Florida Asset Protection : Asset Protection Law & Planning in Florida - Florida Homestead Exemption

A prospective client had established several years ago an irrevocable trust. The trust provided that all income be paid to the client, settlor, during his lifetime, and that upon his death the balance of trust property went to other named beneficiaries. The trust agreement had a spendthrift provision which says the settlor's income interest could not be assigned or attacked by his creditors. The prospective client thought that his interest was protected because the trust was irrevocable and because of the spendthrift agreement. I advised him that this trust would not protect him from creditors and that it would not survive a bankruptcy.

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A husband and wife own an investment real property in Florida as joint tenants with rights of survivorship and a vacation home in Tennessee also titled as husband and wife, tenants with survivorship. Both spouses are Florida residents. Florida law, generally, is that all property owned by married couples as joint tenants with rights of survivorship are presumed to be owned by the entireties. Entireties property is immune from the individual creditors of either spouse. The married couple they presumed both properties are protected from a judgment against the husband only. I advised them that the Florida property is protected, but that the creditor can force the sale of the Tennessee vacation home and claim 50% of the net sale proceeds.

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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.

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I appreciate anyone who takes the time to submit comments about anything I have to say on this blog. All comments are screened before being cleared for posting in order to help eliminate spam comments. As a result, comments may not appear for a few days. Many people submit questions in the the form of blog comments. I do not respond to questions submitted as blog comments. If you have a question about a blog post please send me an email. I do respond to all general questions about blog posts. I do not offer legal advice by email about anyone's particular legal situation.

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A frequent asset protection question is whether engaging in a transfer of assets later found to be a fraudulent conveyance subjects the debtor to an award of additional damages. Neither the Florida Statutes, nor case law, provides that a creditor can add damages to the amount of its underlying judgment for damages because the debtor attempts to transfer or convert assets to avoid collection of the judgment. On the other hand a relatively unknown statute provides that a fraudulent conveyance can trigger a creditor's right to collect attorneys fees.

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Occasionally, I will help creditors collect a judgment from debtors who are trying to hide assets. Working for the "dark side" once in a while helps me design better asset protection plans because I can see the collection process from a creditor's vantage point.

When a debtor has made fraudulent transfers or conversions to evade collection, I find that one of the most effective collection techniques is a "proceedings supplementary" under Florida Statute 56.29. The statute provides that upon the creditor making a motion the court may order the debtor to appear in court and testify under oath before a judge or magistrate. If upon examination it appears that within a year before service of process the debtor transferred money or property to a spouse, friend or relative the debtor must prove at the hearing that the transfer was not made to defraud creditors. Friends or family members who may have received fraudulent conveyances may be called as witnesses. If the court concludes that there has been a fraudulent conveyance the court shall order the sheriff to take possession of the property conveyed. Costs and attorneys fees may be taxed against the debtor.

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A man buys a 35 foot sailboat. He removes the onboard motor, and docks the boat. He attaches a generator to the boat and moves onto the boat as his principal residence. He maintains the boat permanently at the docking facility, never sailing the boat for commercial or recreational purposes. The question is whether the boat qualifies as his homestead for purposes of creditor protection.

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