Selling an exempt homestead in one state in order to move in to a new Florida homestead can be tricky. One must be careful to preserve the protection of current homestead while it is on the market and also protect a Florida property that is purchased before the old home is sold and the new Florida home is occupied.
One of my clients this past week is married and lives in Iowa in a house that he owns in his own name. His wife is not on the house title. Iowa is a state with unlimited homestead protection. The client is facing a probable civil judgment. His spouse is not a debtor. The client wants to sell his Iowa home over the next year and move to Florida. However, he states he found a great deal on a Florida home but he has to purchase the home in the next month. He has enough money in a jointly owned money market account to buy the Florida home for cash. He does not want to move from Iowa to Florida until he sells his Iowa homestead. He wants to know how to protect both properties from a judgment against himself.
A Florida house owned jointly by a husband and wife is owned tenants by entireties even if the couple lives outside of Florida in another state that does not recognize tenants by entireties ownership and there is a judgment against one spouse in his home state, such as Iowa in this instance. Tenants by entireties exemption is based upon the law of the state where the property is located.
I suggested that the client purchase his new Florida property jointly with his wife so that is protected as tenants by entireties property from the prospective judgment against him. I do not consider this to be as a fraudulent transfer if the proceeds are currently in a joint account. He should retain his Iowa homestead while it is own the market to protect that house under Iowa’s homestead laws. When he sells the Iowa house he should transfer the homestead proceeds directly from the title company to another asset that would be protected when he moves to Florida, such as an annuity or a tenants by entireties account at a Florida bank with no branches outside the state. He should not disburse the sale proceeds in to his personal bank account and then try to protect the money because that would expose himself to fraudulent transfer allegations.
Once he sells the Iowa home he can move into the Florida house so that it is protected both as his homestead and as an entireties assets. The conveyance of the Iowa sale proceeds are exempt as long as they do not pass through his own accounts are conveyed to an exempt asset.