The laws governing the protection of assets vary in each state and could vary if you own property outside of the State of Florida. Florida’s asset protection rules are among the country’s most moderate, debtor oriented laws. Florida’s strongest asset protection is via its designation of homestead laws that are some of the strongest in the entire country.
Homestead provides practically limitless exemption from creditors and it should be used whenever applicable. For example, if you reside in an incorporated area such as a planned community or subdivision, you may exempt your primary residence, up to half an acre of land, from a forced sale by creditors.
In order for homestead to apply:
(i) you must be at least a partial owner of the property,
(ii) a permanent resident of the premises or the permanent residence of someone you claim as a dependent on your taxes,
(iii) you must have lived at the property on January 1 of the tax year, and
(iv) you cannot have rented the property for more than 30 days in a calendar year.
People who anticipate substantial civil judgments often move to Florida from other states to become a resident of Florida for asset protection purposes such as OJ Simpson in the late 1990s, although it’s strongly advised to put your asset protection plan in place before litigation arises.
Other Types of Products and Services
Limited liability partnerships and limited liability companies are used to insulate liability. The Florida Statutes also exclude many kinds of financial assets exempt by creditors. Florida protects jointly owned properties of married couples, who purchase property as tenants by the entirety, from either spouse’s creditors. Also, certain types of financial accounts and some properly drafted trusts protect the interest and inheritance of the beneficiaries against their creditors.
For individuals seeking to protect assets from their future spouse (in the event of dissolution) prior to or even after the marriage ceremony frequently use prenuptial or postnuptial agreements.
Most partners use a marital agreement to provide asset protection for the properties that the partner owned prior to the union or plans to obtain from outside sources during the marriage in case of divorce.
Marital agreements may be effective if done properly but unfortunately are not used as frequently as they probably should be (at least statistically due to the low percentage of successful marriages) due to the social stigma attached to them or difficulty to raise the issue with your future spouse.
Assets to protect
Estate planning has multiple aspects and applicable strategies, and asset protection plays a big part of the importance in this process. The family situation, acceptable levels of risk, and number of assets varies on a case-by-case basis, however, a common and important estate planning goal for most people is to ensure that their properties are passed on to their heirs, not to their creditors or former spouse(s).
That is just one reason why creating a will is typically not enough protection and there are many other essential estate planning documents that serve an important purpose in preserving and protecting all that you have worked so hard for.
Issues for doing it wrong
The key concern regarding later stage asset protection is the opportunity for asset titling or transfers to be undone as fraudulent transfers or fraudulent conversions. There are very efficient asset resources, which do not require any transition or conversion of assets.
Transfers made in the face of a legal threat will survive fraudulent transfer assault when prepared correctly to mitigate fraud badges. For example, in most cases, Florida law allows non-exempt assets to be moved to a homestead property even after a court has issued a judgment.
Asset protection tools put in place throughout moments of legal threat may not heal legal issues and do not function as well as efficient protection planning.
That being said, even late enforced asset protection tools put the debtor in a more favorable position than he would already be.
Protection of assets will not make individual court proof, however; protection of assets may improve your negotiating position by making it harder for creditors to obtain your assets.
One should remember that in today’s world of technology, you cannot hide any information; hence your assets can not be hidden from your former spouses, the IRS, or your creditors.
An effective estate plan can ensure that, even after divorce, each of your individual and joint assets will be fairly divided with a proper plan for your children to safeguard their interests.
Do not wait until it is too late, asset protection strategies are only effective if put in place before they are needed!
Speak to one of our professional attorneys at Finity Law Firm for more information on estate planning and how to protect your children as divorced parents.