Under Florida law, homestead property is protected from creditors (except for creditors secured to the property such as mortgagors, mechanic's liens, property taxes, homeowners associations, etc.). If you sell homestead property, are the sale proceeds protected from non-secured creditors? That is often the crucial issue for near-retirees and retirees who are in debt but cannot downsize to a less expensive home to save money, fearful that the sale proceeds will be vulnerable to creditors.
If this describes your situation, here is some good news from a recent Florida Supreme Court case. In JBK Associates Inc. V. Sill Bros, the court ruled that the proceeds from the sale of homestead property are protected, just as the homestead itself is protected prior to sale, so long as these conditions are met:
- You hold the monies from the sale separately and do not co-mingle them with any of your other funds.
- You designate that the sale proceeds are solely for the purpose of buying a new homestead.
- You purchase new homestead property within a reasonable period of time. (Unfortunately, the court did not clearly define "reasonable.")
The ruling makes downsizing a more viable option for retirees and near-retirees with credit problems.Read the Florida Supreme Court ruling, JBK Associates Inc. v. Sill Bros. Inc., here