Tuesday, October 20, 2009

Use of Exempt Assets to Pay Marital Obligations

In addition to substantial tax savings/benefits which accompany IRAs, 401ks and other qualified retirement plans; they are often exempt from creditors claims making them a useful asset protection tool. One creditor who is not hindered by these general exemptions, however; is a former spouse to whom a party owes alimony, support or attorney's fees.

On the contrary, the Court may use an IRA to satisfy obligations imposed under Chapter 61 including an alimony obligation or arrearage (and presumably attorney’s fees) despite the fact that this type of account is normally exempt from creditors. “In a Chapter 61 contempt proceeding a trial court may properly look to a former spouse's individual retirement account to determine whether that spouse has the ability to pay a purge amount in a contempt order. Contrary to appellant's argument, the section 222.21(2)(a), Florida Statutes (1995), exemption of an IRA account from “all claims of creditors” does not shield IRA assets from a court order to pay Chapter 61 obligations….Under Chapter 61 and Bowen, an IRA is not a safe haven where a former spouse can hoard assets while, at the same time, argue that he does not have the present ability to pay a purge amount in a contempt order arising from the non-payment of obligations due under the chapter. Because a person can obtain access to funds in an IRA account, a trial court may properly look to that account as a source of funds to satisfy a purge amount in a contempt order.” Siegel v. Siegel, 700 So.2d 414, 415 (Fla. 4th DCA 1997 emphasis added).

Tuesday, August 18, 2009

Providing Health Insurance Coverage to an Uninsurable Former Spouse

When parties are covered by a group health plan during the marriage, the non-participant spouse is often left without a permanent source of coverage when the marriage ends. Once the temporary relief provided by COBRA or Mini-COBRA ends; a former spouse who is afflicted with pre-existing conditions will often be placed in dire straits.

This issue, which has both financial and emotional components, can often derail settlement negotiations and convert an otherwise simple dissolution into a complex undertaking. If you become involved in a case where long-term health insurance coverage becomes an issue; you should note that an otherwise benign provision in the Florida health insurance code may have a significant impact on your client’s rights and your ability to settle an otherwise difficult case.

Florida Statute § 627.6675 titled Conversion of Termination on Eligibility requires an insurer to provide “conversion coverage” for qualified individuals whose health insurance was terminated by a qualifying event (which includes divorce where the non-participant spouse is financially dependant upon his or her former spouse).

In other words, if your client is financially dependant upon their spouse then the insurance company is required by law to provide him or her with a continuation policy (similar to COBRA) regardless of any pre-existing conditions. Unlike COBRA, however; the conversion coverage provided by § 627.6675 is not restricted by a specific time limit but rather can continue indefinitely so long as the candidate remains eligible under the provision of the statute.

While not ideal (it is still expensive) § 627.6675 provides some security to an otherwise uncovered spouse and may provide you with a vehicle for settling an otherwise difficult case.

Joshua D. Ferraro is a member of the Ferraro Law Group, P.L., an AV rated family law firm whose members have fifty (50) years of combined experience. Josh mediates cases in the areas of family law, probate litigation and commercial litigation.


Welcome to the first Web-Log (BLOG) dedicated to the practice of family law within the Nineteenth Judicial Circuit of Florida. In each entry, I will provide up-to-date information on substantive and procedural issues directly affecting your practice as well as practical tips that can have a real world impact on your clients. In doing so, I hope to assist you in your quest to obtain accurate, timely and insightful information to best serve your client’s interests.

Joshua D. Ferraro is a member of the Ferraro Law Group, P.L., an AV rated family law firm whose members have fifty (50) years of combined experience. In addition to family law litigation Josh also mediates cases throughout the Nineteenth Judicial Circuit.