Married residents of Iowa purchased an investment motel in Florida through their family corporation. They own all the stock in the corporation jointly. A lawsuit was filed against the husband related to a prior investment. Their Iowa attorney told them that the Florida hotel is exempt because it is Florida real estate owned by them jointly as tenants by entireties.
Florida real estate owned by a husband and wife jointly is owned tenants by entireties regardless of whether the owners’ primary residence is in Florida. If the hotel were titled in the couple’s individual names it would be exempt from the husband’s creditor because it would be an entireties asset. However, the husband does not own the hotel; he owns shares of a corporation which owns the hotel.
Personal property follows the owner and is deemed located in the property’s owners’s domicile state. Ownership of the couple’s shares in the corporation is determined by Iowa law. Iowa does not recognize common law tenants by entireties. Therefore, the husband’s interest in the jointly held corporate stock is not exempt. The creditor could domesticate a judgment in Iowa and levy on the stock that owns the hotel. The wife’s shares in the same corporation are exempt.
If the creditor acquires the husband’s share of the corporation it is at least entitled to its share of dividends or other distributions. The wife’s continued operation of the hotel could be made very difficult.
The lesson is that out-of-state married owners of Florida real estate should consider owning the real estate in their own names to take advantage of entireties protection. Although ownership through a corporation or LLC provides a liability shield it also subjects the ownership interests to greater creditor exposure to the individual liabilities of either spouse.
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