Resident's Homestead Protection Does Not Protect Property From Creditor of Non-resident Co-Owner

A parent buys a house for their child to live in. The parent borrows the purchase money by giving a bank a second mortgage on the parents’ own homestead property. The child does not have sufficient income or credit to qualify for a purchase money mortgage on the new home. The second mortgage lender insist that the new property be titled jointly in the names of the parents and the child. The parents and child take title as joint tenants with rights of survivorship. The child moves into the new house and files for homestead taxation. The question posed to me this past week is whether the new home is protected from judgment creditors.

The child and the parents each have an undivided legal interest in the child’s residence. The parents own their 50% interest as tenants by the entireties assuming they own their 50% interest jointly and not 25% each. The parents and the child share legal title as tenants in common. A parent and child cannot own property as tenants by the entireties even though they take title as joint tenants with survivorship. The house is protected from the child’s judgment creditors because it is the child’s homestead. The house is protected from a creditor of either the mother or the father because their interest is owned by the entireties. The house is not protected from a joint creditor of the mother and the father because the house is not the parents’ homestead. The child’s homestead protection does not protect the house from the parents’ joint creditor. A joint creditor of the parents’ may be able to force the sale of the house in which case the child would get 50% of the sales proceeds.

posted by Jonthan Alper, asset protection and banrkuptcy attorney, Orlando, Florida