Florida asset protection is a legal process where a debtor structures his or her assets–such as property, cash, businesses, and investments–in such a way that makes it much more difficult for a current or future creditor to collect on those assets. Asset protection laws are different in each state. Florida asset protection laws are among the most liberal, debtor-friendly laws in the country. Florida’s asset protection laws apply to permanent residents of Florida and people in other states who own property in Florida. People anticipating substantial civil judgments often move from other states to Florida to become a Florida resident for asset protection purposes. Our office is located in Orlando, Florida, but we help clients who live or plan to live throughout the state.
Florida asset protection is based on several legal sources. The Florida Constitution, our most fundamental and important legal document, sets forth many of our most important protections of our assets including Florida’s well-known homestead protection laws. Next, the Florida legislature has enacted many statutes, each of which protects various types of assets from creditors of Florida residents. Finally, there are protections based on what lawyers refer to as the “common law” or legal tradition. Common law is law established by appellate judges in individual cases. Because of the judge’s respect for legal precedent, the courts have built up certain traditional protections which are effective in courts even through they are not found in our Constitution or in Florida Statutes. Courts also define Florida asset protection through their interpretation of Florida’s Constitution and statutes. These interpretations express how the black letter law in the Constitution and statutes will be applied to real-life situations. Consistent interpretations become part of common law legal tradition.
Florida law provides ways to protect different types of assets from creditors. The most important and well-known Florida protection is the homestead exemption of real property. Florida Statutes exempt many types of financial assets from creditor execution. Florida also protects property owned jointly by a husband and wife from the creditors of either spouse. Limited partnerships and limited liability companies are used for asset protection of businesses or investment assets. Additionally, some types of financial accounts and some properly-drafted estate planning trusts protect the beneficiaries’ interest and inheritance from their creditors.
Florida Asset Protection Strategies
Everyone who has been fortunate enough to accumulate assets in today’s economy needs some form of asset protection. In the United States, there are more than one million lawyers, each with a license to file lawsuits against deep-pocket defendants by paying court filing fees and hiring attorneys to work on a contingency fee basis. Too often, decisions by judges or juries are based more on emotion than on facts or the law and the result is a catastrophic damage award that wipes out a lifetime of hard work and investment. A well-designed asset protection plan builds a protective barrier around your estate and guards your family wealth from creditor attack and frivolous lawsuits. Asset protection is an essential element of financial planning.
Effective asset protection starts with common sense. Don’t rely on oral promises and oral agreements in your business dealings as they often result in confusion and misrepresentation. If you enter into written business agreements, make sure the agreement is reviewed by a lawyer in advance. A few dollars spent on attorney fees prior to signing the agreement can save substantial attorney fees in the future. Avoid getting involved in business and financial relationships with people you do not trust or with people who seem combative and adversarial in nature.
Make sure you maintain comprehensive insurance covering your house and all vehicles owned in your name regardless of who drives your cars. A supplemental umbrella insurance policy which expands the limits of homeowner’s and auto policies is an inexpensive and effective asset protection tool. For those individuals with heightened exposure to lawsuits because they own a business or practice in high-risk professions, a consultation with a Florida asset protection attorney will provide them legal asset protection tools to incorporate into their business plan and family estate plan.
Evaluating the effectiveness of asset protection depends on having realistic goals and objectives. Asset protection will not make you judgment proof. An aggressive and skilled collection attorney can, with enough time and money, attack at least some assets of any debtor. A realistic goal of asset protection is to make it more difficult for judgment creditors to levy on your assets, thereby increasing your negotiation leverage in settlement discussions. Therefore, a reasonable goal of domestic or offshore asset protection should be to position yourself in a substantially improved bargaining position with future creditors.
Most importantly, asset protection does not involve hiding assets. Creditors will discover all your assets unless you lie under oath. Asset protection planning should assume that your creditors know about any interest you may have in all assets or that they will learn about your assets and prior transfers of assets in post-judgment discovery.
No one should expect that asset protection will reduce U.S. income tax liability. For example, do not confuse offshore asset protection planning with offshore tax planning. Offshore asset protection with after-tax money is legal – offshore tax evasion is criminal.
When Is It Too Late Protect Assets From Creditors?
Asset protection works best when when implemented before any legal problems are on the horizon. Asset protection is part of estate planning, and asset protection should be done at the same time a person designs their estate plan through a will or a living trust. Reorganization of asset titles and asset transfers done before creditor problems arise are usually very effective if and when liability does arise. Asset protection planning, similar to insurance, works best when put in place before problems arise. Just as most people do not visit a doctor until they experience illness or pain, most people do not consider asset protection until they feel vulnerable to creditor lawsuits in the foreseeable future. Those who ignore asset protection until legal problems arise often ask when it becomes too late to protect their assets.
Asset protection strategy in the context of threatened litigation, or even after a law suit is filed, is more difficult, but there are always tools that legally improve protection against creditor judgments. The main issue regarding asset protection at late stages is the potential that asset titling or transfers can be undone as fraudulent transfers or fraudulent conversions (which a court could reverse after a civil judgment is entered). There are very effective asset tools that do not involve any transfer or asset conversion. Transfers done in the face of a legal threat may withstand fraudulent transfer attack when properly planning to minimize badges of fraud. In most cases, Florida law permits the transfer of non-exempt assets to a homestead property even after a judgment is entered by a court.
Generally speaking, it is not too late to engage in asset protection any time before a judgment creditor actually obtains an interest in your property by lien or execution. Asset protection tools put in place during times of legal threat may not cure legal problems and may not work as well as advanced protection planning, but even late-implemented asset protection tools put the debtor in a better position that he would be otherwise. If you’d like help forming your own asset protection plan, give us a call to schedule an appointment.
Learn More About:
Florida Residency: Many people from all over the country who have current or potential legal problems are interested in moving to Florida to take advantage of Florida’s homestead protection and other asset protection laws. What do you need to do to become a Florida resident?
Top 10 Asset Protection Mistakes: What are some of the most common mistakes that people make when planning to protect their assets in Florida?
Homestead Exemption: In Florida, our home is truly our castle, one that is impenetrable by creditors. What does it take to establish Florida homestead and what exactly does it protect?
Statutory Exemptions: Several asset protection benefits for Florida residents are contained within Florida Statutes. What exemptions are these and when do they apply?
Tenants by the Entireties: Florida has a special form of ownership for property owned by married spouses. What does this form of ownership do and how can you get it? What makes is so effective against creditors?
ITF Accounts and Gifts: A properly designed gift-giving plan can help minimize estate and income taxes as well as remove property from the reach of the parents’ creditors. What are some of the key features of these plans and how can you set them up?
How an Asset Protection Attorney Can Help: An asset protection attorney can help you with the complicated process of asset protection planning. Planning must be legally correct and factually accurate in order to protect your assets. An experienced asset protection attorney is the person who will direct you toward the best asset protection solution.