Disclaimer Statute May Permit Judgment Debtors to Deliver Money to Friends or Family With Nothing to Creditors, But Not Always in Florida

Yes, there may be a way for a judgment debtor in Florida to prevent a judgment creditor’s lien from attaching to inherited assets, but it depends on the debtor’s financial situation. The debtor may be able to use a legal process called a disclaimer to avoid the creditor’s claim, but only if the debtor is not broke. The rules are a bit complicated and there may be some uncertainty, so it’s important to get legal advice to understand the options. In Virginia, a woman named Kathleen Willey was able to avoid her husband’s creditors by disclaiming her interest in his life insurance money. This means that she gave up her right to the money, and it went directly to her children instead. This helped her avoid paying off debts with the insurance money. Ms. Willey’s creditors said her giving up her right to insurance money was a sneaky move to keep it from them. They argued it was a “fraudulent transfer” because the kids got the money without giving anything to Ms. Willey. But Ms. Willey said her giving up the money wasn’t a transfer at all. She said the Virginia law treated her like she had already passed away when her husband died, so the money was meant to go to the kids anyway. The Virginia Supreme Court agreed with Ms. Willey. Ms. Willey’s creditors tried to argue that her disclaimer of life insurance money was an attempt to avoid paying them, even though it seemed obvious. They said that the court should not allow the disclaimer because of this, but the Virginia Supreme Court disagreed. They said that the law didn’t allow them to make an exception, even if they didn’t like the result. In Florida, the law is similar, and a disclaimer doesn’t count as a fraudulent transfer, so creditors can’t use it to try to get the money. In Florida, if you’re in good financial shape, you can legally refuse to inherit something. But if you’re broke, you can’t. The law doesn’t specifically mention fraudulent transfers, but it does say that if you’re insolvent (meaning you don’t have much money), you can’t refuse an inheritance. The problem is that the law doesn’t explain what “insolvent” means or who has to prove that you’re broke. There aren’t any court cases that help explain it either. Insolvent means owing more money than you have in assets. In Florida, being wealthy doesn’t always mean a creditor can collect what you owe them, because some assets are protected from being collected. The definition of “insolvent” is important for determining if someone can be exempt from paying off debts. The Internal Revenue Code defines “insolvent” as owing more than the fair market value of your assets. This definition has led to debates on whether exempt assets should be included in the calculation. Some courts have ruled that exempt assets should not be included when determining insolvency. Mr. Cole was able to avoid paying taxes on forgiven debt because New York law protected his insurance from creditors. However, the U.S. Tax Court has since changed its interpretation and now includes exempt assets when determining if a person is insolvent. This means that people with valuable exempt assets may have to pay taxes on forgiven debt, even if they are protected from other types of creditors. Additionally, bankruptcy law also defines “insolvent” as having more debt than the value of all property, excluding exempt property. The definition of “insolvency” in bankruptcy law and tax law is different. In bankruptcy, excluding certain assets can make someone appear more insolvent, which can help the bankruptcy trustee. In tax law, including those assets can result in more cancellation of debt income being recognized. In Florida, there is no clear definition of “insolvency” in the context of disclaimers, so the legislature needs to decide what the goal is. If the goal is to protect creditors, then exempt assets should not be included when calculating insolvency. If the goal is something else, then those assets should be included. The courts are currently arguing over what “insolvency” means in two different federal laws. Without a clear definition, it’s causing a lot of legal battles. Florida laws might provide some help, but it’s still not clear. The Fraudulent Transfer Statute in Florida says that a person is insolvent when they owe more than all their assets are worth. This might help clear up the confusion. The law in Florida about when someone is considered insolvent, or unable to pay their debts, is unclear. It’s not clear if assets that are protected from creditors are included in the calculation. This makes it hard for creditors to prove someone is insolvent. So, there’s a rule that if someone isn’t paying their debts on time, they are presumed to be insolvent. This puts the burden of proof on the debtor to show they are paying their debts. Ultimately, a court has said that there can be a presumption of insolvency in this situation. If someone in Florida tries to give up their inheritance to avoid paying off debts, a creditor might argue that it’s not fair to the people they owe money to. Even if the law seems to support the person giving up their inheritance, a court could still decide that it’s not right and make them pay up. So, it’s not a sure thing that someone can avoid paying their debts by giving up their inheritance. In Florida, not all disclaimer laws are the same. If someone is unable to pay their debts, they may not be allowed to refuse an inheritance. The definition of “insolvency” is unclear, and it can be difficult for someone to prove that they are insolvent. This means that insolvent people in Florida may not have the same rights to refuse an inheritance as solvent people. This could lead to legal arguments in the future about whether this is fair. For now, if you are unable to pay your debts in Florida, you may not be able to refuse an inheritance. The Florida statutes on disclaiming inheritances have not been reviewed much in court, but Florida is less lenient than other states. In Virginia, a court ruled that disclaiming an inheritance means the person never had a right to it. In Florida, the law specifies that disclaiming an inheritance means it’s like the person died before they got it. The law also says you can’t disclaim an inheritance if you’re broke. The law also affects bankruptcy and the ability to sue someone for fraud when they get an inheritance. There are also rules about what property can be taken to pay off debts, and how to prove you’re not insolvent. Robert C. Meyer is a lawyer who specializes in handling legal issues related to bankruptcy, estate planning, and probate. He received his B.A. from Grinnell College and his J.D. and LL.M.

Source: https://www.floridabar.org/the-florida-bar-journal/disclaimer-statute-may-permit-judgment-debtors-to-deliver-money-to-friends-or-family-with-nothing-to-creditors-but-not-always-in-florida/