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Florida Ex-Wife, as an Alimony Creditor, Was Allowed to Pursue Ex-Husband’s Insurance Assets, Homestead Property if Fraud Was Involved

shell gameAn ex-wife secured an important victory in the Fourth District Court of Appeal, with that court ruling that she could pursue the ex-husband’s insurance assets and homestead property if she could establish that the ex-husband engaged in fraud. The ruling was a significant one in that it rejected the notion that “homestead property and insurance policies are always exempt from the contempt powers of the court regardless of fraud.”

The husband and his wife ended their marriage in 1996. At that time, the spouses reached a post-nuptial agreement, which the trial court included within the final divorce judgment. In a late 2000 alimony modification hearing, the trial judge found the husband in contempt because, according to the judge, the husband was more than $128,000 behind in his alimony.

After the hearing, the husband allegedly continued in his non-compliance. According to the court, he transferred title in a house he owned to his new wife and himself as tenants-in-common, after which he and the new wife took out a second mortgage, but he used none of that money to pay down the alimony debt. The court also found that the husband transferred title of a life insurance policy to the new wife, who then borrowed against the full value of the $200,000 policy. The new wife testified that this strategy was designed to shield that asset and keep it out of the hands of the ex-wife.

The ex-wife went back to court, and the trial judge held a hearing, but the judge determined that the assets were protected from creditors, including the ex-wife. Specifically, the trial court concluded that homestead property (which the husband and new wife’s home was in this case) and insurance policies are automatically exempt from the contempt powers of the courts, whether or not fraud was involved.

The ex-wife appealed, and she won. The ruling here is an insightful one on the limits of Florida homestead (and other asset) protection rules, including where the creditors’ rights arise from family law cases. Here, the creditor was an ex-wife who was owed an alimony debt.

The Florida Constitution recognizes three clear situations in which a creditor is allowed to pursue homestead property. They include a government entity pursuing a tax lien, a lender pursuing money owed on the mortgage loan related to that property, and creditors pursuing a debt incurred from repair or construction work done on that property. The ex-wife argued that the law recognized another exception for alimony creditors, and the appeals court agreed with her. Florida case rulings have stated for more than a century that homestead protections should not be used as “an instrument of fraud.” Based upon those late 19th and early 20th century rulings, the Supreme Court decided in 1950 that the homestead exemption should not be allowed to serve as a shield against debts arising from an “obligation of support and maintenance.” In fact, more recent cases have allowed courts to order forced sales of homestead properties if the spouse owing the debt “acted egregiously, reprehensibly, or fraudulently.”

Based upon this well-established law, the trial court’s conclusion that the homestead property and insurance policy funds could not be reached in any circumstances was incorrect. As a result, the case was sent back to the trial judge to hold a hearing, take evidence, and make a determination. If the husband and his new wife acted fraudulently, the trial court was to “exercise its authority over the real property and insurance policy,” including potentially ordering a forced sale of the husband and new wife’s home.

When it comes to pursuing one’s right to collect alimony, sometimes it takes both determination and skilled counsel. The skillful South Florida alimony attorneys at Sandy T. Fox, P.A. have spent many years helping clients pursue workable outcomes and then enforce the agreements that were made. Contact our attorneys online or by calling (800) 596-0579 to schedule your confidential consultation.

More blog posts:

The Importance of Negotiating a Favorable Florida Marital Settlement Agreement, Fort Lauderdale Divorce Lawyer Blog, April 12, 2017

Wife’s Alimony Shielded from Florida Attorney’s Lien if Needed for ‘Daily Sustenance’, Fort Lauderdale Divorce Lawyer Blog, Oct. 28, 2015