Florida Asset Protection Cases

Florida asset protection law is based on both statutory protections and what is called common law, or case law. Common law refers to the set of prior Florida court decisions that interpret Florida statutes and the Florida constitution. Courts tend to interpret the same laws in the same way. In fact, courts are required to interpret laws in the same was as a higher court has before (such as the Florida Supreme Court).

This post is a summary of the most important Florida asset protection case law and court holdings.

Difference Between Florida Domicile and Residency

Maldonaldo v. Allstate Insurance Company, 789 So. 2d 464 (2nd DCA Fla. 2001)

This decision explains the concepts of Florida domicile, Florida residency, and Florida citizenship.

See also:

• Keveloh v. Carter 699 So. 2d 285 (5^th DCA Fla. 1997)
• Minick v. Minick, 111 Fla 469 (Fla. 1933)

No Liability For Fraudulent Conversion in to Florida Homestead

 Havoco of America v. Hill, 790 Fla. 1018 (Fla. 2001)

The Florida Supreme Court held that a debtor’s use of non-exempt money to purchase, improve, or pay off debt on a Florida homestead cannot be reversed as a fraudulent conversion unless the money applied to the homestead was obtained through actual fraud or other egregious actions.

The Court said that Florida’s constitutional homestead provisions take precedence over fraudulent transfer remedies enacted by the Florida legislature. Therefore, most judgment debtors can at any time protect non-exempt money by buying a new homestead or paying down a mortgage on existing homestead.

Florida Homestead Protection Not Available Without Legal Residence Status

Cooke v. Uransky, 412 So 2d. 340 (Fla. 1982)

The Florida Supreme Court said that a debtor must have legal right to permanent residency in Florida to claim protection under Florida homestead law. Foreign citizens visiting the state as a tourist or under a temporary visa cannot declare property in Florida as a permanent residence. Therefore, they cannot avail themselves of the homestead exemption benefits under the Florida Constitution. Instead, U.S. citizenship or a “green card” is required.

Temporary Absence from Florida Homestead

Hillsborough Inv. Co. v. Wilcox, 152 Fla. 889 (1943)

A debtor may temporarily leave his homestead and reside elsewhere without losing homestead protection if the debtor intends to return to the same property as a permanent residence. This principal permits debtors who work or study outside Florida, and debtors incarcerated for criminal offenses, to retain homestead benefits.

Debtor May Conduct Commercial Business on Homestead Property

Davis v. Davis, 864 So. 2d. 458 (1st DCA Fla. 2003)

A Florida resident’s commercial business operated on homestead property located in the county did not disqualify the debtor from claiming protection of the homestead. It does not matter if a portion of the land is rented to a third party.

See also:

• In re Oullette 2009 WL 1936896 (Bankr. M.D. Fla. 2009)
• In re Radtke, 344 B.R. 690 (Bankr. S.D. Fla. 2006)

Allocation of Homestead Exemption Between Exempt and Non-Exempt Part of Debtor’s Residence

Englander v. Mills, 95 F. 3d 1028 (11th Cir 1996)

Some debtors own a homestead greater in size than the ½ acre homestead lot size limit within cities. The federal appellate court held that the debtor could not allocate the acreage exemption by geography to the most valuable ½ acre upon which the physical house was situated. The entire property must be sold, and the net sales proceeds allocated pro-rata between the debtor and creditors based upon the ratio of the ½ acre size limit over the total lot size.

Presumption of Married Couple’s Tenants by Entireties Ownership

Beal Bank SSB v. Almand and Associates, 780 So. 2d. 45 (Fla. 2001)

The Florida Supreme Court said that real and personal property owned jointly by a married couple is presumed to be owned as tenants by entireties, or TBE, unless the couple has expressly disclaimed entireties ownership. Tenants by entireties property is exempt from the creditors of either spouse but is not exempt from joint creditors.

In the case of joint marital financial accounts, if the account application provided a tenants by entireties ownership option, and the married owners chose another joint ownership option such as joint tenants with survivorship, the court presumes that the married owners rejected entireties ownership. If the application did not offer TE, or if the financial institution does not offer TE, the court presumes that the married owners intended TE ownership unless there is contrary evidence.

This Florida Supreme Court case is one of the bedrocks of Florida asset protection planning for married couples.

Florida Residency Not Required For Tenants by Entireties Exemption

In re Cauley, 374 B.R. 311 (Bankr. M.D. Fla. 2007)

The bankruptcy court held that a debtor does not have to be a Florida resident to claim exemption of property owned tenants by entireties with spouse. Tenants by entireties is a form of property ownership that applies to all property located in Florida without regard to domicile of the owners. Entireties property protections are common law traditions. Tenants by entireties is not an exemption given to Florida residents under Florida statutory law.

Self-Settled Spendthrift Trusts Do Not Provide Asset Protection

In re Brown, 303 F. 3d 1261 (11th Cir. 2002)

Florida law prohibits a judgment creditor from reaching a beneficiary’s interest in a trust with properly drafted spendthrift provisions. However, when the debtor establishes a trust for his owner benefit so that the debtor is both the settlor or trustmaker and beneficiary, the trust is characterized as a self-settled trust. Spendthrift provisions do not protect the trustmaker’s own beneficial interest from creditors in a self-settled trust. The court says Florida public policy strongly disfavors self-settled trusts.

Discretionary Trust Protects Beneficiary’s Interest From Creditors

Miller v. Kessler, 34 So. 3d. 172 (3rd DCA Fla. 2010)

When a trust document provides the trustee complete discretion over distributions to beneficiaries, a beneficiary’s creditor may only reach those distributions that the trustee actually makes to the beneficiary. The court cited section 736.0504(2) of Florida law. The beneficiary’s creditor may not compel a distribution from the trustee or attach any interest in the trust before the trustee makes the distribution.

Business Owner’s Head of Household Exemption from Wage Garnishment

In re Manning, 163 B.R. 380 (Bankr. S.D. Fla. 1994)

Most self-employed business owners who control their own compensation cannot claim Florida’s head-of-household exemption from wage garnishment. For the exemption to apply, the debtor must at a minimum receive regular compensation, regardless of business cash flow, under the terms of an arms- length employment agreement.

See also:

• In re Zamora, 187 B.R. 783 (Bankr. S.D. Fla. 1995)

Garnishment of Bank Accounts in Other States

Stansell v. Revolutionary Armed Forces of Columbia, 149 F. Supp. 3d. 1337 (M.D. Fla. 2015)

Florida courts do not have jurisdiction to garnish debtor’s bank accounts or other assets held outside of Florida. 

No Cause of Action For Aiding and Abetting a Fraudulent Conveyance

Freeman v. First Union Bank, 865 So. 2d 1272 (Fla. 2004)

The Florida Supreme Court said that a creditor cannot sue a third party for assisting a judgment debtor’s fraudulent conveyance. Creditor remedies are limited to reversing the conveyance or a judgment against the transferee.

Collection Against Debtor’s LLC Interest in Foreign LLC

Wells Fargo Bank v. Barber, 85 F. Supp. 3d 1308 (M.D. Fla. 2015)

A creditor’s charging lien and other collection tools directed against debtor’s membership interest in a limited liability company are based upon the laws of the jurisdiction where the debtor holds the interest rather than the jurisdiction where the LLC was formed.

But see a different result:

• JP Morgan Chase Bank v. McClure, 393 P. 3d 955 (Colo. 2017)

Civil Contempt Can Defeat Offshore Trust Plan

 In re Lawrence, 279 F. 3d. 1274 (11th Cir. 2002)

A bankruptcy court may use powers of civil contempt to compel a debtor to repatriate assets from an offshore trust established to defraud creditor collection. Bankruptcy courts have jurisdiction over debtor’s foreign assets. The alleged impossibility of debtor’s compliance with court order is not a viable defense when the debtor created the impossibility.

But see a different result with a more favorable outcome of an offshore trust plan:

• In re Rensin, 600 B.R. 870 (Bankr. S.D. Fla. 2019)

Separate Judgments Against Each Spouse Does Not Create Joint Debt

In re Davis, 403 B.R. 914 (Bankr. M.D. Fla. 2009)

A creditor that has separate judgments agaisnt both spouses is not permitted to execute against exempt tenants by entireties property as if the debt was a joint debt.

Court Does Not Have Jurisdiction to Compel Debtors to Turn Over Foreign Stock Certificates

Sargeant vs. Al-Saleh, 137 So. 3d. 432 (Fla. 4th DCA 2014)

A judgment debtor held stock in various foreign corporations. The Court held that the court lacked jurisdiction to order the debtor to turnover the stock because the court did not have in rem or quasi in rem jurisdiction in the foreign property.