Florida asset protection example

Asset Protection Law in Florida

What Is Asset Protection?

Asset protection is a set of legal techniques designed to protect one’s assets from judgment collection. In particular, Florida asset protection uses Florida’s generous statutory exemptions to safeguard various assets, including real property, cash, businesses, and investments, so it becomes difficult for a judgment creditor to collect those assets. Asset protection planning can work both before and after a lawsuit is filed.

There are three essential steps to asset protection planning:

  1. Reviewing the ownership, acquisition, and titling of the debtor’s assets.
  2. Determining which assets are exempt from collection or exposed to creditors.
  3. Developing a legal plan to protect any exposed assets.

It is rarely too late to protect assets from creditors. Some asset protection strategies are viable even after a lawsuit is filed and or a judgment is entered. Still, the most effective asset protection occurs before liability arises.

Quick Summary

  • Asset protection in Florida is a legal way to protect your property and savings from judgment creditors.
  • Asset protection does not involve hiding assets or tax evasion.
  • People under current or imminent legal threat must consider fraudulent transfer issues when developing their asset protection plan.

Understanding Florida Asset Protection

Florida is considered one of the best states for asset protection because of its generous creditor exemption laws.

Florida law provides unlimited homestead protection and protects tenants by entireties assets, head of household wages, retirement accounts, annuities, life insurance, disability insurance, and more.

How Does Asset Protection Work?

If a judgment is entered against you in Florida, the judgment creditor can find out your financial information and begin to collect on the judgment. Asset protection uses legal methods to better protect what you have and your income from collection on the judgment.

Florida law is considered to be debtor-friendly because of the numerous assets exempt from lawsuits and civil judgments under Florida law. The strength of Florida’s debtor-friendly laws stems from three legal sources:

  1. The Florida Constitution.
  2. Florida statutes.
  3. Florida common law.

Florida Constitution

The Florida Constitution is the most important asset protection law. It is a fundamental legal document that sets forth Florida’s key protections, including the homestead protection.

Florida Statutes

The Florida legislature has enacted many statutes that protect various types of assets from creditors. There are also statutes providing creditors with tools to collect judgments.

Florida Common Law

There are protections based on what is referred to as common law or legal tradition. Common law is established by appellate judges in individual cases interpreting Florida statutes and the Florida Constitution. The appellate decisions become precedents for future cases with similar issues.

Consistent judicial interpretations become part of common law legal tradition and are deemed “settled law.” Judges are supposed to apply common law precedent because the underlying common law principles are in the Florida Constitution or Florida statutes.

Exempt Assets in Florida

The generous protections provided by the Florida Constitution, Florida Statutes, and Florida common law make Florida one of the most debtor-friendly states 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 Florida residents for asset protection purposes.

Florida Statutes exempt many types of assets from creditor execution. Florida common law protects property owned jointly by a husband and wife from the creditors of either spouse, using a type of ownership called tenants by entireties.

The key assets that are protected from creditors in Florida include:

  • homestead, with some acreage limitations.
  • The wages of someone who qualifies as head of household.
  • Annuities.
  • Life Insurance.
  • Retirement Accounts. For example: an IRA or 401k.
  • Tenants by entireties property when the judgment is separate.
  • Interest in a multi-member LLC with a properly written LLC operating agreement (but still subject to a charging lien).
  • Disability income.
  • $1,000 of value in a vehicle.
  • $1,000 of personal property (or $4,000 if you do not own a home).
  • Prepaid college plans.
  • Various generic exemptions, such as health aids, medical savings accounts, and unemployment benefits.
  • Social security.
  • Some properly drafted estate planning trusts protect the beneficiaries’ interest and inheritance from their creditors.

We help protect your assets from creditors.

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Homestead Protection

Florida law exempts an unlimited amount of homestead property. There are limitations on the size of the homestead property:

  • 1/2 acre lots within a municipality
  • 160 acres in the unincorporated county (applies even if the property started off in the city limits but was later annexed)
  • The protection applies to separate but contiguous lots within the size limit.

For families owning a house greater than 1/2 acre inside the city limits, some advanced asset protection techniques can allow a judgment debtor to protect the entire equity using a series of transfers and leases.

Homestead protection requires actual residence in the home. It is not enough that you intend to live in the property at some point in the future (for example, if the property is under construction).

Proceeds from the sale of your homestead are exempt from creditors so long as you intend to reinvest the proceeds into a new Florida homestead within a reasonable amount of time.

The homestead exemption still works even if the property will be transferred to beneficiaries automatically upon the owner’s death through a ladybird deed.

Tenants by Entireties

A basic asset protection technique for married Florida debtors is to own property as tenants by the entireties. Tenants by entireties refers to joint property owned by a married couple as an indivisible fictional unit. Title cannot be severed without both spouses’ consent in most circumstances. Assets held as tenants by entireties are generally immune from collection from a civil creditor of just one spouse.

Tenants by the entireties is based on common law protection rather than a Constitutional or statute-based exemption. Tenancy by the entireties was developed from British common law and thereafter adopted by many U.S. states in the mid-1800s. However, only a few states today recognize tenancy by the entireties. Some of these states limit entireties ownership to real property. In Florida, all personal and real property can be held as tenants by the entireties.

Mere joint ownership of an asset by husband and wife is not enough for property to qualify as tenants by entireties. The ownership must meet the “six unities,” which include unity of possession, unity of interest, unity of time, unity of title, survivorship, and unity of marriage. So long as there is not an existing creditor issue, couples should consider transferring any assets held jointly or individually before their marriage to themselves as tenants by entireties after marriage.

Not all joint marital bank accounts are entireties accounts. Under common law, a joint bank account not opened jointly by both spouses at the same time and in the same document, is not an entireties account.

There is a statute that says marital bank accounts are presumed to be entireties accounts. But, opening a tenants by entireties bank account requires attention to legal detail. If your bank offers a box on the signature card for tenancy by the entireties ownership, then you and your spouse must have checked that box to have entireties ownership.

Once your bank account fails in any way to meet entireties requirements, it cannot be fixed. You should open a new account—while keeping in mind fraudulent conveyance considerations.

Tenancy by the entireties ownership is presumed in the case of real estate even if there is no language specifying tenancy by the entireties ownership. However, this presumption does not apply to jointly owned interests in LLCs, partnerships, or corporations. You and your spouse should include specific language in your businesses’ governing agreements and certificates to indicate your intent to own the interests and tenants by the entireties.

Life Insurance and Annuity Contracts

The cash value of life insurance proceeds is protected from a Florida resident’s creditors. You must be the policy’s owner and insured for the protection to apply.

Unlike inherited pension plans and IRAs, life insurance proceeds are not protected in the policy beneficiary’s hands from that beneficiary’s creditors. The Florida exemption statute protects the life insurance owner, not the ultimate beneficiary, from judgment creditors.

Florida statutes similarly exempt annuities from creditor claims. In the case of annuities, the exemption statute expressly protects annuity proceeds, including proceeds deposited in your bank account. You should segregate received annuity payments or be able to trace your bank funds to the annuity.


Other than tenants by entireties and homestead, the major Florida exemption from creditors in Florida is the unlimited head of household wage exemption.

The wages of a head of household debtor are exempt from creditor collection through wage garnishment. This exemption extends to wages deposited in a bank account for up to six months. If your account contains non-wage money as well, you will have to show which funds are actually wages in order to claim the exemption.

A head of household is someone who provides more than 50% of the support for a dependent. You must have a moral or legal obligation to support the dependent. Common examples are a spouse, child, parent, or another relative.

Protection of wages and salary becomes more difficult when you earn wages from your own company. Courts have denied head of household protection when the debtor controls the timing and amount of salary from the employer. In that case, you should document the employment relationship with an arms-length employment agreement and pay wages periodically.

Retirement Accounts

Pension plans (401k), IRAs, and other retirement accounts are exempt from creditors under federal and Florida law. The protection has the added benefit of tax-deferred growth.

Business owners should consult with a financial advisor or an accountant to determine what type of retirement plan is available. The answer may depend on the number of employees in the business.

Inherited IRAs

Inherited IRAs are protected from creditors in Florida. Some Florida residents have IRA beneficiaries in other states that do not protect inherited IRAs. In these situations, these beneficiaries may be unable to use Florida law to protect their IRA inherited from a Florida resident. If you leave your IRA to an out-of-state beneficiary in a trust, the trust’s spendthrift provisions would protect the beneficiary’s inherited IRA from their creditors.

Prepaid Tuition and 529 Accounts

Florida law protects 529 accounts and pre-paid college programs from judgment creditors. A 529 account is a tax-advantaged account designated for educational expenses. Funds in the account grow tax-free and are not taxed when withdrawn if used for an approved expense category.

Your 529 plan protection is valid even if your plan permits you to spend the funds on yourself (with tax penalty). The protection extends to money withdrawn from the plan. For example, you may withdraw money from your 529 plan with the intent to pay an education expense and deposit the funds in a segregated bank account where the funds remain protected.

Florida law offers pre-paid college tuition programs. These programs allow state residents to pay a set amount to cover college expenses in the future, no matter how high tuition increases. Pre-paid tuition funds are similarly exempt from your creditors under Florida law.

Personal Property

There is no significant exemption amount for personal property. In Florida, assets that can be seized in a lawsuit include your car, furniture, computers, phones, and even your family pets.

Very aggressive creditors could seek a sheriff’s levy to seize your personal assets for public sale. Some creditors threaten levy on personal property to gain leverage, but in practice, the levy does not occur in most collections. Creditors infrequently go after personal property because there the costs of sheriff levy, storage, insurance, and auction are not warranted because the property has little value at auction.

A few items of personal property are exempt. Medical devices being used to treat a diagnosed condition are exempt from creditors. The exemption can even apply to vehicles, such as vans, modified for an actual health condition.

Some people own particularly valuable personal property such as artwork, jewelry, and antiques. These people can better protect their valuable personal property using tenants by entireties ownership, LLCs, or advanced estate planning techniques.

Asset protection in Florida

Semi-Exempt Assets

Semi-exempt assets are not exempt by statute, but are still mostly protected from creditors for other reasons. The most common are limited partnerships and limited liability companies that are used for asset protection of businesses or investment assets.

LLC and Limited Partnerships

Under Florida law, a charging order is a creditor’s sole remedy to collect from your equity interest in a multi-member LLC or limited partnership. A charging order is a court-ordered lien on the distributions from the LLC or partnership to you.

Because the charging order is an exclusive remedy, the creditor cannot get the underlying assets in the company or partnership, thereby protecting these assets from execution.

With a properly drafted LLC or partnership agreement, you can prevent a creditor from receiving any distributions even if the LLC or partnership generates profits. An LLC must be a multi-member LLC for the charging order protection to apply.

Single-member LLCs are not protected in Florida. The creditor can force the sale of the entire LLC interest.

The inability of a creditor to get anything more than a charging order against a multi-member LLC or partnership gives a judgment debtor a strong negotiating position in settlement discussions. A charging order is difficult to enforce, and a patient judgment debtor can delay or stop distributions indefinitely.

We tell you what you can do to protect your assets.

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Asset Protection Trusts

Self-settled domestic asset protection trusts (DAPT) are protected from judgment creditors by state statutes. In Florida, self-settled trusts are not protected from creditors. Several Florida court decisions have expressed the state’s public policy against self-settled asset protection trusts.

Some other states have made laws encouraging the formation of domestic asset protection trusts. The best-known domestic asset protection trust states are Wyoming, Nevada, Delaware, and Alaska. Over the years, many websites have promoted the benefits of asset protection trusts in these states.

You should be cautious before setting up an asset protection trust in these other states. It is uncertain which state’s laws would apply in a Florida court should a creditor seek to collect assets in your DAPT formed outside of Florida. Some courts have held that no matter where a DAPT is formed, Florida law—not the law of the trust formation state—applies.

Offshore Asset Protection Trusts

An offshore asset protection trust is a self-settled trust formed under the laws of a foreign jurisdiction, usually the Cook Islands. Cook Islands trust law has some of the best anti-creditor provisions in the world, and the jurisdiction is frequently regarded as the gold standard of offshore asset protection. The trust’s assets are unavailable to your creditors under Cook Island law so long as the trust was created and funded two years before the claim arose.

Like many asset protection techniques, offshore trusts are most effective when the trust is funded before a claim arises. Some bankruptcy and federal court judges have been able to force people to bring back assets located in an offshore trust when the court believes a person is trying to hide assets from creditors.

That said, creditors with relatively small state court judgments may not want to invest the significant legal fees required to attack an offshore trust plan, even if you had transferred assets to the trust after your liability arose.

A common plan involves an offshore trust in one jurisdiction that owns an offshore LLC in another jurisdiction. The offshore LLC then owns the underlying assets.

Protected Bank Accounts

Certain domestic bank accounts in the U.S. cannot be garnished under state law. The law does not explicitly exempt your funds in the bank account from collection, but the creditor’s inability to garnish your bank account makes judgment collection difficult.

Fraudulent Transfers

A fraudulent transfer is a conveyance of title or ownership to avoid collection by the judgment creditor. A fraudulent conversion is converting a non-exempt asset to an exempt or protected asset. An example of a fraudulent transfer is moving money from your individual financial account to a joint one. An example of a fraudulent conversion is using money from your financial account to purchase an exempt annuity. Fraudulent conveyance often refers to both transfers and conversions.

If a creditor successfully argues that you have made a fraudulent conveyance, the creditor can have the court void or undo your conveyance, or the creditor may seek a judgment against the recipient of the fraudulent transfer for the value of the asset received.

A fraudulent conveyance allegation is nothing more than a judgment collection remedy. Florida law does not give a creditor the right to additional damages or attorney fees.

It is not illegal to make a fraudulent transfer. The word “fraudulent” in fraudulent conveyance does not mean the action is illegal or criminal. A fraudulent conveyance in a civil collection context is not the same thing as civil or criminal fraud.

What Is Considered Evidence of a Fraudulent Transfer?

Florida law lists several facts that are evidence of a fraudulent transfer. Under section 726.105 of Florida law, a transfer is fraudulent if:

  1. It was made with actual intent to hinder, delay, or defraud any creditor of the debtor; or
  2. It was made without receiving a reasonably equivalent value, and the debtor was engaged or about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business, OR the debtor intended to incur, or believed or reasonably should have believed that they would incur, debts beyond the ability to pay as they became due.

The first element is hard to prove as it involves your state of mind. Therefore, courts rely on a list of intent factors (or “badges of fraud”) that indicate what you intended. The more that these factors exist for a given transfer, the more likely it is that a judge will find that the transfer was fraudulent under the statute.

Badges of fraud for a fraudulent transfer include:

  • The transfer or obligation was to an insider.
  • The debtor retained possession or control of the property after the transfer.
  • The transfer or obligation was disclosed or concealed.
  • Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
  • The transfer was of substantially all the debtor’s assets.
  • The debtor absconded.
  • The debtor removed or concealed assets.
  • The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
  • The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
  • The transfer occurred shortly before or shortly after a substantial debt was incurred.
  • The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

In most cases, a judgment creditor has four years to pursue a fraudulent transfer claim or one year after the transfer could have been reasonably discovered.

Assets protected from creditors

Sources of Liability

Before considering asset protection planning, you should first recognize the likely reasons you may be sued. The most common reasons people are sued in Florida are:

  • Professional malpractice
  • Automobile accidents
  • General debt, including credit cards and medical bills.
  • Premises liability. This refers to liability stemming from ownership of a building. For example, someone slips and falls on the premises. Or, a tenant is injured from an error made by a property manager.
  • Liability stemming from relationships. This type of liability includes co-signing on loan applications, for example. Some people face civil claims from former partners in personal relationships.
  • Employment liability. An employer is generally liable for the acts of employees when they act in the scope of their employment.
  • Intentional torts. People are often sued for alleged physical assault, racial or sexual discrimination, or defamation in social media.

We help protect your assets from creditors.

We offer customized advice for clients throughout Florida. Get answers for your specific situation by phone or Zoom.

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A professional malpractice suit occurs when a client files a lawsuit against the professional, claiming that the professional’s negligence damaged the client financially or emotionally. Doctors, lawyers, and accountants are all exposed to malpractice claims in their line of work.

The threat of a malpractice suit puts the professional at a high risk of legal liability. This is more true if the professional also owns their professional practice business.

Automobile Accident Liability

The automobile driver and the vehicle owner may both be liable for a car accident causing injury to another person. Liability for car accidents is not limited to the driver who caused the accident. The car owner may also be held financially responsible for the negligence of any permitted driver.

For example, if your spouse was driving a car titled in your name alone, and your spouse caused an accident, both of you may be liable for injuries caused by the driver’s negligence. You would not, however, be liable for your spouse’s accident if you had an amount of liability insurance deemed adequate by Florida law.

In addition, under Florida law, a minor with a learner’s permit or license must have an adult agree to be held liable for the minor’s negligence. You are liable for the minor’s negligent driving if you sign your child’s application for a learner’s permit or license.

If you are more at risk for lawsuits than your spouse, your lower-risk spouse should sign your child’s license application. If you have already signed your child’s license application, you can change the designation of the responsible parent.

Employee’s Car Accidents

A business owner or entity can be held liable for the negligence of employees driving their vehicles. The employee would have to have caused an accident during their employment duties.

Credit Card Debt

Credit card debt is a primary factor leading to personal bankruptcy in Florida. Some credit card companies aggressively collect unpaid credit card bills. They may contract with professional debt collectors or file lawsuits against credit card customers.

Successful bankruptcy wipes out all your credit card debt and other unsecured debts, including car loans, medical debt, and mortgage deficiency judgments.

There are problems and risks involved in bankruptcy.

First, you must pass a “means test” to qualify for a Chapter 7 liquidation bankruptcy. Not everyone with credit card debt qualifies under the means test.

Secondly, bankruptcy makes you forfeit all assets that are not exempt under bankruptcy law, and fewer assets are exempt in bankruptcy than in state court collection. Experienced and very competent bankruptcy trustees, working on a contingency fee, can challenge your asset exemptions and pursue legal challenges to prior fraudulent transfers and preferential payments to creditors.

In Florida, most people facing credit card debt do not need to file bankruptcy. Because Florida non-bankruptcy law protects assets and transfers vulnerable to a bankruptcy trustee, these debtors can retain more assets and achieve favorable legal action by defending the credit card company collection through state court proceedings.

How Does Bankruptcy Affect Florida Homestead Exemption?

Bankruptcy is not a good option for recent Florida residents who own a homestead property. Florida homestead law protects the owner’s homestead from creditors regardless of when the debtor acquired the homestead and regardless of the homestead value. Florida’s generous homestead protection and other exemption laws apply to all Florida residents immediately upon establishing Florida residency in a state court collection.

But in bankruptcy, a new Florida resident cannot use Florida’s homestead exemption and other Florida protections for 24 months after moving to Florida. The new Florida resident must use exemption law in the state of their former residence. These laws are usually less advantageous that Florida’s laws in bankruptcy court.

In addition, although the Florida homestead exemption protects an unlimited homestead value in state court collection, the bankruptcy law protects only limited amounts of homestead equity acquired within 40 months of filing bankruptcy.

Also, there is no action for fraudulent conversion of money into a homestead in state court, but a bankruptcy trustee may challenge and reverse your purchase of a Florida homestead within 10 years of the bankruptcy filing if the homestead was purchased to defraud your creditors.

Bankruptcy trustees are more effective debt collectors than collection attorneys representing credit card companies in state court matters. Bankruptcy trustees have jurisdiction over all your assets wherever they are located. A credit card judgment is only good in the state where the lawsuit was filed, and the judgment does not affect your real estate or financial accounts in other jurisdictions.

Does Asset Protection Work After a Lawsuit Is Filed?

Asset protection can work even after a lawsuit is filed. The main problem is the potential that your asset titling or transfers can be undone as fraudulent conveyances. Carefully planned transfers done in the face of a legal threat may withstand fraudulent conveyance allegations.

For example, in most cases, Florida law permits your conversion of non-exempt assets to a homestead property even after a court enters a judgment. Transfers of non-exempt assets made for adequate consideration may also be effective.

We tell you what you can do to protect your assets.

We’ve advised thousands of clients nationwide on how to protect their assets from creditors. Schedule a phone or Zoom consultation to get started.

Alper Law attorneys

When Does Asset Protection Not Work?

Asset protection planning may not work well against creditors with enhanced collection powers. For example, asset protection does not work well against divorce judgments, federal government judgments, and federal income tax liability.

Divorce Courts Have Enhanced Equitable Remedies

Asset protection tools are mostly ineffective to avoid paying family court judgments for alimony or child support in divorce proceedings. Family law judges have more powers than judges in civil cases to enforce their family court judgments and orders. Family law judges can override state law protections for retirement accounts, asset protection trusts, state bank account protections, and even homestead to enforce family court decisions.

A court can hold you in contempt for failure to turn over assets in a marital equitable distribution of assets or for failing to pay child support. To avoid contempt, you may have to use assets otherwise exempt from civil judgment collection to pay alimony and support. This threat of contempt (and jail time) makes typical asset protection tools in a divorce context ineffective.

Even offshore asset protection does not work well in a divorce context. Family law judges can order you to return trust assets to the United States. While an offshore trustee might not comply with your request to send assets back, the judge can take various actions against you until you convince the trustee to comply.

Features of property ownership, rather than state law exemptions, can still help protect assets from child support and spousal support claims. For example, if a divorced spouse remarries, newly acquired assets held as tenants by entireties with the new spouse may be immune from collection from the ex-spouse, even for support purposes.

Federal Agencies

Florida statutory exemptions are ineffective against certain “super creditors” under federal law. These super-creditors include the IRS, Department of Justice, SEC, FDIC, and FTC. Super creditors can seize assets that may be exempt under state law because federal debt collection rules and procedures supersede corresponding state law.

For example, the IRS and SEC can take half of the personal property that otherwise might be exempt as tenants by entireties. Federal agencies can garnish the salary of a Florida head of household. Federal agencies can also seize assets preemptively before a judgment is even entered against the Florida debtor. In this way, the federal agency substantially affects the ability of the debtor to retain legal help, which often forces a settlement favorable for the U.S. government.

Tax Debts

Florida asset protection planning usually does not shield tax you from your U.S. income tax liability. The IRS has an automatic tax lien on all your assets to secure collection of delinquent taxes, notwithstanding any state exemption (including Florida homestead).

Still, some people mistakenly believe they can move assets offshore to protect the assets from IRS collection or from the income being subject to U.S. income tax. Do not confuse offshore asset protection planning with offshore tax planning. Offshore asset protection with after-tax money is legal. Moving assets offshore to avoid the recognition of income amounts to tax evasion. Offshore tax evasion is criminal.

Financial Protection

To reduce your need for asset protection, you should use liability insurance, minimize unnecessary risks, and properly allocate vehicle ownership. The least expensive asset protection is common sense planning.

For example, liability insurance should often be the first line of defense against negligence claims. Insurance gives you the money to pay negligence claims without jeopardizing personal assets. Liability insurance includes auto insurance, malpractice insurance, homeowner’s insurance, and personal umbrella insurance.

Next, you can reduce legal risks and lawsuits by planning and minimizing unnecessary risks in your business and personal dealings. For example, you should not rely on oral promises and agreements in business dealings as they often result in confusion and misrepresentation. Avoid getting involved in business and financial relationships with people you do not trust or those who seem combative and adversarial.

Business agreements should be reviewed by a lawyer in advance. A few dollars spent on attorney fees before signing the contract can save substantial attorney fees in the future.

Car Ownership

For most married couples, the primary driver should own each vehicle. This limits the potential of joint spousal liability stemming from one spouse causing an accident while driving the other spouse’s car. Cars should not be owned jointly by two spouses because both spouses may be liable for negligence regardless of who was driving.

Remember that a judgment against both spouses will jeopardize otherwise protected assets owned jointly as tenants by entireties. LLC ownership of vehicles is also possible, but this could lead to higher insurance costs.

Boat Ownership

The primary driver of a boat should own the boat. The owner of a boat in Florida can be held liable for the negligence of the boat driver if the owner is physically on the boat at the time of the accident. Joint liability of spouses should be avoided.

Larger recreational vehicles, including boats, airplanes, or other motorized transportation are sometimes better owned by a separate LLC to protect your equity in the asset. LLC ownership may increase insurance premiums.

Umbrella Insurance

You should get an umbrella insurance policy to prevent lawsuits against you personally for accidents involving your home, boat, or car. Under Florida law, automobile owners must maintain an insurance policy with a minimum coverage of $10,000 per person for bodily injury. The minimum coverage is insufficient. Florida is a litigious state. There are many personal injury attorneys advertising to attract clients to sue for accident injuries.

You should strongly consider a liability umbrella insurance policy. A personal umbrella insurance policy covers negligence liability above the limits of your homeowner and car liability insurance policies. The minimum umbrella insurance coverage is typically $1,000,000. For example, if you cause $1,000,000 in medical damages to a person in an auto accident, but you only maintain auto insurance of $300,000, then your umbrella insurance policy will cover the additional $700,000 of liability.

Also, consider adding uninsured motorist coverage to your umbrella policy. If you have uninsured motorist coverage, your carrier will pay you the amount of damages you suffer from the negligence of an at-fault driver who has no or insufficient insurance. It costs significantly more to add uninsured motorist coverage to an umbrella policy. As a result, carriers typically do not include this coverage by default so that they can quote you a less expensive policy.

Malpractice Insurance

Malpractice insurance covers a professional person’s mistakes. Some professionals think that asset protection enables them to drop their malpractice insurance. This is usually a mistake. Asset protection should not substitute for a professional person’s adequate malpractice insurance.

Asset protection does not make the professional person judgment proof. Most professionals do not want to live with a large judgment and rely on the long-term effectiveness of their asset protection plan. Asset protection laws change—an asset protection plan may become less effective during the life of a judgment because of future court rulings or legislative changes.

Adequate liability insurance helps the professional practice efficiently without the overhanging anxiety about a malpractice judgment. The opposite is also true—malpractice insurance alone, without asset protection, is insufficient for most professionals. Plaintiffs do not always settle for your malpractice insurance limits, particularly when there are multiple defendants.

In addition, sometimes, a plaintiff’s attorney has promised their client a certain outcome, and the professional’s insurance limit is too low to meet that outcome. Finally, sometimes professional insurance carriers will refuse to cover liability, particularly if damages are traced to your intentional actions, bad faith, or malicious conduct.

How Much Malpractice Insurance Should You Get?

Most professionals should choose the highest amount of malpractice insurance limit they can afford.

  • Maintaining high insurance limits allows a professional to insure events in the past, rather than getting tail coverage.
  • Some potential employees may decline to work for a firm with low or no insurance coverage.
  • Ongoing litigation often results in incredible stress for the professional and their family, whether or not they are ultimately liable.

Liabilities Not Covered by Insurance

Some types of lawsuit risks are not covered by insurance, even an umbrella policy. Asset protection is the only shield against these non-insurable risks. These non-insurable risks include:

  • Civil rights violations.
  • Certain professional wrongdoing, such as bad faith or malicious conduct.
  • Certain environmental liabilities.
  • Intentional acts of sexual harassment or discrimination
  • Criminal acts.
  • Tax or other governmental liabilities.

Common Asset Protection Mistakes

Over many years we have seen some of our clients make mistakes in asset protection planning. Here are the most common ones:

  1. Waiting Until It’s Too Late: Starting asset protection planning after a lawsuit or a creditor claim has arisen is often ineffective. It’s crucial to implement protection strategies proactively, before any legal threats emerge.
  2. Mixing Personal and Business Assets: Failing to separate personal assets from business operations can expose personal assets to business-related liabilities. Always keep personal and business finances distinctly separate.
  3. Overlooking Insurance as a First Line of Defense: Neglecting adequate insurance coverage (like liability, property, and professional insurance) can leave assets vulnerable. Insurance should be the first layer of defense against potential lawsuits or claims.
  4. Using DIY Asset Protection Strategies: Attempting to handle asset protection without professional guidance can lead to mistakes and vulnerabilities. It’s essential to consult with legal and financial professionals.
  5. Ignoring Bankruptcy Provisions: Not understanding bankruptcy rules can lead to the loss of assets that might have been protected. Be aware of how different asset protection strategies hold up in bankruptcy proceedings.
  6. Choosing the Wrong Jurisdiction for Trusts and Entities: Establishing trusts or business entities in jurisdictions without strong asset protection laws can weaken your protection. It’s crucial to choose jurisdictions with favorable laws.
  7. Failing to Regularly Update Estate Plans: Asset protection plans should evolve with changes in your financial situation, laws, and family circumstances. Regularly reviewing and updating estate plans is key.
  8. Underestimating Potential Marital Property Claims: Not considering the impact of divorce or death on asset distribution can lead to significant losses. Pre-nuptial agreements and appropriate trust structures can provide necessary protections.
  9. Inadequate Record-Keeping and Documentation: Poor documentation and record-keeping can undermine asset protection strategies, especially during legal scrutiny. Maintain thorough and accurate records of all transactions and structures.
  10. Overcomplicating Structures: Creating overly complex asset protection structures can be counterproductive, leading to management difficulties and increased scrutiny. Aim for an effective yet manageable level of complexity in your asset protection plan.

We help protect your assets from creditors.

We offer customized advice for clients throughout Florida. Get answers for your specific situation by phone or Zoom.

Alper Law attorneys

Frequently Asked Questions

How does asset protection work in Florida?

Florida asset protection means legally structuring assets to minimize risk from judgments, lawsuits, and other claims.

Which assets are protected under Florida law?

Most asset exemptions under Florida law are included in Chapter 222 of the Florida Statutes, including the head of family wage exemption and the exemptions for retirement accounts and annuities, among others.

If someone sues you, can they take your house?

In most cases, a creditor cannot take your house in Florida. The most important and well-known Florida exemption is the homestead exemption. The homestead exemption is in the Florida Constitution.

There is no monetary limit on the homestead exemption. There are lot-size limits. If the home is inside the city limits, the homestead exemption protects homesites up to 1/2 acre. If the home is in the county, the exemption applies on up to 160 acres of contiguous property. There are exceptions to the homestead exemption for fraud and similar misconduct.

Does Florida have asset protection trusts?

Florida does not have a domestic asset protection trust statute. There are estate planning trusts (not living trusts) that protect assets from future creditors. These estate planning trusts are complicated, and there are usually simpler effective asset protection tools.

Are joint bank accounts protected in Florida?

Joint bank accounts opened by a married couple are protected from judgment creditors of either spouse as a tenants by entireties account. The tenants by entireties rules for bank accounts must be strictly adhered to. Joint accounts of unmarried owners are not exempt.

How long can a collection agency come after you in Florida?

A judgment in Florida is valid for 20 years. The timetable starts when the judgment is issued, not when the debt arose or when the case was filed.

Do you need an asset protection attorney?

Asset protection involves the application of creditor collection law to a person’s particular situation. Often an asset protection attorney can help you understand what assets are at risk and your options to legally protect them.

How long does asset protection take?

Designing an asset protection plan only takes 30-90 minutes. Some asset protection tools can be implemented yourself, and others require attorney assistance.

Jon Alper

About the Author

I’m a nationally recognized attorney specializing in asset protection planning. I graduated with honors from the University of Florida Law School and have practiced law for almost 50 years.

I have been recognized as a legal expert by media outlets such as the New York Times and the Wall Street Journal. I have helped thousands of clients protect their assets from creditors.