Asset Protection Planning
The phrase “asset protection” is largely misunderstood by both the public and practitioners. The concept of asset protection is similar to tax planning. The United States Supreme Court held long ago that citizens do not have any obligation to pay the maximum amount of potential tax liability. In fact, tax planning is both understandable and expected. Likewise, if you have a choice between leaving assets available for potential creditors, most often the desire to protect assets is desirable. However, Floridians often have an unrealistic expectation of what asset protection is and practitioners (and others with even less expertise) often “over-promise” without understanding some basic rules.
Palm Beach County Asset Protection Attorney Serving Florida
Several considerations must be kept in mind during asset protection planning.
- You must evaluate the timing of the transfer. If you have a judgment against you, except for transfers into your homestead, a Court can set aside any transfer you make to any third person or if you convert an asset that is not exempt from creditor reach into an asset form that would otherwise be exempt.
- The transfers you make in asset protection planning cannot be made if they will leave you insolvent (generally defined as having liabilities greater than your assets).
- Your planning is ultimately going to be evaluated by a Court. As such, any planning is capable of being upset in some form or another.
- There is a significant difference between transferring assets into an “exempt form” and a form that is merely “protected.”
A Palm Beach County asset protection attorney can advise you on the eligibility and timing of your asset transfer, and help you prepare for the court evaluation process.
Assets Exempt from Creditors in Florida
Under Florida law, seven asset classes are generally exempt from creditor attachment.
- A homestead owned by a natural person up to one-half acre inside a city or municipality, or 160 acres outside a city or municipality (such as in an unincorporated portion of the county) is exempt from creditor attachment (with significant limits in bankruptcy).
- Florida law also exempts the cash value and proceeds of both life insurance and annuities, as well as interest earned in qualified plans and Individual Retirement Accounts (IRAs).
- Wages paid to a head of household (who doesn’t control their own salary) are generally exempt from creditor attachment.
- Florida law also recognizes that property owned by husband and wife as “Tenants by the Entirety” as exempt from the claims of only one spouse.
By contrast, entities such as limited liability companies and limited partnerships are “protected” from creditors, meaning that a creditor’s rights are limited by statute. Specifically, a creditor is generally only entitled to a “charging lien” against a partner’s distributive share, which means that when a distribution comes out of the limited liability company or limited partnership, the creditor can seize the same, however, the creditor cannot force a distribution. If the partnership or limited liability company interest is owned in an exempt form, the distribution may not be reachable at all.
Our attorneys, who practice in Palm Beach County and throughout the state of Florida, can help you review your current assets, examine your existing financial and estate plans, and evaluate any underlining risks.
Develop an Asset Protection Strategy with a Palm Beach County Asset Protection Attorney
For more information on developing strategies for asset protection, contact a Comiter, Singer, Baseman and Braun Palm Beach County asset protection attorney either online or by calling us at 561-626-2101 or toll-free at 800-226-1484. We work with clients throughout the state of Florida. Initial consultations are free.