Florida is not a community property state. Instead, all property held by either spouse alone is considered to be separate property. This type of ownership makes Florida an equitable distribution state. This means that upon divorce, the marital assets are split according to what the judge finds to be fair and equitable.

In a community property state, all assets acquired by either spouse during the marriage are considered marital property and, therefore, owned by both spouses. In some community property states, even income earned from pre-marital separate property is still considered community property.

States with Community Property

As of 2021, only nine states follow community property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Community property classification covers even assets that would normally be exempt from creditors, such as retirement accounts. However, in most community property states, inheritance and gifts are not considered community property so long as they are kept segregated from other community property assets.

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Disadvantages of Community Property for Asset Protection

The biggest problem in community property states in terms of asset protection is that in some states, all community property is subject to creditors of either spouse. In other words, assets acquired by one spouse in those community property states may be subject to collection by a judgment creditor of the other spouse.

Because Florida is not a community property state, property held by either spouse alone is considered separate property and is not available to collect by a creditor of the non-owner spouse. Furthermore, any Florida assets held jointly as tenants by entireties are exempt from creditors of either spouse.

What Happens to Community Property When You Move to Florida?

Community property is still community property even after owners move to Florida. The community property does not become tenants by entireties or any other form of ownership, even though Florida itself does not create community property interests. Instead, Florida imports community property rights from other states.

One of our clients, a married man, acquired and owned an LLC membership interest in his own name while living in Texas. He and his wife moved to Florida. A Texas court entered a money judgment against the wife only, and the creditor moved the judgment to Florida. Texas is a community property state; Florida is not a community property state. Under community property law, each spouse has a separate 50% interest in the other spouse’s property acquired during the marriage so that the debtor wife acquired in Texas a community property right in her husband’s LLC investment. The judgment creditor sought to levy upon the debtor wife’s community property interest in Florida.

The client asked me whether the wife’s judgment creditor can use community property principles in Florida courts to get a charging lien upon the separate 50% interest in her husband’s LLC membership share. Under Florida law, the debtor wife would have no interest in her husband’s LLC ownership.

The general rule is that the wife’s creditor can use Texas community property principles to get a charging lien upon her 50% community property interest. The debtor’s rights in her non-debtor husband’s LLC interest were vested while the couple resided in Texas. The couple moving to Florida did not destroy the wife’s community property interest. There are some Florida cases and a Florida statute that are pertinent.

The joint community property interests in the LLC do not become exempt tenants by entireties assets when the couple becomes Florida residents because community property rights are separate and do not include survivorship at death.

Converting Community Property to Tenants by Entireties

The general rule is that marital property acquired in a community property state retains its community property characteristics after it is imported to Florida.

However, if the same community property assets are used to purchase, or are otherwise converted, into a different asset in Florida, then the new asset would have its property characteristics of Florida laws.

For example, suppose a married couple lives in California, a community property state, and maintains a bank account at a California bank. The couple moves to Florida, opens a new tenant by entireties bank account in Florida, and deposits in the new account their money previously held in the community property bank. In this example, the funds deposited into the new Florida account would be tenants by entireties property. The transfer of money to a new Florida account would be a conversion of funds to a new form of property.

I do not know of a state that does not exempt IRA and other retirement funds. Some states, however, have dollar amount ceilings on their exemption, whereas Florida’s retirement exemption is unlimited. Also, Florida case law exempts withdrawn retirement proceeds held in a checking or other financial account.

Retirement funds held in an account opened in a community property state would probably fall under the laws of the community property state where the account was opened. Moving retirement money to a new account opened in Florida would cause the money to be exempt under Florida’s laws.

Suppose a debtor, after moving to Florida, continues employment with an employer located in a former community property domicile. In that case, I think that a creditor could garnish wages through a court in the community property state. Garnishment actions occur in the state where the employer is located or where the employer has offices. A Florida resident cannot assert a head of household garnishment exemption in a court outside Florida. Only if the debtor worked for a national company with offices in Florida would the new Florida resident have an argument to exempt wages from garnishment.

Jon Alper

About the Author

Jon Alper is a nationally recognized attorney specializing in asset protection planning. He has over 35 years of experience and graduated with honors from the University of Florida Law School.

Jon has been recognized as a legal expert by media outlets such as the New York Times and the Wall Street Journal. He has helped thousands of clients protect their assets from creditors.

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