Florida Asset Protection

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.

Our clients want to know how to protect their assets from judgments. 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.

It is never too late to engage in asset protection planning. In fact, our most typical client is one who wants to protect their assets after a lawsuit is filed, or even after a judgment. Our office is located in Orlando, Florida, but we help clients who live or plan to live throughout the state.

What Assets Are Protected in Florida?

Assets that are protected in Florida in a lawsuit from creditors include:

• Your 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 (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 collect plans.
• Various generic exemptions, such as health aids, medical savings accounts, and unemployment benefits.
• Social security.

The most important and well-known Florida property that is exempt from creditors is the homestead exemption of real property. Your home is protected from creditors in Florida subject to acreage limitations. The law protects up to one-half acre if the home is inside a municipality and 160 acres of contiguous land if the home instead lies in an unincorporated county.

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

How to Protect Your Assets in Florida

Protecting property from a lawsuit starts with common sense planning.

Your own common sense is your most important asset protection tool. You can eliminate legal risk and lawsuits by planning and minimizing unnecessary risks in your personal and business dealings. Don’t rely on oral promises and oral agreements in your 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 with people who seem combative and adversarial in nature.

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.

Who Needs Asset Protection?

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.

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.

Asset Protection After a Lawsuit is Filed

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 lawsuit is filed, is more difficult, but there are always tools that legally improve protection against creditor judgments.

Is Florida a Debtor Friendly State?

Florida is a debtor-friendly state. The strength of Florida’s debtor-friendly laws stems from three legal sources:

• The Florida Constitution.
• Florida statutes, or laws made by the state legislature.
• Florida common law.

The Florida Constitution is our most fundamental and important legal document, and it sets forth many of our most important protections of our assets, including Florida’s well-known homestead protection.

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.

The generous protections provided by the Florida constitution, Florida statutes, and Florida common law make Florida one of, if not the most, debtor-friendly state in the country.

Business Asset Protection

Business asset protection involves structuring business assets and income to make it more difficult for a creditor with a monetary judgment against the business to collect any assets.

Protecting assets belonging to a business requires a different set of asset protection tools than protecting individual assets. You can learn more about business asset protection here.

Hiding Assets from Creditors

It is not a very good asset protection strategy to hide 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.

Protecting Property from the IRS

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.

What Can Make Florida Asset Protection Difficult?

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, for example, 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.

Asset Protection Mistakes

Don’t make these asset protection mistakes:

• Not Understanding the Purpose of Asset Protection: Asset protection will not make you “judgment proof”; however, asset protection may improve your negotiating position by making it harder for judgment creditors to get your assets.
• Believing That It Is Too Late To Protect Assets: Its never too late to improve protection. Late asset protection can still help as long as you don’t try to hide assets and lie under oath to your creditors.
• Thinking Creditors are Stupid or Lazy: Don’t underestimate the skill and intelligence of your adversaries. Creditors and their attorneys are not stupid. You cannot invent asset protection schemes and believe your creditors will not understand what you did.
• Hiding Assets : There are no longer any secrets in this world. You cannot hide assets, offshore or anywhere else, to protect them from creditors, the IRS, or former spouses.
• Fraudulent Transfers and Conveyances: You cannot protect assets by giving them to family members.
• Falling For Asset Protection Promoters and Scams: As asset protection planning has gained popularity, there are many companies promoting complicated asset protection devices such as establishing Nevada or Wyoming companies or offshore trusts. These promoters are usually not attorneys. Their plans are overpriced and usually will not work well in a courtroom in a real case. Especially beware of non-lawyers selling asset protection plans.
• Confusing Estate Planning With Asset Protection: Asset protection is part of estate planning, but a living trust or self-settled irrevocable trust does nothing to protect your assets from creditors.
• Confusing Bankruptcy Law and Asset Protection Law:  Bankruptcy law does not affect Florida’s unlimited homestead exemption and other exemptions outside bankruptcy court. You have less protection in bankruptcy court than you do in state court, and filing bankruptcy is usually a last resort.
• Giving Up Control Over Your Assets: The easiest asset protection plan is to give someone else control over your wealth. This is not a good solution in most cases; however, in some situations giving up some control is your only alternative.
• Paying Large Fees For Complicated Asset Protection Plans: The best asset protection is the simplest asset protection. Many promoters and some attorneys try to convince clients that effectiveness is a function of how much money you spend on complicated asset protection devices and multiple layers of entities. Good asset protection is not necessarily expensive.

What to Do Next

We help people go through their assets and income and determine what is at risk of collection from a judgment creditor. We then develop a plan to protect any exposed assets from collection. If you’re interested in protecting your assets from monetary judgment creditors, contact us to schedule an appointment or schedule an appointment online.