“Can I still do asset protection planning after there is a judgment against me?” A very common question. The answer is “yes” in many cases. Here’s an example from last week’s clients of legitimate and effective post-judgment planning.
This elderly lady had guaranteed her son’s business loan which the son could not repay when the business failed. The business and loan was made in another state with a national bank. The bank just got a judgment against mother and son for several hundred thousand dollars. The mother lived in Florida in a home with a $40,000 remaining mortgage. She had about $60,000 savings in accounts at the same bank that got the judgment. She lived primarily off monthly checks from her deceased husband’s pension and social security.
Here are the post-judgment planning steps she is considering. First, she pays off her remaining mortgage leaving her with about $20,000 at the creditor bank. Paying a homestead mortgage cannot be reversed under Florida law. Next, she’ll move the financial account from the creditor bank to a small bank in Florida; she is not “hiding” the money, but she is removing the money from the “creditor’s doorstep.” The mother’s litigation attorney can probably delay discovery of new bank accounts for a few months after judgment.
The mother will stop using her exempt pension proceeds and social security to pay monthly living expenses. Instead she will use her savings to pay expenses until the money is depleted and hopefully before it is located and garnished. She can use money to make repairs and improvement to her homestead as well as pay her legal bills and taxes.
The unspent pension and social security money can be used to purchase an immediate annuity. Florida statutes exempt from creditors annuities and all annuity distributions. Using pension and social security money to buy an annuity is not a fraudulent conversion because the pension and social security checks are themselves exempt from creditors. When her cash is spent, the debtor mother can revert to living off the pension, social security, and her new annuity.