a FIGHT does not involve a remainder interest to a person but instead to a trust. Fortunately, Florida caselaw is supportive of the FIGHT in that the courts have held that a remainder interest to a trust, of which the beneficiaries were heirs of the decedent, maintained its homestead creditor exemption.[34] Furthermore, upon the death of the transferor, the remainder interest is not subject to the claims of the transferor’s creditors after his or her death because a FIGHT is not a revocable trust described in F.S. §733.707(3).

Maintaining Homestead Tax Benefits

Whether a homestead conveyed to a FIGHT can maintain the tax benefits depends on whether the transferor maintains legal or equitable title in the property. F.S. §196.041(2) provides that:

[a] person who otherwise qualifies by the required residence for the homestead tax exemption provided in s. 196.031 shall be entitled to such exemption where the person’s possessory right in such real property is based upon an instrument granting to him or her a beneficial interest for life, such interest being hereby declared to be ‘equitable title to real estate,’ as that term is employed in s. 6, Art. VII of the State Constitution (emphasis added).

Additionally, Florida Administrative Code §12D-7.011 provides “[t]he beneficiary of a passive or active trust has equitable title to real property if he is entitled to the use and occupancy of such property under the terms of the trust [however, the tax benefits] may not be based upon residence of a beneficiary under a trust instrument which vests no present possessory right in such beneficiary.”[35] The Florida statute and the Florida Administrative Code clearly permit the continuation of the tax benefits for homestead held in a properly-drafted trust. It is noteworthy that the prior emphasized language does not specify that the “instrument” or “trust” granting the equitable title in property be revocable or amendable, nor is there any requirement to provide a power to revest the property. Direct support for this conclusion is found in Robbins v. Welbaum, 664 So. 2d 1 (Fla. 3d DCA 1995), and Nolte v. White, 784 So. 2d 493 (Fla. 4th DCA 2001). In both cases, the property appraiser argued that the transferors lost the tax benefits upon a conveyance of homestead to a QPRT. The Third District and Fourth District disagreed with the property appraiser and found that the transferors maintained sufficient “equitable title” to continue to claim the tax benefits subsequent to the conveyance to the QPRT.[36] Therefore, a properly drafted irrevocable trust, such as a FIGHT, may continue to receive the tax benefits related to the conveyed homestead.[37]

The second course of this article takes a deep dive into various important considerations that should be understood and contemplated before drafting a FIGHT and conveying Florida homestead. Until then, stay hungry.

[1] Snyder v. Davis, 699 So. 2d 999 (Fla. 1997).

[2] Fla. Const. art. VII, §6; Fla. Stat. §196.031 (up to $50,000).

[3] Fla. Const. art. VII, §4; Fla. Stat. §193.155.

[4] Fla. Const. art. VII, §6(a).

[5] Id. §4(a). It is possible for a residence to qualify as protected homestead within a municipality if it was the residence of the decedent’s family, but not the decedent. Friscia v. Friscia, 161 So. 3d 513 (Fla. 2d DCA 2014); Nationwide Fin. Corp. v. Thompson, 400 So. 2d 559, 561 (Fla. 2d DCA 1981) (citing Vandiver v. Vincent, 139 So. 2d 704 (Fla. 2d DCA 1962)).Davis v. Davis, 864 So. 2d 458 (Fla. 1st DCA 2004), dealt with property outside a municipality. The court concluded that the omission of “the residence of the owner or the owner’s family” before the semicolon in Fla. Const. art. X, §4(a)(1) means that the protection for property outside a municipality protects more than the residence and can include portions of the property used for commercial purposes. It could be argued, therefore, that the protection from creditor claims and the restrictions on devise would apply to property outside a municipality only if it was the residence of the deceased owner (in which case, the entire property up to 160 acres would be protected from the claims of the decedent’s creditors).

[6] Fla. Const. art. X, §4(a).

[7] Id. at §4(b).

[8] Id. at §4(c).

[9] “Devise” is defined in F.S. §731.201(10) as “a testamentary disposition of real or personal property.” Courts have found that testamentary dispositions, including disposition through deeds and revocable trusts, are subject to the devise restriction. See Johns v. Bowden, 66 So. 155 (1914); In re Estate of Johnson, 398 So. 2d 970 (Fla. 4th DCA 1981).

[10] Fla. Const. art. X, §4(c). The devise restriction only applies to the portion of homestead up to one-half acre if in city limits or up to 160 acres if outside city limits; any land in excess of the applicable limitation is not subject to the devise restriction. Thayer v. Hawthorn, 363 So. 3d 170, 175 (Fla. 4th DCA 2023) (“If the municipal limit applies, then the exempt homestead is 0.5 acres, and the court must determine what remaining portion of the total property was devisable by James.”); see also HOMESTEAD: NON-CREDITOR ISSUES, ASPR FL-CLE 6-1 (“[I]f only a portion of real property constitutes homestead, it appears that a decedent could devise the portion that does not constitute homestead without the application of the restrictions on the devise of homestead.”).

[11] Fla. Const. art. X, §4(c). The decision in Friscia confirms that a home within a municipality is devise restricted even when the decedent does not reside on the property, provided the decedent’s spouse or minor children resided in the home. But as noted above, a home outside a municipality might not be devise restricted. Davis held, “Giving article X, section 4 a plain reading, and also a reading consistent with decisional law under prior constitutions, we hold that the language limiting homesteads within municipalities to the residence of the owner or the owner’s family does not apply to homesteads located outside municipalities.” Davis, 864 So. 2d at 460.

[12] RPPTL, White Paper for §732.4017,

[13] Id.

[14] Fla. Stat. §732.4017(1).

[15] Id. at §732.4017(2).

[16] Id. at §732.4017(3). Note, while the statute permits a “reversion,” in Stone, it was a reversion upon death to the transferor’s estate and resulting devise under the transferor’s will that triggered the devise restriction. Stone, 157 So. 3d at 301. When drafting a FIGHT, caution should be exercised about any reversionary interest upon the transferor’s death to the transferor or his or her estate or revocable trust.

[17] Fla. Stat. §732.4017(4).

[18] If there is no minor child and a person desires to protect homestead from spousal alienation or the devise restriction, a prenuptial or postnuptial agreement provides a much simpler approach than the FIGHT.

[19] Zuckerman v. Alter, 615 So. 2d 661, 663-64 (Fla. 1993) (“If by the terms of the trust an interest passes to the beneficiary during the life of the settlor, although that interest does not take effect in enjoyment or possession before the death of the settlor, the trust is not testamentary.”); see also Lorraine v. Grover, Ciment, Weinstein & Stauber, P.A., 467 So. 2d 315 (Fla. 3d DCA 1985) (involving an invalid devise in a will prepared by an attorney and stating “it may have been possible to structure a conveyance to avoid the [devise restriction] by having [the transferor] make an inter vivos transfer of a vested interest in the residence”).

[20] See Johns v. Bowden, 66 So. 155 (1914) (deed); In re Estate of Johnson, 398 So. 2d 970 (Fla. 4th DCA 1981) (revocable trust).

[21] A QPRT is an irrevocable trust established for a term of years funded with a residence that the transferor may continue to use during the term, and at the end of the term the residence passes to someone other than the transferor. QPRTs are used in estate planning for the purpose of achieving transfer-tax savings. For more information, see Jeffrey A. Baskies, Understanding Estate Planning with Qualified Personal Residence Trusts, 73 Fla. B. J. 72 (Nov. 1999).

[22] Stone v. Stone, 157 So. 3d 295, 301 (Fla. 4th DCA 2014).

[23] Id. at 302.

[24] If real property is not homestead, then the devise restriction does not apply. For the devise restriction to potentially apply, the property must be homestead. Therefore, for the court to determine the property was subject to the devise restriction implicitly means that the property retained its homestead character during the transferor’s life while in his trust.

[25] Menendez v. Rodriguez, 143 So. 223 (Fla. 1932); see also Southern Walls, Inc. v. Stilwell Corp, 810 So. 2d 566 (Fla. 5th DCA 2002).

[26] Bessemer Props. v. Gamble, 27 So. 2d 832 (Fla. 1946).

[27] Callava v. Feinberg, 864 So. 2d 429 (Fla. 3d DCA 2003); Engelke v. Estate of Engelke, 921 So. 2d 693 (Fla. 4th DCA 2006); In re Alexander, 346 B.R. 546 (Bankr. M.D. Fla. 2006); In re Mary L. Edwards, 356 B.R. 807 (Bankr. M.D. Fla. 2006); In re Cocke, 371 B.R. 554 (Bankr. M.D. Fla. 2007). Contra In Re Bosonetto, 271 B.R. 403 (Bankr. M.D. Fla. 2001) (However, this case has seemingly been repudiated even if not directly overruled.).

[28] In addition to the trust name, the trust itself is referred to as “irrevocable” in the original withdrawn opinion. Cutler v. Cutler, 32 Fla. L. Weekly D583 (2007).However, in the final opinion published by the Third District Court of Appeal, the court noted that the transferor had a right to revest the homestead in herself. Cutler v. Cutler, 994 So. 2d 341, 342 (Fla. 3d DCA 2008).

[29] Cutler, 994 So. 2d at 344.

[30] Id. at 344-347.

[31] Cutler v. Cutler, 32 Fla. L. Weekly D583 (Fla. App 2007).

[32] Stone, 157 So. 3d at 303.

[33] Holden v. Gardner, 420 So. 2d 1082 (Fla. 1982) holding the same definition of homestead used in Fla. Const. art. X, §4(a) (homestead creditor exemption) also applies to §4(c) (devise restriction)).

[34] Engelke v. Estate of Engelke, 921 So. 2d 693 (Fla. 4th DCA 2006); HCA Gulf Coast Hosp. v. Estate of Downing, 594 So. 2d 774 (Fla. 1st DCA 1992); see also In re Estate of Donovan, 550 So. 2d 37 (Fla. 2d DCA 1989) (finding that homestead creditor exemption inured to a homestead interest devised to a trust of which the surviving spouse was trustee and sole beneficiary, and the trust terminated 45 days after the decedent’s death distributing the trust assets to the surviving spouse). A critical factor in the supporting caselaw is the heir beneficiaries of the trusts had the right to use the residence for life; without such right, the homestead creditor exemption of the decedent may not inure. See Elmowitz v. Estate of Zimmerman, 647 So. 2d 1064 (Fla. 3d DCA 1994), in which homestead devised to a trust lost its homestead creditor protection and the court noted in a footnote that the beneficiary “was only entitled to an equivalent in value from the assets of the trust.” However, Elmowitz, which also cites In re Estate of Morrow, 611 So. 2d 80 (Fla. 2d DCA 1992), and Hartwell v. Balsigame, 564 So. 2d 543 (Fla. 2d DCA 1990), as authority for homestead losing its creditor exemption upon devise to a trust, was decided before the Florida Supreme Court significantly broadened the definition of “heirs” to include “any family member within the class of persons categorized in [Florida] intestacy statute.” Snyder, 699 So. 2d at 1005.

[35] See also Fla. AGO 2003-11 (2003); Fla. AGO 90-70 (1990) (emphasis added).

[36] Robbins v. Welbaum, 664 So. 2d 1, 2 (Fla. 3d DCA 1995) (“QPRT [was] valid…as such, the [transferors] hold beneficial title to their residence for homestead purposes, and…are entitled to homestead exemption.”); Nolte v. White, 784 So. 2d 493, 494 (Fla. 4th DCA 2001) (affirming trial court decision in favor of transferor “who claimed a homestead exemption in property that she conveyed to a [QPRT] and in which she retained a right to reside for a term of eight years”).

[37] See Thomas Wells & Jennifer Okcular, Creating a Florida Irrevocable Homestead Trust for Ad Valorem, Income, and Transfer Tax Purposes, 94 Fla. B. J. 46, 48-49 (Sep./Oct. 2020) (“As to the permissibility of owning a homestead in an irrevocable trust, Florida Attorney General Opinion 72-12 held that an irrevocable trust can own homestead so long as the beneficiary (who is residing in and using the homestead as his or her permanent home) is provided a present possessory right to the homestead.”).

Joseph M. Percopo, LL.M, AEP, practices in Orlando with Dean Mead. His practice concentrates on estate and trust planning, estate and trust administration, asset protection planning, and business and tax law. He is a graduate of the Florida State University College of Law with highest honors and earned his Master of Laws in taxation from the University of Florida College of Law. Percopo is president of the Central Florida Estate Planning Council, as well as a former RPPTL Section fellow and graduate of the Florida Fellows Institute of the American College of Trusts and Estate Counsel.

This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Sarah Swaim Butters, chair, and Allison Archbold and Homer Duvall, editors.

Real Property, Probate and Trust Law