Is Debtor’s Deposit of His Own Money To Joint Bank Account A Fraudulent Transfer?

Generally, when a spouse who is subject to a money judgment transfers his separate property to joint ownership with his non-debtor spouse, the transfer is subject to challenge as a fraudulent conveyance. The issue is complicated when the debtor spouse deposits money he earned himself in to a pre-existing joint bank account. Is it a fraudulent conveyance when the debtor spouse deposits his separate paycheck or proceeds from his interest in a business investment to his family’s joint financial accounts and then claim the accounts as tenants by entireties property?

I was researching this issue for a client when I came upon a Florida  bankruptcy case that dealt with this common fact pattern. In this case, some years prior to being sued the debtor spouse initiated a new financial account titled with his wife as joint tenants with survivorship. The debtor opened the account with $200,000 which the debtor earned from a business venture. The non-debtor wife had no part in the business and had no rights to the money. The debtor said that he opened a joint account because he considered the money to be used both for him and his wife and because he wanted his wife to have immediate access to the money if he died. After some time, the debtor and spouse closed the account and distributed the money equally: half to the debtor husband and half to the wife.

The court held that the account in question was an exempt entireties account, and that the husband did not fraudulently transfer his separate funds to open the account. Among other things, the court considered that the couple had been married 30 years during which time they had jointly owned much of their assets.

The decision should help rebut the creditor argument that there is a fraudulent transfer any time a debtor spouse deposits in a joint marital account money he or she acquired independently.

Last updated on May 22, 2020

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