Florida Asset Protection Blog

Annuity Exempt Upon Debtor's Relocation To Florida

Once again I address the issue of whether a debtor’s asset, not exempt where he currently resides, becomes exempt by virtue of Florida residency. Or, if an asset is not exempt in another state can it become exempt by a debtor moving to Florida? In answering this question for a client I came upon an old bankruptcy case where an Arizona resident owned an annuity comprising lottery winning. This debtor encountered financial problems, moved to Florida, and filed bankruptcy shortly thereafter. The issue was whether the annuity issued in Arizona was exempt in the Florida bankruptcy.

To begin with this bankruptcy judge provided an explanation of Florida residency. Florida residency, he said, is established by a good faith intention evidenced by positive overt acts after removal from a prior residence. The court found that the annuity was exempt even though it was issued in Arizona when the debtor was an Arizona resident. The judge referred to judicial policy that statutory exemptions are to be liberally construed in favor of debtors.

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

Tenants By Entireties: Adding Spouse To Title

Although I have previously addressed the issue, I still receive questions about adding a spouse to the title of a currently owned checking account or vehicle to have the asset protected as tenants by the entireties. It doesn’t work. Tenants by entireties ownership requires that the spouses acquire their interest at the same time during the marriage. When one spouse is added to title after the first spouse bought the asset, or opened the account, there is no tenancy by the entireties and the creditor of either spouse can levy on the property. The creditor of either spouse could reach only the interest of the debtor spouse which is most cases is fifty percent of the value. Alternatively, the creditor of the original owner could allege a fraudulent conveyance of fifty percent of the value to the second spouse acquiring an interest subsequent to the purchase.

Tenants By Entireties Protection Of Asset Acquired Before Marriage

A caller stated he owned a piece of investment real estate in Florida when he was single. A creditor got a civil judgment against the caller and recorded the judgment in the county where the real estate was located. A title search showed the judgment as a lien on the property. The caller stated that he was about to get married and put his new wife’s name on the title. He wanted to know if he could thereafter protect the property as tenants by entireties property.

Putting his new wife on the property title will not protect the property from prior judgment. Once the judgment is recorded any change is title is subject to the pre-existing lien. Also, tenants by entireties protection requires that the debtor acquire the asset during the marriage. In this case, the debtor acquired his interest in the real estate prior to getting married so he cannot claim that he owns the property by the entireties.

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

Disability Proceeds: Protection of Single Large Distribution

Florida statutes exempt disability payments from creditor levy. A caller asked if a lump sum disability payment is protected once deposited into the debtor’s bank account. The Florida protection of disability payments most often is applied to exempt from garnishment continuous periodic payments under a disability income policy. The express language in Florida statutes does not protect proceeds of disability policies after receipt. I do not think that a lump sum disability payments would be protected after having been deposited in the debtor’s bank account

The debtor eligible to receive a disability settlement might find protection by depositing the disability payment in another protected asset. The debtor could defend fraudulent transfer claims by stating that the money was exempt until its deposit in which case the debtor has the discretion to transfer or convert the money to any person or any alternate asset.

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

Life Insurance Proceeds: Are Death Benefits Exempt

A husband purchased a large life insurance policy naming his wife as beneficiary. The policy accumulated cash value. The husband and wife had joint creditors. The husband died and the insurance company paid the policy proceeds to the surviving spouse. The surviving wife asked me if the creditors can go after the life insurance proceeds

The insurance policy was exempt from creditors during the husband’s lifetime. Cash value of life insurance is exempt under Florida statutes. The death benefit is exempt from the husband’s creditors after his death. The proceeds once paid to the surviving spouse are not exempt. The Florida statutes do not protect the proceeds of life insurance (contrast to the protection of annuity proceeds in whatever form). I believe the joint creditors and the wife’s individual creditors, if any, can levy upon the life insurance death benefit proceeds once paid to the survivor.

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

Tenants by Entireties Property in a Living Trust

Prior to a judgment being entered against him a judgment debtor owned financial accounts jointly with his wife. He and his wife created a joint living trust for estate planning purposes. They transferred title of the financial account to their joint trust. Property owned jointly by the debtor and his wife is exempt from the judgment against the husband/debtor because the property is deemed to be owned as “tenants by entireties.” The issue is whether the same financial account is tenants by entireties property after it was titled in a joint living trust.

I don’t think the financial account is protected from creditors after transfer to the joint living trust. Homestead property owned by a living trust is still deemed protected homestead according to case law in Florida. The issues in a living trust ownership of homestead are different from trust ownership of marital property. The terms of a typical joint living trust destroy entireties ownership. A typical joint living trust document creates separate shares of ownership for husband and wife, and it divides all assets equally between the separate shares. The separate shares are designed to maximize estate tax savings. Once the living trust document divides a financial account into separate shares there can no longer be qualifying entireties ownership.

There are living trust documents which state that notwithstanding anything else in the trust the married grantors intend to retain tenants by entireties ownership of joint property put into the trust. I know of no court case interpreting the effectiveness of this type of savings clause. I don’t think conveying joint property to a joint trust is effective asset protection. There are other ways to use a living trust for estate planning purposes and also retain tenants by entireties protection. This is one example of the conflict between the goals of asset protection and estate tax planning. Effective asset protection planning preserves both goals.

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

Tenants by Entireties: Spouses Live in Different States

A client presented an interesting question about tenants by entireties ownership. Client was married with children. His wife and children lived in New York. The client lived primarily in Florida where he ran his business. The client had a Florida drivers license, used Florida as his primary address, and appeared to qualify as a Florida resident. Before getting married, the client and his then girlfriend opened a joint stock account at the New York office of a national brokerage. The client is being sued and wants to know if his brokerage account is protected as tenants by entireties property.

Real and personal property owned jointly by husband and wife is immune from creditor levy under Florida law as tenants by entireties property. Some other jurisdictions protect T by E property by statute; Florida’s protection is based on judicial decisions of common law. The law applies to debtor’s who reside in Florida. There are no judicial decisions I know of that require the non-debtor spouse to be a Florida resident as well. Therefore, this spouse’s New York residency should not affect the debtor’s protection of the stock account.

However, there is another problem. T by E protection requires that the debtor acquired the jointly owned property during the marriage. In this instance, the debtor opened the account with his spouse before they were married. The stock account is not protected as tenants by entireties property. The debtor should open a new joint stock account with his wife in Florida. The new account will be T by E property. A creditor might argue that the opening of the new account is a “fraudulent conversion” of the debtor’s separate interest in the pre-marital stock account to the protected T by E account. The debtor would have to show other reasons for opening the new stock account other than creditor protection.

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

What Is An "Annuity?"

Florida statutes protect from creditors annuities and annuity proceeds. Courts have liberally applied the protection of annuity proceeds to any money in a debtor’s financial accounts traceable to an annuity. The term “annuity” is not defined in Florida statutes. What is and what is not an annuity can be confusing. For example, this past week I evaluated a client’s severance package from a national financial firm. The firm agreed in writing to pay the retired client $65,000 each year in monthly installments for the balance of his lifetime. The client asked me whether these payments could be protected under Florida’s exemption statutes.

First, I concluded that the payments are not compensation for services which could fall withing the wage protections afforded to head of household. Although the payments are in consideration for prior employment the money is not payment for current work nor are they tied to the amount of his work. I don’t think this payment falls withing the scope of protected earnings. Neither are the payments protected as pension or retirement money because the payments were not tax deferred during the client’s employment under one of the IRS Code sections listed in the Florida statutes.

I think the retirement package is an annuity, even though his retirement agreement does not mention the term annuity. The characteristics of the retirement package and the proceeds should depend more on how they are structured compared to what they are called or labeled. The Florida courts have defined an annuity generally as a periodic right to payment pursuant to a contract. There are no additional requirements. Although typically sold by an insurance company, annuities may be issued by anyone. Florida courts have previously protected annuities issued one individual to another individual. In my opinion, the financial company intended to provide its former employee a fixed financial benefit for life by contract which is the essence of an annuity.

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

Protection Of 401K Retirement Proceeds

A client recently withdrew large sums of money from his 401 k plan to pay living expenses. He deposited the money in his bank account. The client wants to know if the money is protected from creditors after it has been deposited in his bank account. The Florida statutes exempt many specific assets including retirement proceed and annuities. The annuity statute specifically exempts not only the annuity but the proceeds of the annuity. The statute protecting retirement funds does not address proceeds paid from retirement funds.

I conducted initial legal research while the client was in my office. I quickly found several bankruptcy cases which held that retirement proceeds are exempt. The courts reasoned that although proceeds are not mentioned in the statute the legislature intended to protect retirement money and that protection extended to proceeds deposited in financial accounts. There may be cases with opposite holdings. Florida courts interpret exemption statutes liberally for the debtor's benefit. More likely than not retirement proceeds would be protected from creditors.

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

Is Permanent Residency A Requirement For Tenancy By Entireties Protection

An attorney called me last week about his foreign client who owned Florida jointly with his wife. Neither the client nor his wife had a green card, although both had visitor visas entitling them to be in the United States and Florida for a limited time. The attorney represented the husband as a defendant in a civil lawsuit in Florida court. The attorney asked me if the real property was exempt from his client’s individual creditors as tenants by entireties property. The issue is whether a temporary visitor to Florida can qualify for Florida’s tenancy by entireties protections.

Permanent residency is an issue in homestead protection. Florida courts have ruled that residents without permanent visas (green cards) cannot claim homestead because legally they are unable to resided permanently in Florida or any other state. Permanent residence is not a requirement for tenancy by entireties. T by E protection is a common law protection rather than a creation of Florida statute so there is no statutory requirement of permanent residency either. Tenancy by entireties is a concept of property ownership without residency qualification. I told the attorney that in my opinion any married couple owning joint property in Florida can claim entireties protection as to the Florida property.

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

Can Two Parents Living Together Claim Head Of Household Wage Exemption

I attended a luncheon where the speaker was a local circuit court judge who spoke about bankruptcy and exemption issues in State court proceedings. One of the attorneys asked whether a husband and wife who both worked and together supported two or more children can both claim head of household status to exempt their wages from garnishment. I have always believed and told clients that a family unit may only exempt wages of one person who is the head of household. The judge believed the issue was not decided.

The judge stated that she was aware of no case where an appellate court had held that only one person in a family can be head of household where each working parent supports one or more children. I am aware of courts holding that both a husband/father and wife/mother can exempt their wages as head of household where they are truly separated and living in different permanent residences with different children. Although the issue may not have been ruled upon I still think most courts would find that only one parent’s wages are protected from garnishment where both parents are living under one roof. I think the intent of the wage exemption statute is to protect the wages of only the primary earning spouse even if both spouse’s income is needed to support their children. The law should balance the family’s needs against the rights of creditors to collect their judgment with the least impact on the family’s dependants.

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

Effect Of Tax Elections On LLC Asset Protection

A client asked whether tax elections by an LLC effect the LLC’s asset protection benefits. An LLC is often employed as an asset protection tool because Florida statutes restrict creditors’ ability to collect money from a debtor’s LLC to a lien on distributions made by the LLC to the member/debtor. If the LLC manager makes no distributions to the debtor then the creditor is not entitled to any money from the LLC. For tax purposes, an LLC may elect to be taxed as a partnership, a corporation, or in the case of a single member LLC, a disregarded tax entity.

A corporation has no asset protection benefits. A creditor can levy upon the debtor’s stock in a corporation. The client asked if he forfeits the asset protection protections of an LLC if he tells the IRS to tax his business as a corporation rather than as a partnership or disregarded entity.

The answer is “no.” Tax elections do not change the legal status of a business entity under Florida statutes. An LLC choosing to be taxed by the IRS as a corporation is still an LLC entity under Florida law and retains the LLC’s asset protection features.

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

Protection of Disability Insurance Proceeds

Florida asset protection law sometimes make important distinctions between protected assets and the proceeds of those assets in the debtor’s hands. For instance, Florida Statute 222.14 expressly protects both annuity contract and annuity proceeds. Other laws protecting assets do not deal with proceeds therefrom. Today, a caller inquired whether disability proceeds and proceeds from the refinance of a homestead remain protected in his bank account. Florida Statute 222.18 protects disability income benefits under any insurance contract, but the Statute makes no mention of disability proceeds. Similarly, Florida’s Constitutional homestead provision does not address proceeds from the sale or refinance of homestead property.

Homestead protection is for most purposes the best Florida asset protection. However, Florida courts restrict the protection of homestead proceeds. Proceeds from homestead are protected only so long as the owner intends to reinvest the proceeds in a replacement homestead within a reasonable time. Proceeds from the refinance of a homestead deposited in the owners bank account would lose protection if the debtor intended to remain in his current home.

Florida courts have liberally protected disability proceeds. Although there are few decisions on this issue, appellate courts have interpreted Florida Statute 222.18 to protect disability income proceeds after receipt, without any time restriction, as long as the proceeds remain traceable to disability insurance policies, even though the statute is silent on the protection of proceeds. I am aware of other cases that protect pension and IRA proceeds after distribution to the debtor when the protecting statutes also do not mention protection of distributed proceeds. Florida courts seem to be recognizing a public policy to protect statutorily protected assets in any form so long as they are the debtor’s property.

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

Does Move From Florida Forfeit Tenancy By Entireties?

A debtor has long-established bank accounts in Florida titled jointly with his spouse. The accounts are protected from creditors as tenants by entireties property. The debtor and his family then move out of Florida to Texas. Texas is a community property state which does not recognized the concept, or exemption, of tenancy by the entireties. The debtor asks me whether his Florida bank accounts are protected after he moves to Texas.

I’m not familiar with a case on this issue, but in my opinion this debtor loses the protection of his joint bank accounts the day he unpacks his moving van in Texas. The debtor/creditor laws concerning real estate are based on the law where the property is situated so that this debtor’s jointly owned real property in Florida, if any, would remain exempt T by E property after he moves. The laws concerning personal property, including financial accounts, is based on the laws where the debtor resides. Once the debtor resides in Texas I think that he cannot claim an entireties exemption for his financial accounts wherever located.

A reverse move would have the opposite result, in theory. A Texan with marital bank accounts in Texas or Florida could achieve tenancy by entireties protection by taking up residence in Florida.

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

When Are Annuity Proceeds No Longer Protected?

Florida Statute 222.14 protects from creditors annuities and the proceeds of an annuity. A client posed an interesting question about what happens when annuity proceeds are invested in a different type of asset which other asset is not asset protected. The issue is when do annuity proceeds turn into another type of asset. For example, suppose a Florida resident uses annuity proceeds to purchase a CD or stock, is the CD or stock protected if it is purchased solely with annuity proceeds? Does it make a difference if the annuity was held in a brokerage account and the CD or stock is purchased within the same account?

It seems that the general rule is that annuity proceeds continue to be exempt as long as they are traceable back to the annuity. I partially researched the issue and found a couple Florida bankruptcy cases which held that assets purchased with annuity proceeds are exempt from creditors if traceable to the annuity. These courts believed that the debtor may enhance or invest annuity proceeds in order to provide for his economic well being without losing the protection afforded by the Florida statute.

I think a debtor takes a risk, despite these court decisions, whenever annuity proceeds are transformed from cash into another asset class. There’s a significant chance a court is going to find that the debtor intended to convert annuity proceeds into another type of asset which is not protected. Logically, the investment and reinvestment of annuity proceeds would lose its character of protected proceeds over time. Where that point is may be depend on the particular fact of the case.

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

Proceeds From a Reverse Mortgage on Florida Homestead

Reverse mortgages tap into home equity by providing a lifetime income stream in exchange for a mortgage on your residence. A caller asked this week whether proceeds from a reverse mortgage on his homestead would be exempt from future creditors. Specifically, the caller was considering placing the reverse mortgage, moving from the property into a new homestead, and renting the initial homestead subject to the reverse mortgage

In the first place, I do not know if reverse mortgage programs require the borrower to maintain the mortgaged property as his principal residence. Assuming the caller could move into another homestead and retain the reverse mortgage, I think there is a possibility that a creditor could attack future loan payments after the borrower moves from the homestead, although I don’t know of any court decisions on this issue. As long as the borrower lives in the mortgaged property money received from the bank is homestead proceeds. A creditor probably could not garnish future payments. Moving from the homestead means that future payments are from equity in what is now a non-exempt rental property. (I assume the property has no other protection, such as tenants by entireties). The borrower, debtor, could argue that he acquired a vested right to future payments at a time when the house was homestead and that the exemption of all payments is locked-in at that time. In other words, the exempt or non-exempt nature of reverse mortgage proceeds is determined when the mortgage is placed and not when each payment is received.

In any event, payments received and deposited in the debtor’s financial account would no longer be exempt even if payments were deemed proceeds of homestead equity, unless the bank account is otherwise exempt from creditors. Money from the sale or finance of a homestead is only exempt in a bank account if the money is segregated and intended to purchase a new homestead within a reasonable time. Using reverse mortgage proceeds to purchase directly an exempt financial asset, such as an annuity, would extend protection.

What Is Extent of Protection For Annuity Proceeds

reader asked about the protection of annuity proceeds. Florida statutes protects both annuities and the proceeds of an annuity. The reader said he deposited annuity proceeds in a normal checking account and then moved the money to a separate money market account. The funds in both accounts, he said, are traceable to the annuity

I do not know of any cases which discussed how far courts extend protection to annuity proceeds. I think the traceable annuity withdrawals are protected in the checking account. Theoretically, the proceeds should be protected in a money market account. At some point, these proceeds would become vulnerable and difficult to trace. My advice to debtors relying on the annuity exemption is to keep it simple. Put annuity proceeds in a segregated bank account and either keep them there or transfer the proceeds to another protected asset such as a tenancy by entireties account or homestead.

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

Protection Of Wages Deposited in Internet or Foreign Bank

Florida Statute 222.11 protects from creditors’ garnishment earnings of a debtor who is a head of household. The wages are protected for six months after they deposited in the debtor’s financial account. Some people set up financial accounts where nothing but wages are deposited. These so-called wage accounts are used to clearly isolate and trace protected wages after they are deposited. A reader asked me whether a Florida resident can establish a “wage account” at an internet bank or an out-of-state bank with no Florida branches.

The Florida statutes have no requirements about “wage accounts” in order to protect deposited salary. In fact, the ideal of a segregated wage account is not found in the Florida statutes. The protection of deposited wages depends more on the debtor’s residency and place of employment being in Florida than the locus of his financial accounts. I am aware of no Florida court decisions which limit protected wages to deposits in Florida banks. Therefore, I expect that the wages paid to a Florida head of household would be protected in an internet bank or foreign bank account. As a practical matter, however, deposits in other states may be vulnerable to judgments in those states where wages are deposited. The safest thing is to maintain protected wages in a bank with no branches outside of Florida.

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

Can Debtor Living Alone Claim Head of Household Exemption From Wage Garnishment?

A divorced man has two children. One child is a financially independent adult. The other child, a minor, lives with his ex-wife. The man lives alone. The man pay child support to the ex-wife. The child support covers most of the minor child’s living and education expenses. The ex-wife works and supports herself. The man asked whether a judgment creditor can garnish his wages.

A creditor cannot garnish wages of a head of household. A debtor is the head of a household if he provides most of the support of a dependent person. This debtor lives alone, and there is no dependent in his household. However, Florida cases do not strictly define “household.” The dependent does not have to live with the debtor as long as the debtor is financially supporting the dependent. In this case, where the husband is supplying most of the financial support of his minor child living with the ex-wife, I think the husband could claim an exemption from wage garnishment as head of a household.

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

Garnishment of Payments For Non-Compete Agreement

Wages of a head of household cannot be garnished in Florida pursuant to a Florida statute. A caller stated that he agreed to sign a non-compete agreement with his current employer, and that under the agreement the employer was paying him an amount monthly in consideration for the non-compete. The caller asked whether a creditor could garnish payment owned him under the non-compete clause. He believed that the non-compete payments from his employer were not subject to garnishment under the wage exemption statute assuming he was head of household.

I think a creditor could garnish payments from the employer made pursuant to the non-compete agreement. The Florida wage garnishment law does not exempt all payments from an employer. The exemption is for wages, salary, commissions or any similar payment made in consideration for personal services. The statute protects compensation for a debtor’s labor but not the proceeds received for abiding by a contractual obligation, in this example an agreement to restrict one’s work. In my opinion, this caller’s rights to payments for the non-compete are not in the nature of payment for personal labor; rather, the payments are consideration for performance of a contractual agreement and therefore not protected by the wage garnishment statute.

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

Exemption of Income Tax Refunds

I received an interesting question about whether Florida Statute 222.25(3) exempts all income tax refunds. The statute exempts a debtor’s interest in a refund or a credit from a financial institution pursuant to s. 32 of the Internal Revenue Code. I looked up Section 32 of the Revenue Code and found that it applies to the earned income tax credit. Earned income tax credits are exempt from creditors, and in bankruptcy, any portion of a debtor's tax refund which comes from the earned income credit is not part of the bankruptcy estate. All other income tax refunds are non-exempt and are subject to levy by general judgment creditors and bankruptcy trustees.

Do You Have To Be A Florida Resident To Claim Florida Exemptions?

I would appreciate anyone’s thoughts on the following questions posed by a bankruptcy attorney in Kentucky. The attorney represented prospective bankruptcy debtors who moved to Kentucky from Florida within the past two years. Under the new bankruptcy law, they are ineligible to use Kentucky exemptions because they had not resided in that state for two years. The last state where they lived for two years was Florida. The attorney concluded that Florida exemptions would apply to his Kentucky case, except for one issue. He asked me whether a person has to be a resident of Florida to be eligible for Florida’s exemption under a Florida statute or the Florida constitution. If so, his clients, now Kentucky residents, could not use Florida exemptions and would file bankruptcy under federal default exemptions.

Only Florida residents can file bankruptcy in Florida. Any of my clients who filed bankruptcy, being Florida residents, were eligible for Florida exemptions in bankruptcy. I never have had to determine whether a person had to be a Florida resident to claim Florida exemptions because I never did, or could, file a bankruptcy in Florida for a non-resident. I cannot find any provision of the Florida statutes that specifically states that only Florida residents are protected by Florida’s exemptions. Clearly, only Florida residents can claim homestead protection of the Florida Constitution because the definition of homestead is one’s place of residence, and if your homestead is in Florida you are a resident of Florida.

I do not know the answer to the question facing the Kentucky attorney. If a reader knows authority that supports the position the person filing bankruptcy in Kentucky cannot take Florida exemptions and is under federal bankruptcy exemptions, please send me an email. Thanks.

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

Wage Accounts: Are They Necessary?

Wages paid to the head of household are exempt from creditors, and the wages remain exempt for six month when deposited in a bank account. Many potential debtors set up separate bank accounts which they title as a “wage account” in which they deposit their wages and salary and no other money. The purpose of the wage account is to segregate protected wages and not commingle wages in accounts with money from other sources. The concern is that if the head of household deposit wages in a checking account owed jointly with the spouse or owned by another entity, such as a living trust, the wage protection would be lost. But, are separate wage accounts always necessary?

The statute that provides for the protection of wages from garnishment does not require deposit of protected wages into a separate wage account. In fact, Section 222.11 (3) states that the commingling of earnings with other funds does not by itself defeat the ability of the head of household to trace protected earnings. As long as someone can clearly trace and identity wages deposited into an account the wages are protected. Wage accounts may be helpful, but a separate wage account is not necessary to protect deposited earnings of the head of household.

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

Protection of Hurricane Savings Accounts

One of my clients last week reminded me of an infrequently mentioned financial asset protection tool: the “hurricane account.” Hurricane accounts were established to encourage people to save money to cover uninsured losses from Florida hurricanes. The statute provides that a property owner can set up a segregated financial account to cover insurance deductibles and other uninsured risks of windstorm and flood losses. Deposits into the account are protected up to twice the amount of the insurance deductible. The statute also protects income from the account.

The statue is limited to hurricane insurance for homestead property. Also, the statute’s effectiveness is contingent on the federal government providing tax-exempt status to account’s created to cover an insurance deductible or other uninsured hurricane risk. The statute is not limited to bank accounts, and the contents of accounts are not limited to cash. The statute protects money and “assets” in hurricane accounts. Possibly, a securities account might qualify. I observe that only Florida residents who own a Florida homestead may qualify, the statute does not state that the qualifying insurance is limited to insurance for the homestead. The statute states that accounts qualify if the insurance is for residential property, but not just the homestead residence. One could argue that any homestead owner could protect accounts for other investment residiential property, although I suspect that was not the legislative intent. I am not aware of any court decisions interpreting this statute.

This statute provides some interesting asset protection planning opportunities for owners of residences with high deductible hurricane riders. The statute reference is F.S. 222.22(4)(a).

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

Wage Account Questions

Two people asked me similar questions today about “wage accounts” The first question was whether you have to have a separate account titled “wage account” to have your salary or commissions protected after they are deposited in a bank account. The answer is no. However, whatever the account is titled it makes the wages easier to defend if only wages are deposited. You could deposit wages in a tenancy by entireties account and still qualify for the protection. The statute that protects wages of the head of household does not require segregating the wages in a distinct account.

A second question was whether there is a monetary limit on the amount of money that remains protected in a wage account for a period of six months. The answer is no. The wage protection statute does not impose a maximum amount of protected wages for people who are head of household.

An interesting question is whether the head of household can transfer money from his wage account to another checking account. Probably no, as long as the other account is also protected from creditors. Suppose a single debtor who supported, for example, a minor child or parent, had a “wage account” and a second account in his own name. If money was transferred from the wage account to the second account a creditor could try to garnish the second account. The debtor would have to argue that both accounts hold only wages. The statute does not limit debtors to a single “wage account.” If the same debtor were married, and the debtor transferred wages to a tenancy by entireties account, the transferred wages would be easier to defend. I believe a creditor could still argue that the transfer of money to the joint account was a fraudulent conveyance to the spouse in order to protect the money beyond the six month period provided by the wage protection statute. I do not know of a case on that issue.

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

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

Interesting Question About Tenancy By Entireties Accounts

I am involved in two cases which present an interesting issue about tenants by entireties bank accounts. Property owned by married couples as tenants by the entireties is exempt from the creditors of either individual spouse, but not from joint creditors. The Florida Supreme Court said that in most cases bank accounts owned jointly by spouses are presumed to be owned as tenants by the entireties. The Supreme Court, and previously other appellate courts, pointed out that there are facts which must be established in order for any property to be owned as tenants by the entireties. One such requirement is that the spouses must take title to the property simultaneously during their marriage in order to establish a tenancy by the entireties.. This requirement raises an interesting issue in certain instances.

Suppose that a man and a wife, unmarried, open a joint account with a small opening deposit. Subsequently, the same couple marries and over the years deposits significant money into the same account. The issue is whether this account is protected from their separate liabilities as tenants by entireties property. One view is that since the account was opened before their marriage the account cannot be a T by E account and all money in the account is unprotected joint property. The alternative argument is that while the initial deposit made prior to their marriage is not T by E any money deposited into the account after their marriage is T by E property acquired jointly during their marriage.

The Supreme Court discussed in great detail ownership of bank accounts and other personal property as tenants by entireties but the Court did not clearly consider the question of whether the bank account must meet requirements of T by E or whether money deposited in the account must demonstrate T by E characteristics. I find credible argument on both sides of this issue, and it will be interesting to see how courts resolve the question.

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

Tenancy By Entireties Protection For Unmarried Couple

A Florida debtor emailed me a question about tenancy by entireties protection. He said that a collection agency was threatening wage garnishment and a judgment for old credit card debt. This debtor he lives with and supports his girlfriend and their three dependant children. He asks whether his joint bank accounts are protected as tenancy by entireties accounts where the debts are his only. I do not think this debtor can invoke tenancy by entireties protection because he is not legally married. The case law is clear that tenancy by entireties applies to lawfully married couples. I do think that this debtor can defeat wage garnishment because his support of his children probably qualifies him as the head of a household. In most situations, Florida statutes prohibit a creditor from garnishing wages and other compensation paid to a Florida resident who is head of household .

Debtor As Both Trust Beneficiary and Trustee

I received an email from Florida attorney Tye Klosster concerning asset protection of a trust established for the benefit of a Florida debtor where the trust agreement names the same debtor/beneficiary as trustee and also includes standard spendthrift protection. Such trust arrangements are often set up by parents’ living trusts for the benefit of their children as part of the parents’ estate planning. Otherwise stated, the question is whether trust beneficiary enjoys protection from standard “spendthrift provisions” where the beneficiary serves as trustee with discretion to make distributions to himself.

I think that the trust beneficiary cannot rely on creditor protection where the trustee also has discretion to make distributions. My reasoning is that even though the trust document states that distributions are discretionary a judge could order the trustee/debtor to distribute trust assets where they could be subject of creditor seizure. Alternatively, the creditor could argue the trustee’s discretionary power is an asset subject to the creditor’s levy. The creditor could take over the power and distribute all trust property to the debtor/beneficiary where the property would be subject to the creditor.

Mr. Klooster referred me to a Florida bankruptcy case which he says held that Florida trusts cannot enjoy spendthrift protection if the same debtor is trustee and beneficiary. (In re Bottom, 176 BR 950). If asked , most parents who want to leave assets to children in trust would want the same assets protected from their childrens’ creditors. One alternative is for the parents to name an independent trustee so that the beneficiary has no powers to effect distributions. I find that many parents want to give their children at least limited control over their trust property and to that end my trust documents require the beneficiary to select their choice of an independent co-trustee over their trust share. I almost always provide that no trustee can make any distribution for the benefit of a beneficiary’s creditors or former spouses. I believe the combination of these provisions provides reasonable asset protection with sufficient input from the beneficiary for estate planning. But, I may be wrong; different lawyers will have different techniques.

Mr. Klooster pointed out in a follow up email that this issue is a good example of how asset protection goals often conflict with estate planning goals. He states correctly that from an estate planning and tax standpoint there is no harm in having a beneficiary serve as sole trustee so long as discretionary distributions are limited for health, education, maintenance, and support.

This is an interesting issue and comments would be most

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

Is Debtor Supporting Same-Sex Partner Head of Household For Wage Exemption ?

Florida statutes exempt from creditors wages, salary, and other compensation for services earned by the head of household. A head of household is the person who provides more than 50% of the support for a dependent. Florida courts have held that the “dependent” does not have to be a dependent for income tax purposes and does not have to reside in the household. There must be a legal or strong moral obligation to provide economic support.

A email asked if a debtor could be head of household if the debtor lives with and financially supports a same sex partner. Although there arguably is a moral obligation of support in this situation, in my opinion, that obligation is too far removed from the intent of the statute. Debtors who asserted head of household based on moral support obligations have done so in the context of a traditional family. For instance, a debtor may have a moral support obligation toward an adult child residing in a separate dwelling or toward an elderly parent. Even though a debtor may feel morally obligated to support a live in boyfriend or girlfriend, I do not think that obligation to a non-family member would be strong enough for the debtor to be entitled to wage exemption as the head of a household.

Where Annuity May Not Be Fully Protected

The proceeds from an annuity are exempt from creditors under the Florida statutes. The statute protects from legal process the annuity interest of the beneficiary of the annuity. In almost all cases, the same individual purchases and owns the annuity and makes himself the annuity’s primary beneficiary. The statute protects from creditors all of the beneficiary’s interest in the annuity.

A different result may occur when the owner and the beneficiary are different individuals. For instance, suppose an individual purchases an annuity, makes himself owner and annuitant, and names another family member as primary beneficiary. The beneficiary’s interest is protected from the beneficiary’s creditors. Its not clear that the interest of the purchaser and owner is protected from the owner’s creditors. An attorney called me this past week to discuss a bankruptcy proceeding where the debtor purchased and owned an annuity that named another family member as primary beneficiary. The question was whether the bankruptcy trustee could assert an interest in the annuity.

I think the trustee, or a creditor outside of bankruptcy, could attach the debtor’s interest in the annuity under certain circumstances. The owner of an annuity has rights and powers, and where the annuity contract so provides, those rights usually include the right to change the beneficiary and the right to sell the annuity contract. If the annuity contract gives the owner the power to change beneficiaries the bankruptcy trustee could assume the debtor/owner’s rights under the contract and name himself, the trustee, as beneficiary. Thereafter, the trustee could sell the annuity and the proceeds would be paid to the trustee as the replacement beneficiary. An annuity contract could make the initial appointment of the beneficiary’s irrevocable, and in such case, neither the owner/debtor or the bankruptcy trustee or creditors could gain any financial recovery from the annuity as all proceeds would be paid to the initial beneficiary.

This question illustrates that Florida’s statutory protections must be read precisely, and asset protection must be designed carefully.

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

New Partnership Statute Increases Asset Protection

This year the Florida legislature passed a new limited partnership act known as the Florida Revised Uniform Limited Partnership Act of 2005, as amended. The new law increases protection of limited partnership interest against judgment creditors. Until this point there had been some question whether the charging lien against distributions to a partner was the exclusive remedy available to a creditor, or whether a creditor could also foreclose the debtor’s partnership interest or ask the court for other collection remedies. Section 620.1703 of the new partnership law states that the charging lien is the exclusive remedy of a judgment creditor of a partner. As stated previously on this blog, the term “partner” is defined by the new law to cover both a limited partner and a general partner.

The new law also states that a partnership interest is personal property and that this property may be protected by other Florida exemptions such as tenants by entireties ownership by married owners. The new law also protects limited partners from liability to creditors of the partnership if the limited partner participates in the management or control of the limited partnership.

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

Salary Protection Question

A client asked an interesting question about Florida’s salary exemption. Florida Statute 222.11 exempts from creditors an unlimited amount of salary earned by a debtor who is head of household. A Florida resident is head of household if he provides more than 50% of the support for a dependent. The question was whether in determining the 50% support requirement all of the money used to support the dependent must come from salary earned by the debtor. Otherwise stated, if a debtor uses a combination of salary and investment income to provide 50% of a dependent’s support is the salary itself still protected from creditor garnishment.

The statute defines “head of family” as “any natural person who is providing more than one half of the support for a child or other dependant.” The statute include no requirement on the source of support money. If the head of family support threshold is met with funds from any source, in my opinion the salary exemption should apply. I am not aware of any case in Florida which holds otherwise, although I have not researched the issue.

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

Hurricane Savings Accounts

Florida’s most important statutory exemptions, such as salary for head of household, annuities, and retirement funds, have been in place for a long time. From time to time the legislature adds additional, relatively small, categories of protected assets. A recent addition to Florida’s list of assets protected from creditors are “hurricane savings accounts” now protected under Florida statute 222.22 4 (b). The statute defines a hurricane savings account as an account owned by the owner of homestead property up to twice the amount of an insurance deductible or other uninsured portion of the risk of loss from a hurricane, windstorm, or flood. The statutory protection is available only when the federal government provides tax-exempt or tax-deferred status to such accounts.

Who Can Claim Statutory Car Exemption?

A husband and wife who were jointly liable to a creditor emailed the following question: where a family owns one car free and clear in the name of one spouse, can both spouses claim $1,000 car exemption allowed by Florida statutes for motor vehicles. The couple was trying to exempt a total of $2,000 of their car equity from their joint creditor.

The statutory car exemption is only available to car owners. The spouse of an owner has no right to the exemption. In this case, the couple can exempt only $1,000 exempt equity in the car.

Does Moving to Nursing Home Forfeit Homestead Protection?

Does an elderly person lose homestead protection when they move out of their house and in to a nursing home? I received a phone call from a lady whose father had moved into a nursing home when there already was a judgment for unpaid alimony owed to his ex-wife. The daughter asked if the father’s home was still protected from the judgment, and if not, could the father deed the home to the daughter and her brother.

A Florida resident does not lose homestead protection when he moves out of his residence as long as he intends to return to the house. When a person moves to a nursing home or assisted living facility the move is usually permanent, but not necessarily permanent. Whether the person intends to return to his former home is an issue of fact. It is difficult to show the debtor’s intent to return when the debtor suffers from incapacity sufficient to warrant full time care. At some point soon after the move into the nursing facility the former home will in most cases lose homestead protection. Whereas younger adults often relocate for jobs or for education in locations far away from Florida on a temporary basis, moving to a full time care facility is usually irreversible.

In this type of fact situation, if the parent deeds the home to his children while it is homestead property the deed would not be a fraudulent conveyance, even if intended for creditor protection, because the homestead already is exempt property. The transfer of exempt property to a third party cannot be a fraudulent conveyance. If a person deeded the house to children shortly after moving to a nursing facility the transfer may survive if the family could show that at time of the transfer the debtor/ parent had not yet decided to remain permanently in the nursing home (assuming he is capable of explaining his intentions). Each week of residency outside the house in a full time care facility makes defense of the homestead more difficult and increases the likelihood that a deed to other family members will be reversed.

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

Is Money Reserved To Repair or Improve Future Homestead Protected?

A reader sent me an email asking if proceeds from the sale of a homestead property would be protected in a bank account if the money were being saved to repair and improve a new property that the reader intended to occupy as homestead when repaired. The property presently was not in liveable condition

I don’t know of any cases on this point. Proceeds from the sale of a homestead retain homestead character and their creditor protection if the proceeds are deposited in a financial institution and are earmarked for the purchase of a replacement homestead in a reasonable time. When a replacement homestead is purchased a large lump sum of the sale proceeds are applied at one time to obtain the new residence. Remaining proceeds from the sale of the prior property would then lose their protection after the purchase. The repair and improvement of new property can be an extended process ; there is no “closing” as there is with a home purchase. A debtor could always argue that cash on hand is reserved to repair or improve his homestead. Because the repair and improvement process is indefinite compared to a purchase I think a court would not extend homestead protection to cover funds reserved to repairs and improvements. Secondly, in the hypothetical fact situation there was not homestead suitable for occupancy when the sale proceeds were deposited. Court have not extended homestead protection to properties not yet ready for occupancy, then money reserved to purchase or build such future homesteads is not protected by homestead law. Although courts liberally interpret homestead protection I think that more likely than not money set aside to repair a property to the point where it would be ready for occupancy would be subject to creditor claims.

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

Are Withdrawals From Retirement Accounts Protected?

A called asked about protection whether proceeds withdrawn from tax qualified retirement plans remain protected afer the money is out of the retirement plan. Florida statutes protect IRAs, 401k plans, and other tax qualified plans. If the retiree has a judgment against him the creditor cannot reach money so long as it is held within the plan. In most cases, withdrawals from these plans are deposited in the retiree’s personal bank accounts. While proceeds withdrawn from annuities remain protected so long as they are traceable, the same may not be true for retirement proceeds. An good argument can be made that retirement money is protected after withdrawal, but the case law is inconclusive. Presently, retirees concerned about continued asset protection of retirement benefits should develop an asset protection plan which includes a financial account or legal entity to safeguard retirement withdrawal. Conveyance of retirement money directly to another entity should not be vulnerable to fraudulent conveyance attack as long as the retiree does not hold title individually after withdrawal and before the conveyance.

Canadians Want Florida Homestead

A married couple are both Canadian citizens, but they reside in Florida during six months of the year. They asked me whether their Florida home would be protected by Florida’s homestead laws in the event they were sued and the creditor recorded a Florida judgment.

Protection of a Florida house requires not only that you reside in the house, but that you intend to make the house your permanent residence and Florida your place of domicile. As long as the Canadians remain citizens of Canada and do not obtain at least a green card entitling them to permanently remain in the U.S. they probably could not claim Florida as their permanent residence as they do not have the legal right to live here on a permanent basis.

Protection of IRA Accounts Opened Outside Florida

I received an email question concerning protection of IRAs from judgments. The questioner asked whether Florida law protected an IRA owned by a Florida resident that was administered in a financial account opened and maintained by the office of a financial institution located in a state other than Florida. My first reaction was that the IRA was protected because the applicable Florida statute does not require that the IRA account be maintained in Florida or that IRA assets be situated in Florida. Also, I know of know case which required that Florida residents maintain their IRA in Florida in order that the IRA be protected from creditors. To be sure, I check with “Professor” Alan Gassman, Esq., who is the premier scholar on Florida asset protection law, and Alan agrees we me. Therefore, I can believe I can state with reasonable certainty that an IRA owned by a Florida resident is an exempt asset regardless of where the IRA account is opened

Interesting Question About Salary Exemption

Interesting question from a client today about salary exemption. Florida statutes exempt from creditor claims salary and other compensation from services of the head of household. To be head of household you have to be providing more than 50% of the support of another person for whom there is a moral support obligation. The supported person does not have to be a child or spouse, and there is no age limitation. Supporting an elderly parent may qualify you as head of household.

This particular client said he paid his father’s ongoing living expenses including medical and other personal care. His father, however, also had substantial liquid assets which if liquidated would more than pay for his own care. The client supported the father on an ongoing basis because the client had far more assets and income. The issue was whether the client could be head of household by virtue of his support of this father when his father had no income but had sufficient assets.

I am not sure of the answer, and I do not know of any cases on point. The statute does not refer to any financial criteria of dependency and does not refer to the net worth of the dependent. My interpretation of the statute is that the test is based on who is paying, out of pocket, the ongoing support expenses regardless of net worth. The statute does not specify that the person being supported demonstrate that he needs all the support he is receiving, or that the head of household is the sole source of support. Based on a literal interpretation of the statute, the client in this instance probably would qualify as head of household by virtue of his payments of his father’s daily living expenses.

On the other hand, a literal reading of the statute may not be fair in this type of case. If a creditor challenged salary exemption in this type of situation a court could find that the client was not entitled to salary exemption because his father was not his dependent, or that he was not morally obligated to pay his father’s living expenses, since his father had assets sufficient to pay for his own maintenance and support.

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

Recreational Vehicle As Homestead Property

I researched an interesting homestead issue today for a client who is considering selling his current single family home and using the proceeds to buy an expensive recreational vehicle which would become his principal residence. The question is whether a recreational vehicle can qualify as a protected homestead under Florida statutes and case law.

There is a Florida Statute (222.05) which discusses what may constitute a dwelling for homestead pruposes. Pursuant to the Statute the term dwelling includes a mobile home. Chapter 320 of the Florida Statutes pertains to motor homes. The Florida Statues do not address the issue of whether a recreational vehicle which has the facilities for residence, such as cooking and toilet, can be considered a “mobile home” for purposes of Section 222.05 and thus eligible for homestead designation.

Only one Florida case has dealt directly with this issue in the bankruptcy context. The Court said that wether an RV is a motor vehicle or a motor home depends on its use as well as its physical characteristics. If the owner permanently parks the RV, lives in the RV, and has no other residence then the RV has the characteristics of a “motor home” and should be protected as homestead property. On the other hand, a recreational vehicle used more for transportation would be more like a “motor vehicle” not eligible for homestead protection rather than a “motor home.” Other court cases have held that a houseboat used as a primary residence can be a dwelling house and a principal residence because a houseboat is similar to a mobile home. Although houseboats can be moved they are not primarily used for transportation.

As in many homestead issues, the facts of any particular case would determine the result. If an RV owner wanted to use the RV as a principal residence and protect the investment under Florida homestead laws he should arrange for a permanently available rented lot with utility facilities has the RV’s permanent location. The more the RV is used as a touring vehicle the less likely homestead protection would apply.

The applicable cases are In re Mangano, 158 B.R. 532, and Miami Country Day School v. Bakst, 641 So. 2d 467.

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

Is Life Estate Protected Homestead Interest?

What type of legal interest in a house qualifies for homestead protection? For example, a caller asked about a situation where a parent was living with a child and paying some of the household expenses as a form of rent. The parent was being chased by their creditors. The caller was concerned that if a creditor claimed the parent was renting the house the creditor could levy upon the parent’s leasehold interest and cause the parent to be evicted. He suggested that he give the parent a life estate interest in the house by quit claim deed.

I think that the parent’s right to stay in the house would be protected from the parent’s creditors if the parent had a recorded life estate and continued to reside in the house. Homestead protection is broadly construed to protect Florida residents, and a partial ownership interest should qualify as a legal interest protected by homestead. On the other hand, it is unlikely, though possible, that the parent’s right to reside in the house with the child’s permission would be taken by a creditor because the leasehold would also probably be protected under homestead law. I haven't researched the protection of either type of legal interest so my opinion is an educated guess.

Is Homestead Protection Lost During Reconstruction?

What happens to homestead protection if a Florida debtor moves out of their home and then demolishes the entire structure? A client presented that question about Florida homestead protection. After leveling the home, the debtor rented an apartment and hired a builder to build a new and bigger home on the same lot. Courts have often refused homestead protection to a property while the owner is building a residence on a vacant lot prior to the time when the completed home is livable and the debtor actually occupies the house. On the other hand, courts have also extended homestead protection when an owner temporarily moves out of their homestead with the intent to one day return to the home as a permanent residence. The question I found in this case is whether the debtor could intend to return to a house that no longer existed even though a replacement was being built. Are these facts most similar to non-protected construction of a home on a vacant lot or the protected temporary relocation with provable intent to return? I am not aware of any court decision on this fact situation.

In my opinion the debtor should retain homestead protection. These facts are similar to a situation where a debtor moves out of a homestead in order to remodel the home or renovate the home and lives temporarily nearby during construction. In that case, homestead protection most likely would continue during remodeling. In cases which denied homestead protection to a house under construction the debtor never had previously resided in the property. A court decision on this issue may hinge on the particular facts and equities involved.

Subtleties Of Tenancy By Entireties

I received a phone call from an attorney in California who works for the dark side of the force. He is trying to collect a large judgment from a Florida debtor. The debtor, who is married, owns an expensive building lot jointly with his spouse. The property is not homestead property at this time because the house is unoccupied. His spouse purchased the lot over four years ago which is beyond the statute of limitations for fraudulent conveyance. Recently, the spouse conveyed title to herself and her debtor/husband jointly. They are building their future residence on the lot. The attorney levied on the lot, but the sheriff returned the writ unsatisfied for the reason that the lot is owned jointly as tenants by entireties.

All property owned by husband and wife in Florida is presumed to be owned tenants by entireties, but this presumption can be rebutted by a creditor. One way for a creditor to overcome the presumption of tenants by entireties is to show that the property does not possess what courts have referred to as the “unities of title”, which are the technical requirements for entireties ownership. One of the “unities” is unity of time. The Florida Supreme Court has said that unity of time means both spouses’ interest must have originated at the same time in the same instrument.

Initially, I told the creditor attorney that the property is not exempt as tenants by entireties property. The wife’s interest in the property originated before the husband’s interest originated, and their interest did not originate in the same instrument. However, upon further review, I found Florida Statute 689.11 which pertains to ownership of real estate. The statute provides that one spouse who owns real property in their own name may create ownership of real property by the entireties by a deed to the names of both spouses. In this case, I do not believe the property is protected as tenants by entireties real estate.

This case illustrates that tenancy by entireties is more complicated that it may seem and that it is more that just “joint ownership.”

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