Habeeb v. Habeeb, 36 Fla. L. Weekly D300c (3rd DCA 2011)
Under Florida law, a married individual may not leave his or her principal residence to whomever he or she wishes at death (under Florida law the principal residence of a Florida domiciliary is known as a “homestead”); however, the homestead may be devised to the individual’s spouse if the individual does not have any minor children. If the individual does have minor children, or if the individual does not have minor children and does not devise the homestead to his or her spouse, then, upon the individual’s death, the spouse receives the right to live on the homestead for his or her lifetime (this is known as a life estate), and the individual’s children (both adult and minor children) inherit the homestead upon the spouse’s death.
The foregoing rule can be problematic when it is more desirable, for transfer tax planning purposes, for the homestead (or some portion thereof) to pass to someone other than the surviving spouse upon the death of the first spouse. For example, it may be desirable for the homestead to pass to a “bypass” or “credit shelter” trust for the benefit of the surviving spouse, so that the first spouse to die can take advantage of his or her Federal estate and generation-skipping tax exemptions (currently $5 million each), and so any appreciation on the homestead between the deaths of the spouses will not be included in the gross estate of the surviving spouse upon his or her death. Another example is where a division of the homestead between the spouses, as tenants in common, would allow each undivided portion of the homestead to qualify for a valuation discount upon the death of each spouse, which would save estate taxes.
To get around the restrictions on the devise of the homestead, either or both of the spouses can waive their right to inherit the homestead upon the death of the first spouse. (Note, however, that such a waiver is effective only if the first spouse to die does not have minor children at the time of his or her death.) Florida Statutes provide that a waiver of homestead rights can be accomplished before or after the marriage by a “written contract, agreement or waiver,” provided that, if the waiver is executed after the marriage, each spouse makes a “fair disclosure to the other of that spouse’s estate. . . .” Traditionally, the statute has been interpreted to require the spouses to agree to the homestead waiver in a written instrument separate and apart from any deed transferring the homestead. Furthermore, some practitioners have interpreted the statute as requiring the parties to make a full disclosure of their assets and liabilities.
In Habeeb v. Habeeb, Florida’s Third District Court of Appeal was faced with determining whether the husband waived his homestead rights merely by signing a deed which transferred the marital residence to the wife. In deciding an issue of first impression, the court held that a husband’s and wife’s signing of a deed to their homestead from husband and wife as tenants by the entireties, to the wife individually, by itself constituted a waiver of the husband’s homestead rights in the property upon the wife’s death.
In Habeeb, many years after signing the deed, the wife died with a Will purporting to devise a life estate in the homestead to the husband, and a remainder interest in the homestead to her sister. A few months later, the husband died, survived by his six nephews. A little more than one year later, the wife’s sister died and was survived by her daughter (the wife’s niece). Thus, the determination of whether the husband’s homestead waiver was valid would determine whether the wife’s niece or the husband’s nephews would inherit the homestead.
First, in analyzing whether there had been fair disclosure, the court focused on the fact that (a) the spouses had been in a long-term marriage, (b) the spouses later prepared Wills based on the assumption that the deed effectively relinquished the husband’s homestead rights (i.e., by the wife leaving a remainder interest in the homestead to her sister) and (c) the husband, after the wife’s death, executed certain documents in connection with the probate of the wife’s estate without contesting the devise of the homestead in the wife’s Will. The court believed that these factors were proper grounds for determining that fair disclosure had been made.
The court then turned to whether the deed itself was sufficient to constitute a “written contract, agreement or waiver” as contemplated by the waiver statute. The court was not deterred by the fact that the word “waiver” did not appear in the deed, stating that “. . . ’waive’ is not a talismanic word within the statute. . . .” The court also found that the statute did not require a second contract, agreement, or waiver—that is, a deed itself can constitute the requisite written contract, agreement or waiver. Accordingly, the court held that that the husband waived his homestead rights by signing the deed.
Thus, it appears that a husband and wife can waive their homestead rights in a joint deed without having to prepare a separate waiver instrument or making an explicit disclosure of their assets and liabilities. This is good news for those spouses who wish to waive their homestead rights to facilitate transfer tax planning—now all that is necessary is a valid deed. However, those spouses who want to transfer title to their homestead without waiving their homestead rights should proceed with caution, and probably should execute an agreement (or include language in the deed) expressly retaining their homestead rights