Protecting You & Your Family Since 2001 SCHEDULE A CONSULTATION

The Importance of Asset Protection Planning

Dec. 19, 2021

Woman hand stopping risk the wooden blocks from falling on house.Asset protection should be part of any long-term estate planning, especially if you’ve accumulated assets besides your home, which is largely protected under Florida law.

Notice the use of “long-term.” If you’re already facing a lawsuit, it may be too late for asset protection, but if you prepare for litigation and possible loss in advance, you stand a much better chance of holding onto your assets.

Estate planning is not just for those who live in gated communities, but for anyone who works and accumulates assets. You should begin estate planning as soon as possible, and if you already have a plan in place, you need to periodically review it. You also need to make sure that your plan includes provisions for asset protection. A living trust by itself will not protect your assets.

If you’re in or around Boca Raton, Florida, contact Erich H. Light, P.A. for all your estate planning and asset protection needs.

What Is Asset Protection Planning?

Asset protection planning seeks to put in place legal instruments that can help shield your assets from creditors and others who file civil lawsuits against you. You may think that when litigation rears its head, or you’ve fallen so far in debt that the creditor may come after you, you can hide or transfer your assets so they can’t be touched.

Wrong.

Hiding assets, called concealment, and fraudulent transfer under the 1984 Uniform Fraudulent Transfer Act are both illegal and can subject the person to whom you transferred the property to be sued along with you.

If you try to outwit the legal system, you can also be guilty of contempt or bankruptcy fraud if your case has gone into bankruptcy. If you transfer assets pre-U.S.-taxation to an offshore account, that is tax evasion. If you’ve paid your taxes, then you’re free to use offshore accounts.

Natural Protections Under Florida Law

One of the most generous exemptions under Florida law is the homestead exemption, which allows homeowners to protect all equity in their homes provided they meet one of two criteria. The first is that a home in a city must not have a lot bigger than one-half acre. The second is a home outside a city is limited to 160 acres. Of course, to exercise this exemption when creditors come calling, you may have to file bankruptcy.

Besides the homestead, other protections from creditors in Florida include:

  • Social Security

  • Retirement accounts, annuities, and life insurance

  • The wages of someone who qualifies as head of household

  • Disability income

  • $1,000 of equity in a vehicle

  • $1,000 of personal property, of $4,000 if you don’t own a home

A Step Beyond in Asset Protection: Tenants by the Entireties

If you own a home that somehow falls outside the homestead exemption and you and your spouse are joint tenants with right of survivorship, this arrangement is fine for the purposes of ownership when one spouse dies. The property flows naturally to the surviving spouse outside of probate and even outside any applicable living trust.

The same is not true, however, if one spouse runs up huge debts and gets sued for recovery or is subject to a costly civil lawsuit. That spouse’s half-portion can be subject to litigation. The way around this is through setting up ownership as tenants by the entireties. This means the property is protected if one spouse is subject to a creditor’s claim, but if both spouses are liable, then the protection disappears.

Tenants by the entireties is available only to married couples, and it basically means that each spouse owns the entirety of the property, not just 50 percent. Any personal or real property owned by a married couple is subject to tenants by the entireties, including joint bank accounts. The same holds true for joint ownership of stock certificates.

Tenants by the entireties can also be applied to a Limited Liability Company (LLC), but it gets a bit trickier. The operating agreement has to contain verbiage to provide for tenants by the entireties, and both spouses must have equal control over the LLC.

Overall, the legal elements of entireties ownership require that both spouses acquire their joint ownership interests simultaneously.

Irrevocable Trusts and Florida Land Trusts

An irrevocable trust can also offer asset protection, but to create an irrevocable trust, you must turn over the assets you want to protect to a trustee, and you will no longer have control over them. This might be a valid option if you’re single, divorced, or widowed, and you cannot use tenants by the entireties.

A Florida land trust can be used to create a great deal of anonymity in the ownership of real property. A Florida land trust keeps your name off the public record. The property is recorded in the name of a trustee, who is an individual or an entity who must then carry out your wishes as directed through specific written authorization.

How Legal Counsel Can Help

Every person’s situation is unique, and every angle in the estate planning and asset protection process must be examined before a comprehensive approach can be agreed upon. For this, you need to consult with an experienced estate planning and asset protection attorney.

If you are in or around Boca Raton, Florida, or in neighboring communities, call Eric H. Light, P.A. today. I can carry out a personalized review and assessment, as well as offer you guidance on the proper steps going forward to protect your assets and provide for your loved ones’ welfare when you’re gone.