Have you ever considered what would happen to your property if a court entered a judgment against you? The party in whose favor the judgment is granted – the “judgment creditor” – will be entitled to collect on your assets to satisfy the judgment debt if you fail to pay them.
While the idea of losing hard-earned money and property in this way may be alarming, there is some good news: Florida has some of the strongest asset protection laws in the country. However, you’ll only be able to take advantage of these laws if you have a basic understanding of the ways they can assist you.
What Is Asset Protection?
In many ways, asset protection can be thought of as a form of financial planning. The term simply refers to the use of certain laws and legal processes to safeguard one’s property from judgment creditors, meaning they can’t collect on that property to settle the debt you owe to them. While not all of your property can be secured in this way, there is a wide range of property that can, including real estate, investments, income, and business interests.
Although it is unlawful to attempt to hide your assets from creditors (for example, by transferring assets to relatives), asset protection falling within the bounds established by Florida’s Constitution is perfectly lawful.
On that note, let’s take a look at the basic legal framework.
The Legal Framework
Florida’s constitution is the primary source of asset protection law. It includes one of the founding elements of the state’s protection regime: homestead protection. Homestead protection essentially ensures that your home can never be taken away from you by creditors. In addition to the Constitution, Florida’s statutes significantly extend the protection regime.
Over the years, the legislature has enacted several statutes that mean that certain retirement annuities, investments, and other property are protected from judgment debt collection. Florida’s common law has been developed through years of legal interpretation of the Constitution and statutes to flesh out this framework further.
What Assets Are Protected Under Florida Law?
Florida’s legal regime is “debtor friendly.” That means it exempts a fairly wide range of debtor property from collection by judgment creditors, including:
Homestead Protection
In terms of the Florida Constitution’s homestead exemption, single-family homes, regardless of their monetary value, are protected from collection by creditors. While this protection has no upper-value limit, it is limited to ½ an acre of property if the home is in a municipality, and 160 acres of it is in an unincorporated county. However, the debtor must actually live in the home to qualify for protection: vacation homes are not covered.
Joint Tenancy By The Entirety
This is a form of joint ownership available to married couples, which treats their joint estates as a single, indivisible unit (in other words, they both own the property in question equally in indivisible shares). Assets held in this way are usually protected from collection by judgment creditors who have a claim against only one of the spouses.
Head Of Household Wages
The head of the household is the individual who provides more than 50% of the financial support for some other member of the household (e.g. a spouse or child). These wages are excluded from creditor collection.
Pension Plans (401k), IRAs, Life Insurance, And Annuities
Pension plans, IRAs, and annuity payouts are all exempted. The cash value of the proceeds of life insurance policies is also protected from collection by the policy owner’s creditors.
Other types of property are also exempted from creditor collection, but these are some of the most relevant examples. It is important to bear in mind that to qualify for these protections, you must be a permanent resident or own property in Florida.
Are There Other Ways To Protect My Assets?
One of the great benefits of the homestead exemption is that a debtor can make transfers or conversions into a protected homestead, even after judgment has been granted. In other words, they can purchase and move into a large homestead to avoid collection, and there is nothing a creditor will be able to do to stop this.
Other than making use of the homestead exemption, there are very few lawful ways to protect your assets after a claim has been made or judgment is granted against you. However, there are many strategies you can use before a claim arises.
One approach is to open an asset protection trust (APT) to hold your assets. Another is to use the legal structure of a Limited Partnership (LP) or Limited Liability Company (LLC) to protect your assets. A creditor can only collect against a debtor’s interest in a multi-member LLC by way of a charging order (i.e. a lien on any distributions granted by the LLC to the member). They cannot directly access the LLC’s property.
Why Should I Be Thinking About Asset Protection?
There are several reasons why it is a good idea to start thinking through how you might safeguard your assets, even if you aren’t facing a lawsuit. Firstly, if you work in a profession in which you are likely to be vulnerable to lawsuits (medical malpractice suits, for example), it’s always a good idea to have an asset protection plan in place.
Secondly, if you are a business owner, it is important to consider how you can safeguard your personal assets in the event that a creditor with a claim against your business attempts to execute against your personal assets.
Thirdly, even if you don’t work in a profession in which malpractice suits are a risk, there are several other sources of legal liability you may encounter over your life. For example, causing a car accident or accruing significant credit card debt may result in lawsuits and collections against you.
Finally – and most importantly – you will always be able to protect your assets more effectively if you take steps to do so before legal liability arises. Speaking to an attorney with experience in asset protection and foreclosure defense will help you understand what your options are.
Trusted Asset Protection Specialists In South Florida
If you’ve worked hard all your life and been fortunate to accumulate wealth, you should strongly consider developing an asset protection plan with a trusted attorney. This will enable to you determine which assets fall outside the current protection laws and allow you to take steps to ensure that they are better safeguarded.
At the Law Offices of Gary I. Handin, P.A., we have helped many valued clients achieve peace of mind by developing an asset protection plan to perfectly suit their needs. Contact us at 1-877-815-4560 today to find out how we can help you do the same!