Joint Tax Refund Not Protected As Entireties Asset

There have been several cases in recent years, after 2001, dealing with exemption in bankruptcy of joint tax refunds where only one spouse has filed bankruptcy. The general rule is that property owned jointly by husband and wife is exempt in the bankruptcy of either spouse individually so long as the filing spouse and then non-filing spouse do not have any joint unsecured debts (joint mortgages don’t count because they are secured debts). The tax issue is whether a joint tax refund is exempt as tenants by entireties property.

The court found in this case the joint tax refund was part of the bankruptcy estate of the filing spouse because the refund was attributable solely to the debtor’s income and not to the non-filing spouse. The court also referred to prior decisions which apportioned ownership of tax refunds based on taxes withheld and paid by respective spouses. The court noted a prior ruling of another Florida bankruptcy court where a joint tax refund check was deposited into a joint bank account a significant time prior to the bankruptcy filing and where the judge exempted the money in the joint account as tenants by entireties money. (Case No. 07-bk-8726)

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Flordia

Comments

[Arizona Attorney]

It is interesting how they sited this prior Florida case:

"The court noted a prior ruling of another Florida bankruptcy court where a joint tax refund check was deposited into a joint bank account a significant time prior to the bankruptcy filing and where the judge exempted the money in the joint account as tenants by entireties money."

Here in Arizona, I've not looked into this issue, but I'm glad you raised awareness for us if we get joint refund checks for one of our clients.