It’s not unusual for marital settlement agreements (“MSAs”) to pop up as major players in contested probate proceedings (see here, here, here), what is unusual — which makes this case a “must read” for probate lawyers — is how the MSA’s contractual provisions trumped one of the sacred cows of Florida inheritance law: a surviving spouse’s homestead rights.

Friscia v. Friscia, — So.3d —-, 2014 WL 4212689 (Fla. 2d DCA August 27, 2014):

The decedent (“Husband”) entered into a MSA as part of his 2008 divorce from “Former Wife”. They had two children together. After the divorce Husband and Former Wife owned their “Marital Home” 50/50 as tenants in common. Under their MSA, Husband and Former Wife agreed she could continue living in the Marital Home until their youngest child graduated from high school, at which point Former Wife had the option of either buying out Husband’s 50% share in the property or selling it and splitting the net sales proceeds 50/50 with Husband.

Husband married again (“Second Wife”), then a few years later died in 2011. Second Wife was the personal representative of Husband’s estate. Husband’s youngest child had yet to graduate from high school in 2011, which meant Former Wife’s occupancy rights under the MSA remained in effect. Second Wife tried to circumvent the MSA by taking control of Husband’s 50% share of the Marital Home.

[1] Can a person have two homestead properties? YES

Second Wife argued the Marital Home didn’t qualify as creditor-protected homestead property because Husband wasn’t living in the house when he died, so she was free to take control of it as PR and sell it pay estate obligations. Wrong answer. As I’ve previously written here, under Florida law it’s possible to have more than one homestead property, even if you’re not living in the second house.

In this case, as in [Beltran v. Kalb, 63 So.3d 783 (Fla. 3d DCA 2011)], the final judgment of dissolution did not operate to transfer the Decedent’s interest and the former marital home had not been deeded when the Decedent died. Thus, the Decedent and the Former Wife still owned the former marital home as tenants in common at the time of his death. See Beltran, 63 So.3d at 786–87. And the fact that the Former Wife had been awarded exclusive use and possession of the marital home did not in itself extinguish its homestead protection. See id. at 787. The Decedent’s interest retained its homestead protection because the Decedent’s sons, whom he still supported financially, continued to live on the property. See id.; see also Nationwide Fin. Corp. of Colo. v. Thompson, 400 So.2d 559, 561 (Fla. 1st DCA 1981) (“[T]he Florida Constitution does not require that the owner claiming homestead exemption reside on the property; it is sufficient that the owner’s family reside on the property.”).

[2] Did the MSA’s sales clause waive homestead property’s creditor protection? NO

Having struck out on her first homestead argument, Second Wife then claimed that the homestead property’s creditor protection shield had been waived by the MSA’s sale clause, so here again she was free to take control of it as PR and sell it pay estate obligations. My guess is that most probate lawyers would have bet on Second Wife winning this point. Why? Because not too long ago in Cutler v. Cutler (a case I wrote about here), the 3d DCA held that a Will’s sale’s clause stripped the decedent’s homestead property of its creditor protection, freeing the estate’s PR to take control of the property and sell it to pay estate obligations. Why the different outcome this time around? Because for probate purposes the homestead property’s protected status gets decided when the decedent dies. If the sales clause applies at death (as it did in Cutler), creditor protection falls; if the sales clause does not apply at death (as in this case), creditor protection stands.

Here’s what the 2d DCA had to say in terms of the importance of timing:

As relates to this case, the operative time frame for determining homestead status is the time of the owner’s death because a property’s character as homestead dies with the decedent. Rohan Kelley, Homestead Made Easy, 65 Fla. B. J. 17, 18 (Mar. 1991); see also Wilson v. Fla. Nat’l Bank & Trust Co. at Miami, 64 So.2d 309, 313 (Fla.1953). “Although the property is no longer ‘homestead,’ the exemption from forced sale ‘bonds’ to the title and transfers to the heir or devisee, if the constitutional conditions are met.” Kelley, supra, at 18.

Again, because the MSA’s sales clause had yet to kick in when Husband died, it didn’t waive the homestead property’s creditor protection shield, which meant Second Wife couldn’t take control of it as PR and sell it to pay estate obligations:

[T]he Decedent’s agreement to sell the marital home was not necessarily inconsistent with the homestead right protecting his interest in the home from forced sale. See In re Ballato, 318 B.R. 205, 209 (Bankr.M.D.Fla.2004) (holding that a provision of a final judgment of dissolution providing for the sale of the marital home and the division of the proceeds does not in itself preclude homestead status on one spouse’s half interest); Barnett Bank of Cocoa, N.A. v. Osborne, 349 So.2d 223, 223 (Fla. 4th DCA 1977) (“[W]e determine the trial court correctly ruled that the property was subject to the homestead exemption claimed by the former husband, notwithstanding the former husband and wife having been divorced and the wife entrusted by the decree with custody of the children and possession of the home” until the youngest reaches majority.).

Similarly, the Decedent’s agreement to divide the proceeds was not necessarily inconsistent with his homestead right protecting his share of the proceeds from claims of his creditors. See Kerzner, 77 So.3d at 217 (holding that a husband’s agreement to sell the marital home and pay any “liens or encumbrances” on the home with the proceeds does not constitute a waiver of homestead protection from claims of his creditors because a judgment held by a creditor is not a lien or encumbrance on the homestead property).

Thus, the MSA provision providing for disposition of the marital home did not constitute a waiver of the Decedent’s homestead protections from forced sale or the use of any sale proceeds to pay his creditors.

[3] Will surviving spouse’s homestead rights trump ex-wife’s contractual rights under the MSA? NO

This is the part of the case I find most interesting. A key component of the MSA was Former Wife’s right to keep living in the Marital Home until the kids were out of high school. This contractual right conflicts directly with Second Wife’s right to a life estate in Husband’s 50% share of the Marital Home, which she’s entitled to under F.S. 732.401(1) if it’s homestead property. Not one to wait around, once she lost her homestead disqualification argument, Second Wife showed up at First Wife’s doorstep and demanded to be let in so she could enforce her homestead life-estate rights. As reported by the 2d DCA, this bit of “self help” didn’t end well:

Second Wife went to the former marital home “to exercise her right in the life estate” and Thomas [Husband’s older son] refused entry. When the Second Wife persisted with her attempts to gain entry, Thomas called the police and they escorted the Second Wife from the property. [Second Wife] argued that, as a life tenant, [she] has an unrestricted right of access to the property.

Why didn’t Second Wife’s ploy work? Because under the MSA’s successors-in-interest clause, Husband’s executor (i.e., his PR), heirs,  and “next of kin” (including his Second Wife) were bound by the terms of the MSA as they relate to the Marital Home, even if that means his new wife ends up with a life estate “in name only.”

[T]he homestead status afforded to the Decedent’s interest in the marital home does not negate the terms of the MSA. If the Decedent had lived, the Former Wife would have been entitled to exclusive use and possession of the former marital home. . . . Because the MSA provides that it is binding on the parties’ “respective heirs, next of kin, executors and administrators,” . . . Second Wife [is] bound by its terms as well. Unfortunately for the Second Wife, the . . . provisions of the MSA result in her having a life tenancy in the Decedent’s interest in name only.

Lesson learned?

This “homestead” case has attracted a good amount of commentary (e.g., see here, here). My guess is that most probate lawyers will read it and scratch their heads in consternation, while most divorce attorneys will do the same and feel vindicated. Why? Because at its core this case really isn’t about homestead law, what it’s really about is the lengths to which our courts will go to enforce settlement agreements, even when that enforcement action takes place as part of a probate proceeding involving parties who never signed the contract (like a new wife!).

As noted by the 1st DCA in Pierce v. Pierce (a case I wrote about here), the “mediation and settlement of family law disputes is highly favored in Florida law.” My personal experience is that judges will bend over backwards to hold parties to their settlement agreements, especially in family disputes. If you’re involved in an inheritance dispute that revolves around enforcing an MSA, step one is to get the dispute before the right judge (which may be your family-law judge instead of your probate judge, see here). Step two: hammer away at the point that litigating parties make big sacrifices when they settle their disputes short of trial. The benefit of that bargain is meaningless if the deal goes up in smoke when one side dies. The way we make sure that doesn’t happen is by enforcing MSAs in the probate context, even if that means someone’s homestead rights get sacrificed in the process.