A Remainder Interest in Property Can Qualify as Homestead Exempt
The issue of whether a debtor who owns a remainder interest in a house in which he resides is entitled to claim the house as exempt homestead pursuant to the Florida Constitution was recently decided by Middle District of Florida Bankruptcy Court Judge, Paul M. Glenn. In the case of In re James B. Williams, Jr., 2010 WL 1553456 (Bankr. M.D. Fla.), the debtor’s mother executed a Warranty Deed transferring her house to the debtor, subject to a life estate reserved for herself. Subsequently, the debtor and his wife moved into the house, and resided there with the debtor’s mother. In the debtor’s chapter 7 bankruptcy, the trustee objected to the debtor’s claimed homestead exemption. In the objection, the trustee asserted that the debtor’s interest in the house is a remainder interest and since persons who hold a remainder interest have no present right of possession, the property does not qualify for homestead exemption. Id. at 2.
The Court overruled the trustee’s objection and found that the debtor is entitled to claim his remainder interest in the house as exempt homestead pursuant to the Florida Constitution. The Court concluded that because the debtor permanently occupied the family home, the debtor had a “present right of possession” sufficient to qualify the house as exempt homestead. The Court found that the house is the “residence” of the debtor within the meaning of the Florida Constitution. Id. at 6. The Court further found that the debtor held a vested remainder in the house and a vested remainder is “property owned by a natural person” within the meaning of the Constitutional exemption. Id. at 3.
In further support of the Court’s ruling, the Court relied upon earlier holdings stating that the purpose of the homestead exemption “is to promote the stability and welfare of the state by securing to the householder a home, so that the homeowner and his or her heirs may live beyond the reach of financial misfortune and the demands of creditors.” Id. at 7 citing Snyder v. Davis, 699 So.2d 999, 1002 (Fla.1997).
In this case, like most interpreting Florida’s Constitutional homestead exemption, the court liberally construed the exemption in favor of protecting the family home and those whom it was designed to protect.
 Article X, section 4(a) of the Florida Constitution provides:
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:
(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, …; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family.