Florida Asset Protection Blog

Vulnerability of Out of State Financial Accounts

A Florida resident who owns personal property as a general rule may protect that property from creditors with exemptions provided by Florida law. For instance, a securities account owned by a Florida resident debtor jointly with his spouse is protected from the debtor’s creditors because the account is presumed to owned tenants by the entireties in Florida. An interesting issue is presented when the debtor who is presently a Florida resident had moved from another state which does not recognize tenants by entireties exemptions, and the debtor had previously opened a joint financial account at his previous residence at a national financial institution with offices in Florida and his home state. In that case, a creditor who had obtained a judgment against the debtor in a court proceeding in the home state may try to garnish the joint financial account in the home state. The debtor would argue that as soon as he became a Florida resident all his joint accounts should be exempt as tenants by entireties accounts. The creditor would argue that the debtor and spouse had no intent on opening an entireties account in his old state because that form of ownership was, and is, unavailable. Additionally, a move to Florida does not stay collection actions by courts in other states against accounts located in their states. If the creditor prevailed in this argument, does that mean than a Florida resident with joint account in a national financial institution may have the account garnished by serving a writ of garnishment at an office of same institution in any state other than Florida?

I am unaware of a legal decision on this issue without having done any research. Yet, I think the creditor in this hypothetical has the stronger arguments. When moving to Florida to protect assets from legal problems it is best to open new accounts at Florida branches of national banks and brokerages and to title the new Florida accounts as entireties accounts or in the name of a protected legal entity.

Homestead Protection Against Collection of Alimony

The homestead protection defeats almost all creditors, but there are narrow exceptions (IRS debt being the most common). Occasionally, people asks whether an ex-spouse can force the sale of or impose a lien on a homestead to enforce the collection of past-due alimony. This issue was discussed in the case of Robles v. Robles, 860 So 2d 1014 (Fla. Dist. 3 2003). This appellate court decision said that the general rule is that an ex-spouse may not impose a lien on a homestead property to collect alimony. There are exceptions where the party owing the alimony is found to have engaged in affirmative fraudulent or reprehensible conduct which interfered with the spouse’s ability to collect the alimony award. Some examples of such conduct are where a husband was found in contempt of court multiple times and would only pay alimony if subject to incarceration or when a husband purchased the homestead subsequent to divorce and lived there with and supported a girlfriend. In such instances, a court may either order the homestead sold to pay alimony or impose an equitable lien on the homestead so that alimony is recovered when the debtor’s homestead is sold.

Discovery of Personal Financial Information Pre-Judgment

I have been asked many times whether a creditor can demand production of and inspect a debtor’s personal financial information after a lawsuit is commenced but before the creditor gets a money judgment against the debtor. The general rule in Florida is that discovery of personal financial information in civil cases– other than divorce– is irrelevant and usually prohibited before final judgment. See Friedman v. Heart Inst. of Port St. Lucie, Inc, 863 So 2d 189, 194 (Fla 2003). In a very recent case issued December 8, 2004, the Fourth District Court of Appeal allowed a plaintiff to review a defendant’s personal financial information prior to judgment. All About Cruises, Inc. v. Cruise Options, Inc., 2004 WL 2823244 (Fla .App. 4 Dist.,2004). The appellate court said that financial discovery may be limited t an in camera inspection or may require the proponent to post bond, but neither of these conditions are required and the terms of such financial discovery are in the trial judge’s discretion.

Court Gives Snowbirds Florida Residency

Florida residency is required to take advantage of Florida’s asset protection laws including Florida’s broad homestead protection from creditor judgments. Whether a person is a Florida resident depends on their lifestyle and their contacts to Florida. Many people who originally lived and worked exclusively in northern states spend part of each year in Florida during retirement. Floridians refer to these people as "snowbirds."

A Florida appellate court in the case of Margaret Roach and Thomas Roach v. State Farm Mutual Automobile Insurance Company, 2004 WL 2532959, recently considered whether a pair of Indiana snowbirds had established Florida residency for purposes of their taking advantage of certain Florida laws relating to motor vehicles. The court’s analysis is important for other snowbirds seeking protection of Florida’s property exemptions from creditor execution.

The relevant facts were that the snowbirds and defendants, a Mr. and Mrs. Hodges of Indiana resided in Florida typically each November through the following April. Mr. Hodges had an Indiana drivers license whereas Mrs. Hodges maintained a Florida license and applied for Florida homestead tax reduction. Mr. Hodges used their Indiana address for tax filings and voting. The court found that even through Mr. and Mrs. Hodges each year spent more time in Indiana than in Florida their presence in Florida was not, “the transient or temporary presence of an occasional or regular visitor” . The court said that, “The Hodges established a significant degree of permanency in Florida by owning a home in Florida..., returning to reside in Florida for approximately five and on-half month every year ..., and by garaging [a car] in Florida....” Noting that residency is a malleable legal concept that depends on its context and use, the court found that the Hodges were Florida residents for the purposes of the automobile law at issue. This case illustrates that there are no universal tests to determine Florida residency, and that residency depends on the context and the parties’ demonstrated intent.

Homestead: a "State of Mind"

A speaker at a legal seminar on Florida asset protection law, when discussing homestead protection in Florida described homestead as a state of mind. Homestead law seems simple, but it is actually very complex involving many facts and nuances. I think that describing Florida homestead as a state of mind captures the essence of homestead law. What the speaker was referring to is that whether a property serves as your Florida homestead is a matter of your subjective intent. Your intent includes things only you know in your own mind. For example, homestead protection is available to you if you really intend to make the property a permanent and primary place of residence. It also matters whether you consider Florida as your home state. On the other hand, if you intend to remain here only until legal clouds are clear and then return elsewhere you do not have the homestead state of mind. Homestead therefore depends on facts and circumstance- your behavior- which indicate to a judge what your true state of mind is in regards to your Florida property. There are no clear tests or standards that must be met to have a protected Florida homestead. The expression state of mind is a great description of a complex law that is easily understood by laymen.

Tenancy by Entireties Strengthened in Bankruptcy

In what it described as a case of first impression, the U.S. Court of Appeals for the Eleventh Circuit (the Federal appeals court covering all of Florida and other states) upheld tenancy by entireties protection in bankruptcy cases. This case was important in light of a 2002 decision by the United States Supreme Court (U.S v. Craft) holding that the IRS had the authority to invade tenants by entireties property to satisfy the tax obligation of either spouse individually. The Federal Appeals court refused to extend the Craft decision to the bankruptcy context finding that creditors in bankruptcy do not enjoy the same authority the IRS has to divide tenants by the entireties property.

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The circuit court pointed out first that the nature of a bankruptcy debtors interest in property is determined by state law. Next, the Court pointed to the Florida Supreme Court’s decision in Beal Bank v. Almand where it held that in Florida tenancy by entireties property cannot be seized or divided to satisfy the creditors of just one spouse. The court said that Florida law on the subject is clear and there is no basis in the Craft decisions or otherwise to make tenancy by entireties property subject to creditors of a bankruptcy debtor. Tenancy by entireties remains a strong form of asset protection planning for people in stable marriages.

My thanks to Mr. Tye Klooster, Esq. of Holland and Knight in St. Petersburg for bringing this case to my attention

Tenants by Entireties Ownership of Automobiles Not Possible

It may be impossible to own a automobile as tenants by entireties in the State of Florida based on a decision entered December 3, 2004, by the Fifth District Court of Appeal in the case of Vongsack Xayavong and Damomonh Xayavong v. Sunny Gifts, Inc. (cite not yet available). In this case, the creditor, Sunny Gifts, seized an automobile titled in the Xayavongs’ names as husband or wife. The appellate court in this case held that the presumption established by the Florida Supreme Court in favor of tenants by entireties ownership of all jointly owned marital property does not apply to cars. The reason for the court’s holding was that a Florida statute, F.S. 319.22, states that when co-owners title a vehicle using the conjunction "or" the vehicle shall be held in joint tenancy (not tenants by entireties). The court said that the statute eliminates uncertainty about the form of ownership, and therefore, the presumptions in Beal Bank are not needed to resolve ambiguity of the owners’ intent.

Interesting, the same statute says that when a married couple owns a car as husband and wife, then upon the death of the first spouse to die ownership does not automatically pass to the survivor. Automatic transfers upon death to a co-owner are known legally as "survivorship" of title. In Beal Bank the Supreme Court said clearly that survivorship of title is a necessary element of tenancy by the entireties. Therefore, a car owned by husband and wife also cannot be owned as tenants by entireties because by statute the essential element of survivorship is absent.

So, after the Xayavong decisions of the Fifth DCA and the Supreme Court’s Beal Bank decision neither ownership of a car by husband or wife or ownership as husband and wife produces a tenancy by entireties car title. Those choices, and & or , are the only two options presented on Florida’s car registration form. These decisions logically make it impossible for a married couple to own a car as tenants by entireties.