Florida Asset Protection Blog

Can Parents Own Property With Child As Tenants By Entireties

The general rule is that property owned by a husband and wife as joint tenants with rights of survivorship is presumed to be a tenancy by the entireties (“TE”) which is protected from the individual debts of either spouse. I received an email question about a property owned by a husband, wife, and their child as joint tenants with rights of survivorship. The writer wanted to know if the property would be protected from one spouse’s creditor.

There is no tenancy by entireties ownership when a non-spouse is on title with survivorship rights. Tenancy by entireties is limited to property owned by married couples who meet certain ownership requirements. Therefore, a creditor could levy upon the debtor’s spouse’s interest. As there are three equal owners, the debtor’s interest is 1/3 of the property equity.

This family could have titled their property in a way which could have retained entireties protection. The parents could have owned their share as tenants by entireties and made their daughter a tenant in common for 1/3 or any other percentage of equity. The parents’ two-thirds interest in the property would be owned as TE property. The parents’ estate plan could have left their interest to the daughter upon their deaths, and the daughter could have bequeathed here interest to the parents, thereby accomplishing the same result as three-way survivorship but protecting the interest of the debtor parent.

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

New Florida Trust Law

The Florida legislature enacted a new trust law which has favorable asset protection features. The new statute codifies in the statutes the protective benefits of “spendthrift provisions” which limit the beneficiary’s right to assign or pledge their interest in an irrevocable trust. There are some exceptions to spendthrift protection. The new trust code also adds protection to discretionary trust where the trustee may make discretionary distributions of income and principal to the beneficiary. The law states that a beneficiary’s creditors cannot compel a trustee to make a discretionary distribution which may become subject to creditor attack. This protection applies to trusts in which the beneficiary serves as trustee with discretionary powers over his own trust share so long as distributions are subject to certain standards of discretion.

The new statute is effective in January, 2007. The statute then becomes applicable to new as well as previously settled trusts. There is a more detailed discussion of the new trust statute at my website: www.alperlaw.com, under Asset Protection Updates/New Trust Law.

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

Homestead Depends on Timing

Timing is a key element in asset protection as evidenced by this story submitted by a caller last week. . A man owned two adjacent lots. He lived in a house on one lot. The adjoining lot was vacant. He and his family wanted to build their new home on the vacant lot. So, he sold his residence to a third party and used some of the sale proceeds to pay a contractor to begin construction of his new home on his vacant lot. He and his family rented an apartment during construction. Approximately two weeks prior to obtaining a Certificate of Occupancy on the new home and moving in a civil court entered a money judgment against the caller. He asked whether his new home is protected homestead.

I don’t believe this caller has any homestead protection from the judgment. Even though he owns the lot where his new house is being built, the caller is not entitled to homestead protection until he actually resides in the property after a Certificate of Occupancy. His intention to make the new home a homestead does not warrant protection. As soon as the judgment was recorded it became a lien on the home under construction. Moving into the home after the judgment attaches will not clear the judgment. The caller will have homestead protection against future judgments, but his protection will be subject to the judgment recorded before he actually resided in the property as a permanent residence.

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

Do Liens Transfer to A New Homestead?

A few weeks ago I received an email inquiry about the effect of a judgment lien on the writer’s ability to sell their homestead and buy a new homestead. The writer was concerned that a money judgment would prevent him from selling his homestead and buying a new homestead. The writer wanted to know if the lien would transfer to the new homestead. The answer is “no” for several reasons.

In the first place, a money judgment should not be a lien on the homestead. Sometimes by mistake a title search on the homestead will pick up a prior money judgment as all judgments recorded are a lien on all the debtor’s property, subject to homestead exemption. Before the writer even considers the transfer of sale proceeds to a new homestead, the current home could not be sold unless the lien is removed. There are procedures in the Florida statutes to assert homestead exemption to clear liens when the owner is trying to sell or refinance a homestead property. This procedure will be necessary to provide title insurance to the buyer and his mortgage lender. The lien will be released prior to the sale as homestead is asserted, and there will be no lien to “transfer” to a new residence.

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

Timing Annuity and Homestead Purchase Before Moving to Florida

An individual currently resides in a state outside of Florida where he is facing a potential large lawsuit from a business transaction. The individual is considering moving to Florida, purchasing a Florida homestead, and investing cash in annuities which are protected from creditors by Florida statutes. His current state of residence does not afford sufficient protection of either homesteads or annuities. The question posed is the timing of purchasing the annuity and the homestead relative to the time of his move to Florida

The answers depend in large part upon the vulnerability of his purchase of a homestead and an annuity to a creditor’s fraudulent conveyance attacks. Under Florida law homestead is not subject to fraudulent conveyance attack with narrow exceptions. The purchase of an annuity with non-exempt money may be set aside as a fraudulent transfer or conversion under applicable Florida statutes.

I suggested to this individual that he could wait to purchase the homestead until after he made a final decision to move to Florida, even if the move is not made until the time of a judgment. I suggested that he should purchase annuities now if annuities fit with his personal financial planning. Because the annuities are not exempt assets in his current State residence, the annuity purchase should not be considered a fraudulent conversion because it is not a conveyance of money to an exempt asset. Fraudulent conveyance actions are based on the debtor’s intent at the time of the conveyance. At this time, purchasing an annuity does not protect the individual’s assets, and therefore, his intent logically is not to hinder or delay future creditors. Nevertheless, if the individual were to become a Florida resident in the future Florida’s laws would apply to debt collection, so that his previously purchased annuities should be protected. There is no court case that holds that someone’s moving to Florida could be considered a “fraudulent move” subjecting the person’s assets to creditor attack.

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

Vacation

Blog suspended for my vacation through September 15, 2006.

Garnishment of Florida Bank Account In Another State

A Florida man opened a wage account at a local branch of a large national bank in which he deposits only his salary. The man is married and head of household. A creditor got a judgment against the same man in California. The creditor did not yet domesticate the judgment in Florida. The creditor garnished the account at a California branch of the same bank. California law does not provided unlimited protection from wage garnishments and does not protect wages deposited in bank accounts. Is the Florida debtor’s wages protected from garnishment in California.

I’m not sure. I spoke with a very good collection attorney, and he is not sure. There is a Florida statute that says bank accounts opened in any Florida bank will be governed by Florida law unless otherwise specified in the depositor’s written agreement with the bank. If the debtor’s banking agreement is silent on this issue then his Florida protection against wage garnishment would apply. But the national bank may have an agreement that specifies which state’s law is applicable to deposits in branches all over the county. Such contract provision makes sense for the bank in order to consolidate its legal actions with its depositors under a single legal code.

In either event, the debtor will have to file a motion in California to dissolve the garnishment. A Florida court will not likely take jurisdiction over a Florida judgment.

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