Florida Asset Protection Blog

Florida Judgments Collected in Other States

A Florida resident wrote a comment asking about the effect of a Florida judgment in another state with a short statute of limitations on judgment collection. Florida judgments are enforceable for 20 years. The reader stated that the other state had a 4 year statute of limitations on collection of judgments. What happens to the judgment if the debtor moves from Florida to the other state?

The Florida judgment is still effective for 20 years. The Florida judgment cannot be collected against the debtor or his property in the other state. The creditor can domesticate the judgment in the new state of residence, and the creditor would then have 4 years to enforce the judgment in the other state. The debtor’s move to another state, or the creditor’s domestication of the judgment in the other state, does not affect the Florida judgment.

Correction

On June 16, 2006, I raised the question of whether an unrelated heir can force the sale of the parent’s homestead which was devised to three heir when one of the heirs occupied the house. I stated my opinion that the homestead protections of the Florida Constitution would prohibit forced sale of an heir’s homestead to allocate the proceeds among the other heirs. Apparently, my opinion was incorrect. A reader referred me to the Tullis case at 360 So 2d 375 which held that courts can order partition of homestead property to allocate value among competing interests in the property.

Wage Garnishment To Collect Student Loans

A man called me concerning collection of an education loan. The caller had defaulted on payment of a large education loan, and the government had turned over collection to a private collection firm and its attorneys. The collection firm threatened to garnish the caller’s wages. The caller explained that he supported his spouse and that he was head of household. Initially, I told him that his wages were protected from garnishment by Florida Statutes because of his head of household status. When I looked into the matter further I discovered that there are federal laws and regulations concerning collection of student loan. These laws specifically permit wage garnishment, and they state further, that the governments garnishment rights supercede state law regarding wage garnishment. I found cases in other states which said that the federal government’s right to collect default student loans preempted the state’s garnishment protections. It would appear that the federal government can garnish the wages of a Florida head of household to collect student loan debt. Please email me if someone is aware of contrary law.

Can Heir Force Sale of Jointly Owned Homestead

A caller stated that his parent had devised his homestead property 30 percent each to himself, his brother, and 40 percent to an unrelated third party. The brother lived in the property with the parent and continues to live in the property as his primary residence after the parent’s death. The caller wanted to know if the unrelated heir can force the sale of the parent’s homestead and an allocation of the sale proceeds

Because the parent had no surviving spouse or minor child he was able to leave his homestead to whomever he chose. The house is the brother’s homestead and is exempt from forced sale under the Florida Constitution. The protection is against not only creditors, but anyone else seeking to force the brother from his home. I think the surviving brother has a life estate in the house. Upon the brother’s death, or his abandonment of the homestead, the unrelated relative could request sale and distribution of the net proceeds according to the parent’s will. Practically, the surviving sons could likely reach a settlement with the unrelated heir to purchase his interest in the house given that otherwise he may not receive any value for many years.

posted by Jonathan Alper, asset protection and estate planning attorney, Orlando, Florida

Is Your Homestead In a City?

Here’s a practical question. An attorney outside of Florida was considering moving to Florida, in part, because of Florida’s homestead protection. The attorney read that homestead protection is limited to ½ acre properties inside a Florida municipality. The called asked me how he can determine if a house he is considering buying is in or out of a municipality.

There are several ways to ascertain whether property is in a city or the county. First, you should asks the real estate salesman because the sales listing should state whether the property is in a city. Or, you can check the county tax assessor’s webpage and look up the property. The tax assessor will state the amount of county taxes and municipal taxes, if any. If there are no municipal taxes listed your property is not in a municipality. There are also detailed maps on the internet which show municipal geographical limits. To be extra sure, make the location of the property a contingency in your contract. The municipal location of a property is only a factor if the lot is greater than ½ acre regardless of its value. A multimillion dollar condominium downtown is protected homestead.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Tenants By Entireties Offshore Accounts

A caller asked about whether a bank account owned by married Florida residents is exempt as tenants by entireties property if the account is in a foreign bank with no United States offices or branches

It may seem that bank accounts located outside the U.S. would not be subject to our exemption laws. However, the general rule is that exemptions of personal property, including financial accounts, is based on the law of the debtor’s residence. Certainly, a Florida husband and wife could maintain a protected tenants by entireties account at a New York financial institution. I do not know of any case that distinguishes foreign situs of financial accounts. Today, financial transactions are often international and Americans more frequently invest in foreign companies and bank instruments. I suspect that Florida courts would uphold the tenancy by entireties status of almost any bank account wherever located, although I am not aware of any case where the issue was addressed.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Does Florida Homestead Protect Property In Another State?

Debtor owns house in Georgia, and then moves to Florida where he rents an apartment. He does not sell his Georgia home. A creditor gets a judgment against the same debtor. The debtor seeks to protect his Georgia house on the grounds that as a Florida resident he is entitled to exempt his homestead. Can a Florida resident protect his primary home if it is located in another state, or does the Florida Constitution protect only homestead owned by Florida residents and located in Florida?

A recent decision from a Florida bankruptcy judge held as follows:

“The idea that someone with no connection to Florida, other than that the primary debt owed by the person resulted from a Florida investment of many years prior, can file bankruptcy in Florida to avail herself of Florida exemption laws for property located in other states is without any support under Florida law. Indeed, if this were the law, it would open the floodgates to parties remaining in their home states but using the generous Florida exemption laws simply by virtue of filing in the state of Florida without ever having to become actual residents domiciled within the state. This simply is not the law.”

This is good advice. If you want to enjoy Florida's homestead protection please at least purchase a property in our state.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Exemption of Homestead Foreclosure Proceeds

I discussed the following case with a creditor attorney. A debtor loses his house at a foreclosure sale. The foreclosure sale price brings in enough money to pay off the mortgage and provide excess funds of $20,000. The funds are held temporarily in the trust account of the debtor’s attorney. Next, the debtor files bankruptcy. The question is whether the excess funds from the sale are exempt.

Florida law protects the proceeds from the sale of a homestead so long as the debtor intends to reinvest the proceeds in a new homestead. No case has distinguished proceeds from a voluntary sale from foreclosure sale proceeds. Therefore, the foreclosure proceeds should be exempt if intended for a new homestead.

Private Annuity Trust

The June 1, 2006, Wall Street Journal had an article on “private annuity trusts” in its Personal Finance Section. I have already received inquiries about using private annuity trusts as an asset protection tool in Florida inasmuch as Florida statutes protect annuities from creditors claims. A reader asked if he could protect non-exempt money by funding a private annuity trust. The article described private annuity trusts as a tool to defer capital gains from capital assets such as real estate. The owner creates a trust and then transfers the appreciated asset to the trust in exchange for a annuity.

The private annuity trust may provide asset protection to shelter proceeds from the sale of appreciated assets. If the assets are sold outright the funds received could be vulnerable to creditors. However, if an annuity trust is used to defer income tax then not only is the annuity exempt but the payments once received from the annuity trust remain exempt in the hands of the seller/debtor. Florida protects not only annuities but also proceeds of an annuity so long as they are traceable back to the annuity.

On the other hand, you probably could create a private annuity trust and simply dump cash or unappreciated assets in the trust for asset protection because that would have no demonstrated income tax benefit. Transfers of cash or unappreciated assets to a private annuity trust would probably be subject to reversal as a fraudulent conveyance.

The private annuity trust appears to have asset protection as well as income tax benefits for owners of highly appreciated assets.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Affidavits For Florida Asset Protection

A reader was confused about the various affidavits that debtors may need to file in Florida such as the homestead affidavit, head of household affidavit, and affidavits of domicile. A homestead affidavit may be required to qualify for the homestead tax exemption. The homestead affidavit must be filed after you move into your residence prior to January 1 because real estate taxes are based on January 1 tax value and homestead status. That affidavit is not required for homestead asset protection.

Your homestead is protected as long as you own and reside in the property as your primary residence regardless of filing affidavits. The affidavit for domicile is provided under Florida statutes to give notice of Florida residency. This affidavit is neither necessary nor determinative. Filing an affidavit of domicile does not make you a Florida resident if Florida is not actually your primary home. The affidavit of domicile can be filed at any time. A head of household affidavit is filed as a defense to wage garnishment. Wages of a head of household cannot be garnished under Florida statutes. This affidavit is not filed until after a creditor has served a writ of garnishment on your employer. The debtor may have to prove facts that support head of household status.

posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida