Will Richard Fuld’s “Scam” Work?

While taking my son to school recently, I heard some DJs prattling on about how Richard Fuld had sold his Jupiter Island mansion to his wife for $10.00.  (Actually, it was $100.)  The DJs dubbed this the “oldest dodge in the book” and opined that he would never get away with it.  Their comments got a little more intelligent when they commented that it might fail because the couple could not prove Florida residency.

Actually, Florida law might allow him to “get away with it.”  First, as one law professor pointed out, real property owned jointly by a married couple in Florida is a tenancy-by-the-entireties.  Entireties property is protected from someone that only one of the spouses owes money too.  Thus, no one who gets a judgment against Richard Fuld could seize the mansion unless they also had a valid claim against Mrs. Fuld.  The property was exempt from creditors of Richard Fuld even before he transferred his interest in it to Mrs. Fuld.  It was not necessary for Fuld to transfer his interest in the home to his wife,  If he had left it in joint names, it would have remained safe from creditors of his.  Perhaps Fuld failed to seek legal advice before transferring the home to his wife?

Second, if  Mrs. Fuld can establish that the Jupiter Island mansion is her primary residence.  She can claim it as her homestead and it will be exempt from creditors of hers.  A person’s homestead under Florida law is completely exempt from the claims of creditors.  Of course, if Mrs. Fuld cannot prove Florida residency, then she cannot claim the constitutional creditor protection for the property and it is subject to claims of any of her creditors.  Thus, the Fulds may have actually decreased the protection the home enjoyed against creditors because now it may be subject to the claims of anyone who Mrs. Fuld owes money.

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3 thoughts on “Will Richard Fuld’s “Scam” Work?

  1. How could Richard Fulk claim a tbe interest in the Florida property if he was not a resident of Florida. Isn’t the tbe immunity from claims of creditors an FLA exemption, only available to Florida residents.

    • You have to be a Florida resident to claim the constitutional homestead exemption, as noted in the post. If either spouse is a Florida resident and they have a primary residence in Florida, then that spouse can claim the homestead exemption for the home. Thus, even if Richard is not a Florida resident, Mrs. Fuld can claim the home as her homestead if she is a Florida resident.

      As for property that is a tenancy-by-the-entireties, it is presumed that real property owned jointly by a married couple in Florida is a tenancy-by-the-entireties. The creditor exemption arises because each spouse has a right to the whole property and that right can not be severed by either spouse alone. Thus, a creditor of just one spouse cannot deprive the non-debtor spouse of his or her right to the whole. You don’t have to be a Florida resident to own property in Florida and the entireties exemption has nothing to do with Florida residency. I am not, however, a bankruptcy lawyer. I suppose that if you are the resident of another state and you file bankruptcy, that entireties property in Florida may not get the same treatment if you are entitled to bankruptcy exemptions based on the law of another state. However, as it pertains to the enforcement of a judgment outside of bankruptcy court, entireties property would be exempt from the creditors of one spouse regardless of residency.

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