Legal vs Equitable Ownership: What’s the Difference?

When it comes to owning property, we tend to think of it as pretty clear cut. There’s the owner or owners, and then there’s everyone else. But legally, it’s not that simple. The law recognizes that there are times when the legal owner of property may not be the actual equitable owner.

Why You Should Care

Before explaining the difference, you may wonder why this actually matters.

It matters because if you’re trying to collect on a judgment, or assessing whether someone has assets that can be used to satisfy a judgment, you may just see property in someone’s name, and assume that you can get to that property, to satisfy your judgment.

Lo and behold, when you do try to collect on that property, you might be surprised to find that the legal owner is not the actual owner.

So What’s the Difference?

You probably know what the difference between legal and equitable title is, because it’s common in our day to day lives.

Imagine that a car is titled in mom and dad’s name, but the car resides with an adult college student child, where the child goes to college. The child pays for maintenance for the car, expenses, and for all intents and purposes other than what’s on the actual legal title, the car belongs to the college aged child. While the parents might have legal title, the child has equitable title.

As another example, an adult may keep his or her money in an account that is titled in a parent’s name. The adult child has access to the money, and access to the account, Although legally the account belongs to the parents, equitably, the account and the money are owned and controlled by the child.

Abusing the System

Many people, unaware that the law makes this distinction, try to use title as a way to evade creditors or to evade paying judgments. For example, they will put their money in a bank account titled in someone else’s name, even though they maintain access to the account and to the funds in the account. Then they claim they do not own those assets.

Whether it’s a bankruptcy court or a judgment creditor or anybody else, creditors are allowed to make an argument to a court that property belongs to whomever equitably owns it, regardless of whose name may be on the actual title.

The other thing to be aware of, is that if you are using, accessing or managing property or money for yourself (that is, you’re the equitable owner), and for your own benefit, that property could be taken by judgment creditors, if you end up having any.

If the legal owner has any interest in the property, they should know that allowing someone else to use property as their own, could subject that property to garnishment or seizure or other court action.

Call our West Palm Beach commercial litigation attorneys at Pike & Lustig for help collecting your judgment.

Source:

nacba.org/store/viewproduct.aspx?id=25721439