Why "Trust Me" Estate Planning Can Be Disastrous When it Comes to Homestead Property
Collinson v. Miller, 2005 WL 840188 (Fla. 2 DCA April 13, 2005) (TRIAL COURT REVERSED)
This case should be kept in your files and shared with clients who would rather skip any type of formalized planning for what is in all likelihood their single largest asset - their homestead property - and opt instead for some sort of unwritten "trust me" estate plan. In terms of technical guidance, you may also want to keep this one on the shelf and refer back to it the next time you need to wade into the legal thicket surrounding exactly what "constructive trusts" are, when they are used, and when they don't apply.
This case involved a second marriage where both spouses had children from previous marriages (this fact alone should instantly trigger alarm bells). "Husband" purchased waterfront property and built a home on the property. The idea was that if "Wife" survived Husband, she would be able to use the home for the rest of her, but at her death the house (which was valued at over $2.2 million in Wife's estate) would go to Husband's children.
At this point, the couple had a choice to make. They could opt to do nothing to memorialize their estate plan and simply hope for the best. This is what they in fact did . . . and six years afer Wife's death, her estate remains embroiled in litigation among the surviving children. From the perspective of the families involved, you know it's not a good sign when the appellate court summarizes your case as follows:
The facts in this case recite like the worst nightmare of a law student preparing for a final exam in trusts and estates.
A better choice for all concerned would have been to invest a little time and money up front to work through the homestead and tax issues in a formalized estate plan. For example, the couple could have created an estate plan that incorporated a waiver of homestead rights in accordance with Florida Statue 732.702 coupled with a transfer of the homestead property upon the death of the first spouse (in this case, Husband) to a trust for the benefit of Wife for life, with the remainder to children of Husband. If properly designed (i.e., if the trust qualifies for "QTIP" treatment under IRC Section 2056(b)(7)), this trust would have deferred any estate tax on the homestead property until after Wife's death, ensured that all or most of the property or its equivalent value would be there at the end of the day for Husband's children, provided maximum flexibility for Wife for the remainder of her life, and, most importantly, avoided the expense and heartache of years of litigation.
My father passed away last year. He has owned 23 acres in Lutz, FL for over 12 years, before he married his third wife. They have been married 22 years, although they never really lived together until the last 5 years. The last 5 years they lived in my fathers house which he declared homestead. The Lutz property is soley in his name. When they sold the house, his wife moved out to N. Carolina and he bought her a mobile home, which is still in his name. He moved back on his Lutz property. He lived in a RV. After living almost a year on the Lutz proprety, my father passed away unexpectedly.
Less than a month before he passed away, he purchased 6 acres with a mobile home on it,unbeknownst to his wife, this too is soley in his name. He had plans to divorce hise wife. He closed on the property August 4, 2004 but passed away Sept 1, 2004. The seller was still living on the property at the time of his death because the sales agreement allowed her to live there for 30 days after the closing. He never moved in on that property. He was going to, eventually.
His estrange wife is trying to declare that the newly purchased property is his homestead, although he never lived or moved any of his belongings on it. Because he lived in a RV on the Lutz property, it meant that it was mobile, so because the RV is considered mobile, the Lutz propety could not be established as being homestead.
Because my father lived in a RV, which was hooked up to electricity, water, sewer, the judge made the decision because the RV was mobile and my father never moved in on his new property his decision was that both properties are not homestead.
Now the estranged wife wants to declare her N. Carolina mobile home, which is parked in a mobile home...his homestead.
Any advice?