Many real estate professionals have large commercial development loans which they are having difficulty repaying in today’s real estate environment. One such client and his wife are planning to move to Florida to protect their wealth in the likely event that the bank calls a large commercial loan personally guaranteed by the husband. The non-debtor wife has already moved to Florida and purchased a home with her husband where the wife now resides with her children. She and her children travel up north each weekend to visit her husband The wife has a Florida drivers license and other indices of Florida residency. The debtor husband remains “up north” where he is trying to salvage his company’s loans and sell the couples’ jointly owned real estate. The couple wanted to know how they can safely finish liquidating their home-state property and protect their money in Florida.
The couple want to sell they jointly own up north and protect the sales proceeds until they can protect the money in Florida. Asset protection law of personal property, such as financial accounts, depends on the law of the state where the debtor resides, or in this case, the law of the debtor’s current residence up north. Property owned jointly by husband and wife is not considered protected tenants by entireties property in the state where the husband still resides and where the family used to live because this state does not recognize tenants by entireties protection.
If they sell their property up north they cannot protect the sales proceeds in their existing joint bank accounts. If the jointly owned money were deposited in a joint, or entireties, Florida account, the debtor husband still would not enjoy tenants by entireties protection of this money until he becomes a Florida resident.. Once the husband himself moves permanently to Florida the couple’s joint financial accounts could have entireties protection in a Florida bank. They should maintain the sales proceeds from the sale of their joint property up north in a joint account in Florida at a bank that does not have branches outside of Florida. I do not think this transaction would be a fraudulent conveyance to a Florida entireties account because the property sold was jointly owned.
These people asked whether the money from the sale of their current assets outside of Florida would be protected as a Florida homestead asset if they intended to use the money to buy a new Florida homestead. The answer is, “no.” Homestead bank accounts are protected to the extent they contain funds from the sale of a Florida homestead which funds are intended to be reinvested in a new Florida homestead. Money in a financial account from a source other than a Florida homestead cannot be protected as a “homestead account” just because the owners intend to buy a Florida residence.
Another issue is whether the husband’s interest in the Florida house currently occupied by the non-debtor wife and owned jointly by the two spouses is protected from the husband’s creditors as a Florida homestead by virtue of the wife’s occupancy. In general, the husband is not entitled to Florida homestead protection until he becomes a Florida resident. The husband may have a life estate in his wife’s Florida homestead, and his wife cannot convey an interest her homestead without her husband’s signing the conveyance instrument.
The husband’s life estate interest may be protected from his creditors, but I do not think his full 50% ownership interest is protected until he moves into the property. The same property is protected from the husband’s current creditors as entireties property even though the husband is not a Florida resident. Laws regarding real property are generally based on the laws of the state where the property is located; in this instance, Florida. Tenants by entireties does not have residency requirement. If two married Florida residents jointly own real property in a state that does not recognize entireties ownership the property is not protected from either spouse’s creditors. Likewise, Florida property jointly owned by husband and wife should be protected even if the debtor spouse does not reside in Florida.