Florida is a debtor friendly State. It is impossible to provide estate planning services without covering asset protection strategies. Asset protection strategies in Florida include planning with Limited Liability Companies (“LLC”), insurance, Florida Homestead, and Tenancy by the Entireties.
The most widely used entity in Florida for asset protection is the LLC. The reason for this is that the LLC provides a lot of flexibility plus adding the much needed asset protection.
The LLC also allows you to make certain tax elections depending on the type of business or assets that the LLC holds.
There are two types of limited liability protection in LLC’s, inside and outside protection. Inside limited liability protection applies to the acts of the limited liability company. Outside limited liability protection applies for act of the members who own the LLC, and the ability of the member’s creditors to attack the LLC.
An outside creditor is limited to a charging order in Florida when the LLC has 2 or more members. This means that your creditor can only attach the distributions made to you in LLC and cannot foreclose your interest in the LLC. A properly drafted Operating Agreement can add even more protection.
If you want to know more read LLC’s Limited Liability Protection.
Insurance is widely used for asset protection in Florida. Insurance is typically the first line of defense against creditors. When we review your exposure against creditors, the first thing we review is your insurance coverage.
Having low amounts of insurance will make your assets a target in the event that the insurance does not have enough funds to cover the claim.
Life insurance and Annuities are also typically used for asset protection purposes.
Florida Statutes Section 222.14 states that the cash surrender value of life insurance policies and the proceeds of Annuity contracts issued to residents of Florida, shall not in any case be liable to attachment, garnishment, or legal process in favor of any creditor unless the policy or annuity contract was effected for the benefit of such creditor.
In Florida your primary residence is considered to be your Homestead as long as you have the intent to remain there indefinitely. The Florida Constitution allows an exemption against forced sale for your Homestead.
Although Florida Homestead Law provides an acreage limitation, it does not provide a value limitation. A creditor of yours cannot force sale your property, his or her only remedy is to put a lien on the property unless the creditor obtained a valid homestead waiver or is listed as one of the three exceptions.
The exeptions to Florida Homestead protection against forced sale include: 1) property taxes, state tax, or IRS tax liens; 2) Mechanic Liens; and 3) Mortgages.
In Florida when married couples own an asset together is presumed to be as Tenants by the Entirety.
The effect of the exemption is to grant each spouse an undivided right to the whole asset. Thus, the creditor of only one spouse cannot reach assets owned 100% by the other spouse and, as such, the debt of one spouse in most circumstances will not allow a creditor to pierce the tenants by the entireties ownership as to the interest of the remaining spouse, leaving the entire asset unreachable by the creditor.
This means that in order for a creditor to reach an asset owned as tenants by the entirities, the creditor must have a legally enforceable debt against both spouses in order to attack such asset. This is why when one spouse requests a loan, the financial institution makes the other spouse also sign all the loan documents.
Call our office today to schedule a consultation and an asset protection health check where we review your exposure against potential creditors.
Proper asset protection planning can insure that your assets are protected in the event of a lawsuit or an unexpected turn of events. Call us today at (305) 489-1415 or fill the contact form located in this page.