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

Husband and wife open a joint bank account at a Florida bank, and on the signature card, they pencil in the words "tenants by entireties" to express their intent that the account be an exempt entireties account. Subsequently, the deposit in the account money from another joint bank account and a joint income tax refund. These facts support clearly the conclusion that all money in the account is owned tenants by entireties, and assuming no fraudulent transfers, the money is protected from the individual creditors of either spouse. It would seem very difficult for a creditor or a bankruptcy trustee to defeat the entireties exemption- not exactly.

A decision by a Florida bankruptcy court found that a husband and wife with the above facts could destroy their entireties exemption by their actions and testimony after this account was opened and funds deposited. Here are the most important facts which undid the couple’s exemption.

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IRA funds are exempt from creditors in and out of bankruptcy pursuant to the exemption in Florida Statute 222.21(a)- except if your "IRA" is inherited, according to a recent decision by a Florida appellate court. The case considered a judgment creditor's claim against the debtor who had inherited  IRA funds from his deceased parent. The parent started the IRA and contributed pre-tax money during his lifetime. The court recognized that the parent's IRA was exempt from the parent's own creditors during the parent's lifetime. When the parent died, the debtor/son had the option under the tax law to withdraw all of his parent's IRA money over a five-yearperiod or  retain the money in what the IRS rules call an "inherited IRA." An inherited IRA is not subject to a five-year distribution rule, and it requires the debtor/son to take minimum distributions annually- the distributions could not be deferred.

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Several courts have sustained a debtor's exemption of retirement fund proceeds deposited in a financial account even though the applicable exemption statute does not state that retirement proceeds are exempt after money is withdrawn from the debtor's retirement plan. The annuity exemption statute specifically exempts annuities. Courts have read into the retirement fund exemption an protection of proceeds paid. One would expect that at some point in time money withdrawn from retirement and deposited for other use would eventually lose protection. Eventually, the exempt character of retirement distributions deposited or invested should transform to the debtor's non-exempt assets. A recent bankruptcy case considered a debtor who withdrew retirement money in 2004, deposited the money in a financial account, and then in 2007 wrote a check from the same financial account payable to his attorney's trust account for legal work to be performed on the debtor's behalf. The bankruptcy trustee claimed that the money held on the debtor's behalf in the trust account could not be exempt under the Florida Statute protecting retirement money.

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In a blog post earlier this year I reported that the 11^th Circuit Court of Appeals had certified to the Florida Supreme Court the question of whether a charging lien was a judgment creditor's sole remedy against a debtor's membership interest in a single member LLC. The Florida Supreme Court held oral argument on this case on January 8, 2009. A decision should be issued soon. The case is Shaun Olmstead v. Federal Trade Commission, SC08-1009.

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A Florida resident's homestead is protected even if he is not residing the house temporarily as long as he intends to return the same property and considers the property to be his primary residence. If and when the facts indicate that the owner intends to abandon the homestead as a primary residence the homestead protection is lost. Abandonment is clear when the debtor sells the homestead property. A Florida bankruptcy court recently considered the question of whether a debtor shows his intent to abandon his homestead when he signs a contract to sell the property. A debtor executed a contract to sell, clearly intending and hoping to sell his homestead and then move, and prior to closing the sale the debtor filed bankruptcy.

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A Florida bankruptcy court recently considered an interesting homestead issue. A debtor resided in a home titled in the name of a limited partnership. The limited partnership is owned primarily by a corporation which is 100% owned by the same debtor and occupant of the property. The debtor argued that although she does not hold legal title to the house in her name, she has an equitable interest in the property as its indirect owner, and that her equitable right to control the property is sufficient to protect the property under Florida's homestead laws. The bankruptcy court ruled against the debtor and found that the property is not the debtor's homestead because it is not owned by a natural person.

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Florida law is that personal property owned jointly by a husband and wife is presumed to be owned tenants by entireties and protected from the creditors of either spouse. Financial accounts, including bank accounts and securites accounts, titled jointly in the name of husband and wife are presumed to be entireties accounts. However, the presumption of entireties ownership can be rebutted where a creditor can show that the spouses disclaimed entireties ownership and chose another unprotected form of joint ownership. Spouse's can forfeit protection if they are not careful when the open new financial accounts.

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I sometimes get calls from out of state clients who own Florida real estate and want to know if their real estate is protected from creditors. People who reside in another state cannot qualify for protection of a Florida property as their homestead because a protected homestead must be your primary residence. A more interesting question is whether Florida real estate owned jointly by a husband and wife residing outside of Florida is protected as tenants by entireties property. In other words, does the debtor and his spouse have to be Florida residents in order to have tenants by entireties property protected from the creditors of one or the other spouse?

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As a general rule if spouse one, the debtor spouse, owns a non-exempt asset and conveys the asset to both spouses as tenants by entireties the transfer could be a fraudulent conveyance by the debtor spouse. A bankruptcy case dealt with the question in terms of the deposit into an entireties account of a tax refund when most of the refund was on account of income earned by the debtor spouse. The court said that the tax refund payable to both spouses is protected entireties money once it is deposited into the joint bank account

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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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I have previously written on this blog about out-of-state courts trying to stop debtors from evading money judgments by moving to Florida and buying a house. Judges in other states are issuing orders imposing an equitable lien or a constructive trust on the debtor's Florida house in favor of the creditor on the theory that the debtor has "fraudulently" used money owed to the creditor to buy a Florida homestead. A recent opinion by a Florida bankruptcy judge explains Florida law's requirements to impose a constructive trust and equitable lien on Florida real estate.

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I read a relatively recent bankruptcy court ruling that examined in unusual detail a debtor's claim of tenancy by entireties protection of a variety of assets owned jointly with his wife. The decision upheld entireties protection of the debtor's furniture and other personal household property but denied tenancy by entireties ownership of a joint mutual fund account. The facts and holding are instructive for other Florida debtors relying on tenancy by entireties.

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I came across a bankruptcy case which is important for debtors contemplating moving to Florida from another state and filing bankruptcy immediately. In this case, a debtor lived in a state which had little or no homestead protection. In April, the debtor and his wife moved to Florida and bought a piece of property titled in their joint names. Two months later, in June, they filed Chapter 7 bankruptcy, and one month after filing bankruptcy the moved into a house on the same property. The issue was whether the debtor could claim an exemption for the property. The bankruptcy judge said he could exempt the property. Here's why and how:

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Most people, including myself, understood that all IRAs were exempt from creditors outside of bankruptcy and were exempt from the bankruptcy estate for debtors who filed bankruptcy. I received an email from attorney Tye Klooster about an Illinois bankruptcy case which holds that some IRAs are not exempt. If followed in Florida courts this ruling would diminish IRA protection for Florida residents.

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I recently read a case issued by the federal Court of Appeals which illustrated again the different treatment of homestead protection under Florida state law and in bankruptcy law. In this case a debtor obtained a money award through the settlement of her personal injury lawsuit to recover for personal injuries sustained in an accident. She never took possession of her share of the award. Instead, she directed her personal injury attorney to pay her award directly to the bank that held a mortgage on her homestead property. During the personal injury suit the debtor had been sued by American Express for her non-payment of credit card debt. The debtor stated that she had the personal injury award paid directly to her homestead mortgage in order to protect the award from American Express by virtue of Florida's homestead protection laws.

A few months later the debtor filed bankruptcy. The bankruptcy trustee sought to put an equitable lien on her home. Under Florida law, paying extra money to reduce a mortgage, even if done to protect the money from current creditors, cannot be undone or reversed with one exception. If the money was invested in the homestead to protect it from creditors was the result of fraud or other egregious circumstances courts can give a creditor an equitable lien on the homestead for the amount of the creditor's debt. This bankruptcy trustee argued that what this debtor did with her personal injury proceeds was either fraudulent or egregious and warranted the imposition of an equitable lien on the homestead.

There are separate rules in bankruptcy applicable to this transaction. In bankruptcy, if a debtor converts money to a homestead or other exempt asset within a year or two of filing bankruptcy in an effort to defraud creditors the bankruptcy court can deny the debtor its discharge of unsecured debts pursuant to Section 727 of the U.S. Bankruptcy Code.

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An Orlando Florida bankruptcy judge issued a decision in one of my client's cases which included interesting holdings and valuable instructions on the issue of tenants by entireties bank accounts. My client and her future husband opened a joint bank account. They proceeded to marry. The money in the bank account on the date of their wedding was spent, and over the years it was replaced with new money acquired during their marriage up until the time the wife filed bankruptcy. The question was whether the money in the account was exempt as a tenants by entireties asset.

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The Beal Bank decision by the Florida Supreme Court in 2001 established a presumption that all bank accounts owned jointly by a husband and wife were presumed to be owned as tenants by entireties and protected from the judgment creditors of either spouse, individually. No protection afforded against joint creditors. Since Beal Bank different courts in different jurisdictions have addressed whether the presumption afforded bank accounts in the Beal Bank case extends to other forms of personal property. While these court decisions are not uniform, most courts have held that all jointly owned personal property is presumed to be held as tenants by entireties.

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I have written previously about whether a residence owned by a debtor's living trust is entitled to protection against creditors afforded by the Florida Constitution. The Constitution protects homesteads owned by "natural persons." Some creditors have argued that a homestead occupied by the debtor but legally titled in the name of the debtor's testamentary living trust is not protected because it is owned by an entity (the trust) other than a natural person. Several years ago a bankruptcy court denied homestead protection to a debtor's property titled in a living trust. However, a subsequent Florida appellate case from the Third District Court of Appeals reached the contrary conclusion an upheld homestead status to a property held in a living trust.

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I had previously written a post about homestead protection of a duplex where one half is owner occupied and the other unit is rented. The issue is whether the constitutional homestead protection includes a rental unit attached to the dwelling where the two units cannot be subdivided. The prior post cited precedent that the constitution protects dwellings and businesses located on the same property outside a municipality but that homestead properties within a municipality are limited to the actual dwelling unit. Other cases have protected dwellings and attached units used for business where the property could not be subdivided.

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The Third District Court of Appeal held this month in the case of Buchman v. Canard that a debtor could not claim homestead protection of his residence which was titled in the name of a partnership. The court ruled that partnership properties are not entitled to the homestead exemption even if a partner resides in the property. Previous posts on this blog have expressed the importance of owning homestead properties in the name of the natural person (individual) who lives in the property.

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A prior blog post reported that an Arizona bankruptcy judge had ruled that because of a glitch in drafting the new bankruptcy law the $125,000 cap on homestead protection under the new law applied only in two states: Texas and Minnesota. Under the rationale of the Arizona decision bankruptcy debtors in states such as Arizona and Florida continued to enjoy unlimited homestead exemption in bankruptcy courts.

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One of the first bankruptcy opinions, if not the first opinion, interpreting the new bankruptcy law's homestead provisions was issued by an Arizona bankruptcy judge. The judge ruled that the $125,000 homestead limitation applicable to debtors who acquire their property within 40 months of filing bankruptcy is not applicable in states like Arizona, or Florida, that have opted out by statute of federal bankruptcy exemptions. Based on this court decision a Florida resident filing bankruptcy under the new law, regardless of when he purchases his Florida homestead, still enjoys unlimited homestead exemptions under the Florida constitution.

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Family partnership and limited liability companies provide asset protection in state court collection proceedings because creditor's collection tools are limited by Florida statute to a charging lien on distributions. Less clear is how a debtor's partnership interest or LLC interest would be treated if the debtor filed bankruptcy. The bankruptcy trustee is not necessarily limited to collection tools set forth in Florida's partnership and LLC statutes.

In a case where a bankruptcy debtor own a minority LLC or partnership interest, could the trustee force the partnership/LLC to sell all of its assets at a "fire sale" after which the trustee would take that part of the net sales proceeds allocated to the debtor's minority interest, or could the trustee sell only the debtor's interest subject to the provisions of the partnership/LLC agreement without disturbing partnership assets. The value of a minority interest in a partnership/LLC subject to the provisions of the agreement and rights of other partners would most likely be much less then cash proceeds from a liquidation sale. Also, a partnership/LLC agreement may give other partners the right to purchase the debtor's interest for cash at the fair market value of the minority interest, thereby preserving partners' interest in the entity and the assets.

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A recent blog post discussed the Department of Revenue's position on documentary stamps for transfers of real property in asset protection planning. Asset protection often involves conveyance of real property you own individually to your partnerships and limited liability companies . In the past, the Department was insisting on your paying documentary stamps where the legal entity that received the property was owned by the same individuals who owned the property to begin with. Recently, according to the recent post, the Department has retreated from its position and had imposed tax on such transfers only to the extent of a mortgage balance, if any, encumbering the property.

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Waiting for a hearing to be called in bankruptcy court I had a conversation with an attorney who was litigating a Florida homestead issue. The question was whether a debtor who owned a duplex and occupied one of the two units could exempt the entire property under Florida's homestead exemption. The general issue is whether homestead protection is lost when an owner uses part of the property from rental or other income producing commercial purposes.

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Committing a tort in Florida subjects the tort doer to the jurisdiction of Florida courts under Section 48.193 of the Florida Statutes. The Florida Fifth District Court of Appeal issued an opinion on April 28, 2005, stating that a fraudulent conveyance is not a tort. The Court cited a same conclusion by the Third District and a consistent opinion by the Florida Supreme Court. The Supreme Court said that Florida's fraudulent conveyance statutes provide for recovery of transferred property but do not create the basis for an independent action for damages; damages are an essential element of any tort. Based on this precedent, the Fifth DCA said that a corporate officer whose corporation receives fraudulent conveyed property does not commit a tortious action in Florida. This conclusion further cements the Florida law to the effect that fraudulent conveyances are distinct from common law tortious fraud, and that third parties cannot be held liable for assisting a transfer later reversed under Florida's fraudulent conveyance statutes.

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Florida's Third District Court of Appeals has upheld Florida's homestead protection against creditors in Conseco Services v. Cuneo. The Third District Court opinion also clarified some issues and questions raised about the Supreme Court's important homestead decision in Havoco v. Hill, 790. So 2d 1018.

Conseco Services obtained a civil judgment in Indiana against the Cuneos for their failure to repay a large loan, and after judgment Cunseco filed a proceedings supplementary alleging that the Cuneos transferred assets to other family members to hinder, delay and defraud their creditors. Subsquent to the judgment and the fraudulent conveyance complaint the Cuneos liquidated $8 million in investment securities and took out a $2.45 mortgage on a second home in Connecticut. The invested $10.2 million in a home in Florida which they proceeded to declare as a Florida homestead. Conseco filed an action in Florida attempting to put a lien on the Florida homestead.

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Previous blog entries have discussed issues concerning wage exemption from garnishment for single owner businessmen or professionals. In short, there are cases in Florida that say that creditors can garnish wages paid to a person who is the sole owner of his employer. These cases pertain to doctors/lawyers/dentist who are solo practicioners and who draw a salary form their professional corporation or businessmen who are the sole owners of their own corporations or LLCs even when the debtors are head of family. The Florida cases held that the sole owner has too much control over his business and distributions to qualify for wage garnishment protection which, the cases say, is designed to protect people who earn compensation from an arms length relationship with an employer. The cases previously discussed in other blog post involved "bad facts" including lack of a written employment agreement and varying amounts to distributions to the debtor rather than fixed amounts of periodic payments usually associated with arms length employment.

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The homestead protection defeats almost all creditors, but there are narrow exceptions (IRS debt being the most common). Occasionally, people asks whether an ex-spouse can force the sale of or impose a lien on a homestead to enforce the collection of past-due alimony. This issue was discussed in the case of Robles v. Robles, 860 So 2d 1014 (Fla. Dist. 3 2003). This appellate court decision said that the general rule is that an ex-spouse may not impose a lien on a homestead property to collect alimony. There are exceptions where the party owing the alimony is found to have engaged in affirmative fraudulent or reprehensible conduct which interfered with the spouse's ability to collect the alimony award. Some examples of such conduct are where a husband was found in contempt of court multiple times and would only pay alimony if subject to incarceration or when a husband purchased the homestead subsequent to divorce and lived there with and supported a girlfriend. In such instances, a court may either order the homestead sold to pay alimony or impose an equitable lien on the homestead so that alimony is recovered when the debtor's homestead is sold.

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I have been asked many times whether a creditor can demand production of and inspect a debtor's personal financial information after a lawsuit is commenced but before the creditor gets a money judgment against the debtor. The general rule in Florida is that discovery of personal financial information in civil cases- other than divorce- is irrelevant and usually prohibited before final judgment. See Friedman v. Heart Inst. of Port St. Lucie, Inc, 863 So 2d 189, 194 (Fla 2003). In a very recent case issued December 8, 2004, the Fourth District Court of Appeal allowed a plaintiff to review a defendant's personal financial information prior to judgment. All About Cruises, Inc. v. Cruise Options, Inc., 2004 WL 2823244 (Fla .App. 4 Dist.,2004). The appellate court said that financial discovery may be limited t an in camera inspection or may require the proponent to post bond, but neither of these conditions are required and the terms of such financial discovery are in the trial judge's discretion.

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Florida residency is required to take advantage of Florida's asset protection laws including Florida's broad homestead protection from creditor judgments. Whether a person is a Florida resident depends on their lifestyle and their contacts to Florida. Many people who originally lived and worked exclusively in northern states spend part of each year in Florida during retirement. Floridians refer to these people as "snowbirds."

A Florida appellate court in the case of Margaret Roach and Thomas Roach v. State Farm Mutual Automobile Insurance Company, 2004 WL 2532959, recently considered whether a pair of Indiana snowbirds had established Florida residency for purposes of their taking advantage of certain Florida laws relating to motor vehicles. The court's analysis is important for other snowbirds seeking protection of Florida's property exemptions from creditor execution.

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In what it described as a case of first impression, the U.S. Court of Appeals for the Eleventh Circuit (the Federal appeals court covering all of Florida and other states) upheld tenancy by entireties protection in bankruptcy cases. This case was important in light of a 2002 decision by the United States Supreme Court (U.S v. Craft) holding that the IRS had the authority to invade tenants by entireties property to satisfy the tax obligation of either spouse individually. The Federal Appeals court refused to extend the Craft decision to the bankruptcy context finding that creditors in bankruptcy do not enjoy the same authority the IRS has to divide tenants by the entireties property.

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It may be impossible to own a automobile as tenants by entireties in the State of Florida based on a decision entered December 3, 2004, by the Fifth District Court of Appeal in the case of Vongsack Xayavong and Damomonh Xayavong v. Sunny Gifts, Inc. (cite not yet available). In this case, the creditor, Sunny Gifts, seized an automobile titled in the Xayavongs' names as husband or wife. The appellate court in this case held that the presumption established by the Florida Supreme Court in favor of tenants by entireties ownership of all jointly owned marital property does not apply to cars. The reason for the court's holding was that a Florida statute, F.S. 319.22, states that when co-owners title a vehicle using the conjunction "or" the vehicle shall be held in joint tenancy (not tenants by entireties). The court said that the statute eliminates uncertainty about the form of ownership, and therefore, the presumptions in Beal Bank are not needed to resolve ambiguity of the owners' intent.

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A decision by the Fourth District Court of Appeals strengthens asset protection afforded by tenants by entireties ownership. The issue presented to the court was whether proceeds from the sale of an asset owned as tenants by the entireties retains its character as entireties property when deposited in an attorney's trust account. The creditor argued that once the sales proceeds were deposited in an attorney's trust account the property no longer had all six unities necessary to constitute a tenancy by the entireties. The appellate court held in the case of Passalino v. Protective Group Securities, Inc., 2004 WL 2534222 (Fla. App. 4 Dist) that transferring entireties property to a trustee for the benefit of the husband and wife does not terminate the unities of title or posession, where the parties clearly intended their property to be held as a tenancy by entireties by their jointly exercising beneficial ownership of the property and jointly controlling the property's ultimate disposition. Even where the husband or the wife, unilaterally, could order the disposition of the money held in trust the entireties characteristic is preserved.

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If a debtor fraudulently conveys property to a third party, and the creditor expends legal fees recovering the property in a proceeding supplementary, can the creditor recover its attorneys fees from the third party who received and was in possession of the property. The answer, is "no" according to the decision of Florida's Fourth District Court of Appeals in the case of Gaedeke Holdings, Ltd. v. Mortgage Consultants, Inc., 877 So. 2d 824. The court said that attorneys fees may be taxed against the debtor, and the applicable statute has no provisions for assessing fees against third party transferees

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I received an email from an attorney seeking my opinion on a joint revocable trust for the benefit of a husband and wife as tenants by entireties under Florida law. The issue is whether a couple can enjoy the asset protection of tenants by entireties within the framework of a joint revocable trust prepared for estate planning purposes.

I am not aware of any Florida court decisions on whether husband and wife can own beneficial interest in trust T by E. On one hand, the Florida Supreme Court said in the Beal Bank decision that all property owned jointly by husband and wife is presumed to be owned T by E, and the beneficial interest in a trust is a type of intangible personal property. What has always troubled me was the provisions in most joint living trusts which create separate and distinct shares for a husband and wife. There are several purposes for the separate and distinct shares in tax planning. The typical trust agreement says that property which is joint when contributed to the living trust is deemed owned half by wife's share and half by husband's share. Separate trust shares in a joint trust would undermine T by E. I assume that a T by E trust attempts to avoid that joint trust language or override it. I haven't seen a joint trust that can guarantee both TE protection and the estate tax advantages of separate shares; although, I have seen some forms which attempt to do that and maybe some work.

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A debtor who borrows money on credit cards in order to gamble the money may still discharge these credit card debts in bankruptcy according to the court decision in In re Rembert, 141 F. 3d 277. The fact that a debtor takes available cash, or borrows money, and then proceeds to lose the money at the gambling table is not by itself indicative of fraudulent intent. The court decisions stated, "The fact that Rembert later admitted that it probably was not reasonable to believe that she would win enough money to repay the Appellants does not indicate a subjective intent not to repay her debts in this case. Accordingly, under the totality of the circumstances, we conclude that the bankruptcy court clearly erred in determining that Rembert possessed the necessary fraudulent intent for purposes of § 523(a)(2)(A). We thus agree with the district court's findings that at the time Rembert incurred the debts at issue she intended to repay them and believed that she would have the means to do so from her gambling winnings. Accordingly, the district court properly reversed the judgment of the bankruptcy court.

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A limited liability company does not provide blanket protection against personal liability. According to a recent decision by Florida's Second District Court of Appeals the managing member of a LLC can be held personal liability for negligent actions without a piercing of the corporate veil. Estate of Canavan v. National Healthcare Corp, 2004 Fla. App. LEXIS 10998 (Fla. 2d DCA, July 23, 2004)

This case involved a negligence action brought against an LLC who owned a nursing home and the LLC's sole member and manager who operating and managed the nursing home. The plaintiff alleged that the owner was personally negligent for approving the home's budget, that the functioned as sole member of the nursing home governing body, that he ignored complaints of residents made to him personally, and that his mismanagement caused medical problems and damages to the residents. The owner argued that he could not be held personally liable since the nursing home was owned by the LLC.

The appellate court held that personal negligent is tortious conduct which is not shielded from personal liability, hence it was not necessary to pierce the corporate veil in order to make the alleged individual tortfeasor/member as a party defendant. The case is a reminder that LLC protection is not absolute. A LLC member or manager can be held personally liability for his or her own personal negligence or other tortious conduct while acting on the LLC's behalf.

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Florida Statute 222.14 protects annuities owned by Florida residents from creditor claims and judgments. Some people have asked whether variable annuities are included under the same statutory protection. Variable annuities are similar to investment accounts which at the option of the annuitant convert to a fixed annuity some time in the future. The issue was whether the variable annuities prior to their "maturity date" when they start paying out an income stream liked a fixed annuity were intended to be included in the statutes's definition of protected annuities. In 2001, the Florida Supreme Court considered this issue in the case of In Re Alan L. Goldenberg. Dr. Goldenberg was a physician who filed for bankruptcy to escape malpractice judgments and claimed exemption of several variable annuities. The Court concluded that Dr. Goldenberg's variable annuities were protected under Florida Statute 222.14. The Court stated that, "the proceeds of an annuity contract where there is a surrender penalty are exempt from legal process...."

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I received an email for an attorney about a bankruptcy court decision in Michigan which held that filing bankruptcy destroyed a tenancy by entireties. The decision was described as an indication of the end of tenants by entireties protection. Actually, such description is indicative more of the end of common sense than the end of tenancy by entireties protection, at least as far as Florida is concerned. Florida has a long and strong tradition of common law tenancy by entireties protection most recently championed by the Florida Supreme Court in the 2001 Beal Bank decision discussed elsewhere in previous post. Secondly, regardless of what happens in Michigan bankruptcy courts, the great majority of Florida debtors never come near any bankruptcy court in the protection of their assets. No Michigan bankruptcy decision should be interpreted as a retreat by Florida's state court judges, including the Florida Supreme Court , from the concept of tenants by entireties ownership protecting against creditors of each individual spouse.

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In the case of In re Shilo, Case No. 03-9358, Judge Jenneman issued an Memorandum Opinion which held that a car owned by married couple as husband or wife with rights of survivorship is not legally owned tenants by entireties and is not exempt from the husband's individual creditors. The general rule in Florida is that both real and personal property owned tenants by entireties is exempt from the creditors of either spouse individually, although it is not exempt from any joint creditors

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People throughout the country are learning about the Florida Supreme Court case of Havoco v. Hill and its importance for Florida asset protection planning. Havoco says that if you take non-exempt money otherwise subject to creditor attack and use the money to purchase, expand, or repair a house or to pay a mortgage on the house with the purpose of hiding that money from creditors, the payment toward the house cannot be undone or reversed even if the payment would otherwise be considered a "fraudulent conveyance." Many people make the mistake in asset protection planning of assuming that the license and planning opportunity created by Havoco carries over into a bankruptcy proceeding. It does, and it does not. If a bankruptcy debtor applied non-exempt funds to his homestead property over a year before filing bankruptcy then, yes, Havoco v. Hill would probably protect that application of funds from being undone in a bankruptcy proceeding. But, if the transfer was within a year prior to bankruptcy there would be potential problems. Bankruptcy Code section 727(a)(2) gives the bankruptcy court the power to deny bankruptcy discharge (i.e,., allows debts to survive bankruptcy) if the bankruptcy debtor transfers property within the year of filing with intent to hinder, delay, or defraud a creditor. The court could order the transfer reversed and the transferred amount paid to creditors either from other funds of the debtor or through a sale of the homestead. The court may issue additional sanctions including prohibiting subsequent bankruptcy filings for a period of time.

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As you many readers of this blog already know, the Florida Supreme Court declared that personal property owned jointly by a husband and wife is presumed to be tenants by entireties property which is immune from the creditors of either spouse individually. The Supreme Court made this holding in the case of Beal Bank, SSB v. Almand and Associates in 2001. The Supreme Court conldued that there is a strong policy favoring the presumption of tenants by entireties title when a married couple jointly own personal property. The Court said that the well-recognized presumption of tenants by entireties ownership of real property owned by married couples should extend to personal property as well.

The ruling seems clear, but it apparently is not clear to everyone. In a recent case in Orange County Circuit Court, of Sunny gifts, Inc., v. Vong Corporation, Judge Thomas Mihok entered an order stating specifically that the Beal Bank decision and its presumption of tenants by entireties does not extend to the attachment of a motor vehicle owned jointly by husband and wife. The judge permitted a creditor to levy on a jointly owned automobile.

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It is possible to successfully defend allegations that you fraudulently conveyed assets to avoid creditors. Take the case, for example, of Thomas J. Meyer who filed bankruptcy in the case of In re Meyer, 2004 WL 527860 (Bkr. N.D. Ill). The bankruptcy trustee alleged Meyer conveyed assets to his wife within one year of filing bankruptcy to evade creditors and the bankruptcy trustee. Mr. Meyer said the transfers were part of estate planning and were done on the advice of his estate planning attorney. The court found in Mr. Meyer's favor. The court said that the bankruptcy trustee had to prove that Mr. Meyer intended to make transfers to defeat creditors. As matter of fact, the court was convinced that the reason Mr. Meyer transferred assets to his wife was because his wife had just lost her job and had become pregnant; the transfers were designed to protect his wife financially by putting sufficient assets in her name. The judge also accepted Mr. Meyer's explanation that the transfers were made in part upon the advice of his estate planning attorney who suggested balancing the ownership of assets between Meyer and his wife. Also, the court noted that all transfers were fully disclosed on the debtor's bankruptcy schedules which showed good faith. The court did not find sufficient evidence that Mr. Meyer's transfers of non-exempt assets were designed to hinder, delay or defraud his creditors.

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In May, 2003, The Eleventh Circuit Court of Appeals certified to the Florida Supreme Court the question of whether under Florida's Uniform Fraudulent Transfer Act or FUFTA there is a cause of action for aiding and abetting a fraudulent transfer when the alleged aider-abettor is not a transferee. The Supreme Court's unanimous answer in Lewis B. Freemen, etc., et al., vs. First Union National Bank ( decided January 29, 2004 ) was an unqualified "No."

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In March, 2001, the Florida Supreme Court decided the case of Beal Bank v. Almand where the Court adopted the presumption of tenants by entireties ownership for bank accounts owned jointly by husband and wife. Since then most attorneys assumed that all personal property owned jointly by spouses was presumed tenants by entireties property. This is important because tenants by entireties property is exempt from levy by creditors of either the husband or the wife individually. However there is one bankruptcyopinion which has taken a different view, and which has limited the Beal Bank decision to apply only to bank accounts.

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On January 29, 2004, the Florida Supreme Court issued an opinion in the case of Freeman v. First Union Ntl Bank which is important to attorneys and others involved in Florida asset protection planning. Some creditors and their attorneys have attempted to thwart asset protection planning by attacking debtor's attorneys and their financial institutions for their part in assisting fraudulent conveyances. The Supreme Court held that the Uniform Fraudulent Conveyance Statute (UFTA) as enacted in Florida does not provide a basis for claims against third parties of aiding and abetting a fraudulent conveyance. .

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