Devising Homestead Property: How Specific Do You Need to Be?
The rules regarding homestead property set forth under both the Florida Constitution and the Florida Statutes permeate multiple facets of the practice of law in Florida. Simply, the rules of homestead are always there and always considered. For this reason, the probate court’s holding in Warburton v. McKean caused some pause with regard to the application of homestead rules to testamentary instruments.
At the time of Henry Pratt McKean’s death, he owned a condominium valued at $141,000 and other assets valued at $10,000. A Last Will and Testament was produced bequeathing two cash amounts, $20,000 and $150,000, devising specific property (that the court stated was not at issue) and devising the rest, residue and remainder of his property equally to four half-brothers (the “McKeans”). Clearly, there were not sufficient assets in the estate to satisfy both estate liabilities and the cash bequests. As a result of the sale of the homestead property generating some funds, two distinct classes of beneficiaries expected to receive a distribution. Warburton, the $150,000 cash bequest beneficiary, expected the homestead sales proceeds to be treated as estate property and distributed to satisfy his cash bequest before payment to any residuary beneficiary. Alternatively, the McKeans anticipated that because the property was homestead it immediately vested in the McKeans as residuary beneficiaries and heirs-at-law and the sales proceeds, therefore, would be distributed to them under the residuary clause. Consequently, Warburton was filed in the Circuit Court for the 19th Judicial Circuit.
During estate administration, the personal representatives sold the condominium and placed the sales proceeds in escrow until the court determined the proper recipient of the sales proceeds. The probate court determined that the homestead property “vest[ed], by operation of law, at the time of the decedent’s death, in the name of the beneficiaries who are devised the homestead.” As Henry McKean’s Last Will and Testament did not specifically devise the homestead or direct the use of any homestead sales proceeds, the McKeans, as beneficiaries of the residuary clause, became the vested owners of the homestead property. The probate court further determined that the homestead proceeds, as such, were not part of the probate estate and therefore passed to the McKeans under the residuary clause of the Last Will and Testament. Thus, there were no assets available to satisfy the cash bequests.
Warburton appealed this decision to the 4th DCA. Warburton claimed that the homestead proceeds should have been first applied to the payment of his cash bequest. The appellate court agreed and reversed and remanded the probate court’s decision. In arriving at this conclusion, the 4th DCA stated that the homestead sales proceeds were “property of the estate subject to division in accordance with the established classifications giving some gifts priority over others.”
Evaluating the facts at issue, the court applied the classification system defined under Park Lane Presbyterian Church v. Estate of Henry to classify the different legacies provided under Henry McKean’s Last Will and Testament. Determining that the beneficiaries of cash bequests were general devisees and the McKeans were residuary devisees, the 4th DCA next analyzed which category of gift must be satisfied first. Citing Section 733.805 Florida Statutes, and its own decision in In re Estate of Potter, the court determined that general legacies are satisfied before residuary legacies and therefore the cash gift to Warburton must be satisfied before any estate assets are applied to the satisfaction of a residuary devise. Thus, as the homestead sales proceeds constituted property of the estate the proceeds should first be applied to satisfy the cash devise to Warburton.
In contrast to the 4th DCA’s opinion, the probate court did not consider the homestead proceeds available to satisfy a cash bequest because Henry McKean’s Last Will and Testament did not specifically state that homestead sales proceeds were to be so applied. Such a decision disregards both the classification system and order of abatement provided under case law and Florida Statute 733.805. If such an opinion were to control, then any practitioner creating an estate plan would be required to include specific direction for the use of homestead property or proceeds as an estate asset in any number of different possible circumstances existing at the time of a testator’s death and without expectation that the abatement rules could control freely devisable homestead property or proceeds. This would cause the already complicated estate planning process to become acutely more complicated as one must actually draft an instrument articulating the use of homestead property or proceeds in multiple scenarios with different financial circumstances.
The 4th DCA opinion, on the other hand, calls for a more reasonable analysis. First, determine if the homestead property is freely devisable under the Florida Constitution and the Florida Statutes. Second, if the homestead is freely devisable, distribute the homestead property or proceeds as an estate asset and distribute the property to the devisees in the order prescribed under Florida Statute 733.805 and clarified by the Supreme Court in Park Lane. Not only is this analysis streamlined, it is also more consistent with the expectations of a testator who generally would expect a cash bequest to be satisfied before a residuary beneficiary will receive any distribution.
Recognizing the great public importance of the issues presented inWarburton and the application of homestead rules and Florida Statute 733.805 to testamentary instruments, the 4th DCA certified the following question to the Florida Supreme Court:
Where a decedent is not survived by a spouse or any minor children, does decedent’s homestead property, when not specifically devised, pass to general devisees before residuary devisees in accordance with Section 733.805, Florida Statutes?
I am sure we are all looking forward to a clear answer from the Supreme Court regarding this murky homestead issue.