A New York attorney states that he represents a married couple that jointly owns a house in Florida. The wife is subject to a civil judgment entered by a New York court. The spouses maintain separate residences; the wife lives in New York with her children, and the husband resides full time in the Florida property. The husband’s job is in Florida. The husband claims the Florida house as his homestead.
The wife wants to use non-exempt assets to pay down the mortgage on the Florida house. The attorney wants to know if the wife may claim a homestead exemption on the Florida property where her husband resides so that the mortgage payoff cannot be reversed as a fraudulent conversion.
The house is exempt from the wife’s creditors as a tenants by entireties property even though the wife is not a Florida resident. However, paying down the mortgage may be attacked as a fraudulent conversion to the entireties. If the wife has homestead exemption her paying down the mortgage cannot be reversed as a fraudulent conversion.
There are cases holding that a non-debtor spouse has a separate and distinct homestead right under the Florida Constitution. A spouse (debtor or non-debtor) has an automatic interest in a homestead owned entirely by the debtor spouse- or, a spouse does not have to be on the house titled to have a protected homestead interest. This case is different in that the debtor wife not only is not on the title, but she has a separate homestead and her homestead is in New York.
In my opinion, the wife’s homestead rights in the Florida property is that the house may not be mortgaged or sold by the husband without wife’s agreement. This homestead interest adds nothing to her control over the house by virtue of its joint ownership. The wife’s application of non-exempt money to pay the mortgage, I believe, would be a fraudulent conversion. However, the creditor cannot force the sale of the house to reverse the conversion because it is the husband’s homestead. The wife’s creditors could sue the husband for money damages for his share of mortgage debt reduction.
This is a complicated legal and factual situation, so I told the New York attorney that the wife’s plan is risky, and I’m not sure how a court would rule.
About the Author
Jon Alper is an expert in asset protection planning for individuals and small businesses.
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