Florida homestead protects your real property from certain creditors. Creditors cannot force you to sell your homestead property to pay off your debts, but what happens to the proceeds after you sell your homestead? Are the proceeds protected from creditors?
Proceeds from the sale of your homestead property can be protected from creditors if you intend to reinvest the proceeds in a replacement homestead. For your proceeds to be protected, you must be able to show that you:
- You are actively looking for a new homestead.
- You cannot co-mingle homestead proceeds with money from other sources.
a. To keep homestead proceeds separate, you can deposit homestead proceeds into a new bank account.
There is no explicit time limit for you to find a new homestead to invest the proceeds, the proceeds must be invested in another homestead within a “reasonable time.” A reasonable time will be determined from the facts and circumstances of your situation. Florida courts have found that holding homestead proceeds for a year or two is reasonable depending on the circumstances, but courts have found that four years or more is too long.
Overall, you can protect proceeds from creditors after selling your homestead if you reinvest the proceeds in a replacement homestead. You must be able to show that you are actively looking for a replacement homestead, you did not co-mingle the homestead proceeds with other money, and you find a replacement homestead in a reasonable time.