Husband's Homestead Plan Jeopardizes Wife's Assets
A client was contemplating what seemed to be a safe asset transfer that could have inadvertently subjected his wife to personal liability. The client had sold a company for substantial amounts of cash and then put half of the proceeds in a jointly owned investment account. The wife had substantial assets in her own name. Subsequently, the husband was sued. To protect their assets the couple used the joint account proceeds to purchase an expensive Florida homestead.
The homestead is absolutely protected from the husband's creditor. The wife, however, still has problems. The conveyance of the business sales proceeds to the joint account amounts to a fraudulent conveyance to the wife of half of the amount. That the proceeds were invested in a homestead protects the homestead, but it does not cure the original fraudulent conveyance. The husband's creditor may name the wife as a defendant in a fraudulent conveyance action since she is the transferee of one half the amount in the joint account. They will probably get a judgment against the wife for the amount of half the joint account. The wife then will be liable to the husband's creditor to return to the husband and pay the creditor the amount of the judgment. Even though the creditor could not force the sale of the homestead to collect the fraudulent conveyance judgment against the wife, the husband's creditor can attack the wife's separate assets to satisfy the judgment.
Therefore, the husband's conveyance of funds to a joint account on the way to a joint purchase of a homestead exposed the wife's assets to significant liability. In anticipation of a judgment against husband, the better plan would be for the wife to sever the joint account and return the joint account money to the husband. Then, the husband could purchase the homestead. The wife's return of the joint money undoes the fraudulent conveyance and provides her a good defense against any such lawsuit against her for her possession of the husband's business sale proceeds.
