Constitutional Homestead Protection Cannot Shield Assets Where Exemptions are Used for a Fraudulent Purpose

By Karma Hall, Esq.

On May 24, 2017, Florida's Fourth DCA, in a family law dispute, Spector v. Spector, Case No. 4D16-0922 (Fla. 4th DCA May 24, 2017), reversed and remanded the lower tribunal's order denying proceedings supplementary against Ellen Spector, the New Wife of the Former Husband. In its order, the trial court concluded that the transfer of real property and an insurance policy could not be fraudulent as a matter of law due to constitutional protections found in Florida's Constitution, which provides:
There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon…  the following property owned by a natural person…  (1) a homestead…." Art. X, § 4(a)(1), Fla. Const. 
The court noted that, as a general matter, Florida's homestead protection can only be breached in certain limited situations, such as (1) government entities with a tax lien or assessment on the property; (2) banks or other lenders with a mortgage on the property which originated from the purchase of the property; and (3) creditors with liens on the property which originated from work or repair performed on the property. The appellate court additionally acknowledged a fourth exception, that of alimony creditors. As to the exception for alimony creditors, the 4th DCA stated:
The exception relating to alimony creditors is founded upon our supreme court's conclusion more than one hundred years ago that the homestead protections "should not be so applied as to make it an instrument of fraud or imposition upon creditors." Pasco v. Harley, 73 Fla. 819, 75 So. 30, 32 (Fla. 1917).

You may be wondering by now why this family law decision is published here on this Property Insurance Blog. Under clearly established and binding Florida Law, the proceeds of any insurance recovery on a homestead property are imbued with homestead protection under Article X, section 4 of the Florida Constitution. See Quiroga v. Citizens Property Ins. Co. 34 So. 2nd 101 (Fla. 3d DCA 2010). 

In Quiroga, the court held: "[i]n the event a homestead is damaged through fire, wind or flood, the proceeds of any insurance recovery are imbued with the same privilege. Hence, when insurance proceeds are paid on a property insurance claim where the property is homestead property, those proceeds are protected homestead property. Yet, a problem can arise where the insured owes alimony. 

The Spector court makes clear, where one spouse is an alimony creditor of the other spouse, that insurance proceeds may lose their exempt status if the insured acts either egregiously, reprehensibly, or fraudulently. If so, an ex-spouse may be able to recover alimony from what otherwise would have been homestead protected insurance proceeds. 

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The Law Office of Karma Hall, PA provides legal services throughout Florida, main office in Miami.  Visit us online: www.karmahallpa.com;  email info@karmahallpa.com.



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