Case Study: Securing Personal Wealth Against Future Liability

[Note: The following case study is based on a real matter handled by Alper Law. Names, dates, and specific financial details have been altered to protect client confidentiality and attorney-client privilege.]

For most successful business owners, insurance is the first line of defense. A general liability policy and a personal umbrella policy are essential tools for risk management. However, policy limits are not always sufficient. Catastrophic claims—whether arising from a severe accident, professional negligence, or a premises liability event—can easily exceed coverage caps, leaving personal assets exposed to the remainder of the judgment.

This case study examines the situation of “Michael,” a client and business owner, who was concerned about future liability from his profession.

Michael’s situation highlights a critical reality for Florida residents: while insurance provides liquidity to settle claims, statutory asset protection provides the final backstop when insurance fails.

Initial Assessment

When Michael first retained our firm, he was not aware of any current creditors or lawsuits. We conducted a comprehensive review of his personal finances to determine what a creditor could seize if it prevailed in an amount exceeding his insurance policy limits.

Despite his success, Michael’s asset structure was typical of many business owners. Our review focused on four asset categories.

1. Primary Residence

Michael owned a valuable home in Orlando, Florida, titled in his personal name. The equity in his home was constitutionally protected. We verified that the property was located within a municipality and situated on a lot smaller than one-half acre.

Under Article X, Section 4 of the Florida Constitution, a primary residence meeting these criteria is 100% exempt from forced sale by judgment creditors, regardless of the home’s value. We confirmed that this major asset was already “off the table.”

2. Investment Property

Michael owned a vacation rental condo on the coast, titled in his own name.

This created a two-way liability. First, if a tenant were injured at the condo, they could sue Michael personally, jeopardizing his other assets. Second, if Michael were sued for his business activities, a judgment creditor could place a lien on the condo and force its foreclosure, as investment property does not enjoy homestead protection.

3. Joint Bank Accounts

Michael and his wife maintained approximately $500,000 in a joint checking account. While they assumed this money was safe because they were married, a review of the bank’s signature card revealed some risk with the account’s signature card. It provided them the option for tenancy by the entireties, but Michael and his wife did not check that box.

In Florida, tenancy by the entireties (TBE) protects against debts owed by only one spouse. However, if the married couple disclaims tenancy by the entirety in writing, the protection is lost.

4. Business Structure

Michael operated his consulting firm as a single-member LLC. Like many business owners, he used the business account to hold excess retained earnings.

In Florida, a single-member LLC does not offer the same level of protection as a multi-member LLC. Under the ruling in Olmstead v. FTC, a court can order a debtor to surrender their entire interest in a single-member LLC to a creditor, effectively handing over the business and its bank accounts. Multi-member LLCs, by contrast, are generally limited to a charging order, which restricts the creditor to a lien on future distributions only.

Solution: Comprehensive Statutory Protection

Because Michael was acting proactively (with no pending lawsuits), we had the maximum flexibility to restructure his estate without fear of fraudulent transfer allegations. We implemented a plan to harden his assets against future threats.

Step 1: Correcting Account Titling

We advised Michael to close the existing joint tenancy accounts and open new accounts explicitly titled as tenancy by the entireties.

We ensured that the signature cards and account agreements specifically elected TBE status. In Florida, property held as tenancy by the entireties belongs to the marriage as a single indivisible unit. If Michael were ever sued individually, a creditor generally could not touch these marital assets. This simple administrative change effectively shielded the $500,000 in cash reserves.

Step 2: Segregating Liability with a Multi-Member LLC

To protect the vacation rental, we transferred the property from Michael’s personal name into a newly formed multi-member Florida LLC.

Crucially, this LLC was not owned solely by Michael. We structured the operating agreement so that Michael and his wife were both members. This shift from a single-member to a multi-member structure triggered Florida’s charging order protection.

If a creditor ever obtained a judgment against Michael, they would no longer be able to seize the condo or take over the LLC. Their only legal remedy would be a charging order—a lien on financial distributions. However, even that remedy may not be available because of tenancy by entireties protection.

Step 3: Documenting the Wage Exemption

Finally, we addressed Michael’s income. As the owner of his business, Michael paid himself a salary. We reviewed his household finances to confirm that he provided more than 50% of the support for his wife and children.

We then created an employment agreement confirming his salary. The employment agreement stated that salary decisions must be made by all owners unanimously.

Under Florida Statute § 222.11, the disposable earnings of a head of family are 100% exempt from garnishment. Claiming the exemption for salary from a wholly-owned business is tricky, so the documentation best positions himself should the exemption later be challenged.

Deterrence and Leverage

By implementing these structural changes, Michael transformed his financial profile from a collection of vulnerable assets into a secure estate. Although he was not facing an active lawsuit, this proactive planning created two significant advantages for his future.

1. Settlement Leverage. In the event of a future claim—such as a tenant injury at the rental property or a professional error—Michael now holds leverage in settlement negotiations. If a plaintiff’s attorney conducts an asset search, they will find that his significant assets are either exempt (like his wages and homestead) or protected by legal structures (like the multi-member LLC and tenancy by the entireties accounts).

When assets are difficult to seize, creditors are far more likely to settle for insurance policy limits than to pursue uncollectible personal assets through expensive, prolonged litigation.

2. Prevention of Liability. By moving the rental property into a separate multi-member LLC, Michael effectively quarantined that risk. If a lawsuit arises from the rental condo, the liability is limited to that specific company. The creditor cannot easily reach Michael’s personal home, his business, or his family savings to satisfy a judgment against the rental property.