Florida Asset Protection
Individuals with high risk professions or businesses can often benefit from asset protection planning. There are numerous ways to legally protect your assets from creditors. Taking advantage of available Florida property exemptions and protections is not improper if handled in an appropriate fashion. Our office can guide you through this difficult process.
One key factor for an individual to consider is the Florida homestead protection. Most states offer some form of homestead protection from creditors (not to be confused with the homestead real estate tax exemption offered in many states). Florida is one of a hand full of states that offer an unlimited homestead exemption. The purchase of a homestead is generally considered the first and most important step in protecting assets in Florida. The protection takes effect immediately upon closing on the property and taking up residence with the intent to permanently reside in the home. The property must be titled in the individuals name, not a corporation, although some courts have upheld the homestead protection for homes titled in an irrevocable trust.
Other exempt assets in Florida include annuities, cash surrender value of life insurance policies issued upon your life, life insurance benefits, Florida Prepaid College Trust Funds, Medical Savings Accounts, IRA’s and certain other retirement funds and disability benefits. We can assist you in developing a plan that is right for you.
Asset Protection and Fraudulent Transfers
Transfers made shortly before a lawsuit is filed or other claim is made may later be deemed fraudulent transfers and set aside. Clients often wait until they have encountered financial difficulty before they seek asset protection advice. The options at that point are much more limited. The potential for a fraudulent transfer action should always be considered in asset protection planning.
Asset Protection and Bankruptcy Reform
Asset protection planning has changed dramatically under the new bankruptcy reform laws. Responsible planning should be conducted with an eye towards the effect of these new laws.
Several provisions of the 2005 legislation limit the application of the homestead exemption. Five states (including Florida) now offer their residents an unlimited homestead exemption. Many people facing large money judgments have moved to states like Florida, purchased a home with their available funds, waited an appropriate time period (usually one year) and filed for bankruptcy. Several provisions in the new bankruptcy laws were designed to limit this form of planning.
One new provision limits the homestead protection available in bankruptcy if the Debtor has not owned his or her home for more than 1215 days (three and one-third years). Until that ownership period has been reached the homestead exemption is limited to $146,450.00. This amount is adjusted periodically. Once a Florida resident has owned and lived in the homestead for more than 1215 days the homestead protection reverts to the unlimited Florida homestead exemption for up to one-half acre within a municipality or 160 acres outside a municipality.
A second provision prevents a debtor in bankruptcy from claiming as exempt any equity fraudulently transferred into the home within the past ten years. This could occur, for example, if the individual used non-exempt funds to acquire the property or to pay down the mortgage. The equity resulting from the one-time payment may not be exempt until the then year period expires. This may lead to an unusual situation where an individual’s home may be protected from creditors as long as the debtor steers clear of bankruptcy for the ten year period. Asset protection planning must then take into consideration the possibility that a creditor may file an involuntary bankruptcy. Competent planning must take into consideration all of these factors and many others. Call us for a free initial consultation to see if asset protection planning may benefit you.