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What is the legal basis of Florida asset protection?

State laws provide abundant opportunities for protecting your family’s hard-earned wealth. Florida has historically been a favorable jurisdiction for forming and maintaining asset protection trusts. Progressive laws coupled with an income tax-free environment make the state one of the best places for estate planning and asset protection.

In Florida, asset protection is the legal process of structuring your assets, like property, cash, businesses, and investments, in such a manner that makes it difficult for both current and future creditors to collect on them. As such, it’s rarely too late to protect your assets from creditors. Florida’s generous creditor exemption laws provide substantial protection for a number of different assets.

The Florida Constitution, Florida Statutes, and Florida common law are the three legal sources that make asset protection possible in Florida. Let’s get into the details.

Asset Protection Laws in Florida

Firstly, Florida Constitution provides the foundation for asset protection through laws that protect tenants by entireties of assets and provide unlimited homestead protection to homeowners. Following the State Constitution are the Florida Statutes that give ground for asset protection, granting residents a wide array of asset protection tools.

Even though the Statutes do provide measures you can use to protect your holdings against creditors, there are also statutes that provide creditors with some legal tools to collect what's owed to them.

Finally comes the Florida common law that grants courts the power to judge individual cases through their interpretation of the State Constitution and Statutes. Ultimately, this means judges have the authority to decide the fate of a case, but since their interpretations become part of common law legal tradition, they’re still beholden to legal precedent.

It’s important to mention that Florida’s asset protection extends to individuals who own property in Florida but may not have resident status.

Exemptions That Provide Asset Protection in Florida

Nearly every state has statutory provisions that place specific holdings beyond the reach of creditor's claims. Florida has some of the most generous exemptions, including:

1.  Homestead Protection

The homestead is protected from forced sale. Most judgments favor the owner. However, there are 3 exceptions to this rule that may subject the homestead to a forced sale.

  • Payment of taxes plus assessments thereon;

  • Commitments contracted for the purchase of the home which may also extend to repairs and home improvement contracts;

  • Obligations for any labor performed on the property.

That said, unlike other States, there’s no dollar limitation for homestead exemption in Florida.

2.  Entirety Ownership

When two married people own property as tenants by the entirety, the property cannot be reached by obtaining a judgment against one spouse. The property is only at risk when the ruling is passed against both spouses. However, there are limitations to Entirety Ownership, making it a good idea to consult an experienced attorney for additional protections that may be available to you.

3.  Wages

The wages of someone who qualifies as a head of household are exempt from creditor claims. The protection also extends to the disposable earnings of a head of household for six months after the payments are received.

Other key assets that can be protected from creditors include:

  • Life insurance
  • Retirements accounts like Roth IRA and 401(k)
  • Disability income
  • Prepaid college plans
  • Social security
  • Various generic exemptions such as unemployment benefits and medical savings accounts

Are Trusts Reliable Tools in Terms of Asset Protection?

With a well-structured trust, you can count on Florida's laws to provide you with the protection you need to ensure your property and other assets cannot be reached by creditors. An asset protection trust also protects your beneficiaries from creditors. Moreover, a trust can provide provisions that allow you to access the protected funds, even when there's a judgment in place.

Wait, there’s even more good news. An asset protection trust isn’t the only structure available to you. Under Florida law, Limited Partnerships form the cornerstone of asset protection planning. A limited partnership is where none of the members are liable for the entity’s obligations and debt.

Put simply, a creditor cannot levy on or force the sale of assets held in a multi-member limited partnership if the judgment is not passed against all the members. Instead, they get a limited remedy known as a charging order that allows them to receive payments against the partner against whom the order is charged. In other words, they receive partial payments from the liable party until the judgment/debt is paid in full. Limited partnerships can also provide various tax and estate planning benefits.

Safeguard Your Assets Today

While asset protection strategies are still effective even after a lawsuit has been filed, it’s in your best interests to take advantage of Florida’s asset protection laws before potential liability arises.

Let’s conclude by saying this: It’s crucial to work with an attorney with extensive experience in asset protection. This way, you can evaluate legal options to better protect your assets from creditors and create a plan that’s tailored to your assets and any possible circumstances of civil liability.

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