A divorced female reader submitted an interesting question about alimony payments. The reader relies on alimony payments from former spouse to pay most of her bills. She does not support a child, and therefore, she is not the head of a household. She is facing potential judgments from credit card companies as a result of her inability to pay some debts incurred during the marriage. She asks if her creditors could garnish her alimony payments.
Can you waive your homestead protection? The issued was recently addressed by the Florida Supreme Court in the case of Chames v. DeMayo. The Court pointed out that Florida's Constitution expressly allows people to give up their homestead protection when they voluntarily pledge their homestead to secure a debt by mortgage deed. The Supreme Court in previous cases affirmed the right of a spouse to waive marital homestead rights before or during marriage. The present case addressed the situation where a debtor entered into a written contract with a creditor (in this case, a law firm) which contract waived the debtor's homestead protection in the event the creditor took legal action to collect the debt. While affirming the narrow exceptions to homestead waiver stated above, the Supreme Court said that the homestead protection cannot be waived by contract with a creditor to enforce an unsecured debt. The Court overturned a contrary decision by one of Florida's district appellate courts.
A caller described his asset protection plan designed by his financial planner. The caller had created a "grantor retained annuity trust" which he funded with about $500,000 within two years of being sued. The trust had been accumulating income, but the trust document named the grantor/debtor as the sole lifetime beneficiary. Income paid to the grantor from the trust would be in the form of an annuity for his lifetime. All annuities, in whatever form, are exempt from creditors in Florida. The caller's estate was below the level susceptible to estate tax.
I came across an interesting case involving tenants by entireties. A husband and wife had an entireties account at their bank. They wanted to buy a parcel of real estate and title the property in the wife's name. Normally, such transfer would not be a fraudulent transfer against either the husband's or the wife's individual creditors as the T by E account is exempt. The couple wrote a check from the entireties account to an escrow agent who was handling the real estate closing. They instructed the agent to hold the escrow as tenants by entireties money. The sale closed, and the escrow agent transferred the money to the seller. A creditor of the husband challenged the transaction as a fraudulent conveyance arguing that the money lost its entireties status when it was deposited in the bank account owned by the escrow agent.
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