A Guide to Asset Protection
What Is Asset Protection?
Asset Protection is the process of organizing your financial affairs in such a manner as to minimize the risk of losing your assets in the event a claim is pursued against you. The process generally involves changing the form and substance of ownership of assets from an exposed form to a protected form. A good asset protection lawyer will conduct a thorough analysis of all of your assets and possible claims and develop a custom plan which will help protect what you have worked too hard to accumulate.
What Are Claims?
Claims are legal actions by creditors who are seeking satisfaction of the amounts owed. Claims can be judgments from medical malpractice lawsuits, automobile accidents, personal guarantees on loan documents, and any other type of final judgment. There are thousands of lawyers in Florida who devote their entire livelihood in the pursuit of claims against doctors and other individuals.
What Assets Are At Risk?
In general all assets (home, bank accounts, investments, real estate) are at risk unless they are protected specifically by a State law or in a protected form such as in a limited partnership, limited liability company, or irrevocable trust.
Is My Home Protected?
The Florida constitution states that the homestead in Florida is exempt from forced sale by a creditor other than your mortgage holder. However, even the Homestead Constitutional Protection has limitations and many people are unaware that their home fails to qualify until it is too late.
Are Assets and Accounts Owned Jointly With My Spouse Protected?
Maybe. There is a common law doctrine that states that assets held by husband and wife as joint tenants by the entireties are not subject to the Claims of either individual spouse. However, this is only a common law doctrine not a statute and courts are free to ignore the doctrine if they think it is not applicable for any reason. In addition, the doctrine has limitations. Many cases have held that the account titles must state the magic words “Joint Tenants By The Entireties" for the exemption to hold. In addition, any joint Claims such as personal guarantees signed by both spouses will be able to get at the jointly held assets. The doctrine is attacked vigorously in the courts and should not be relied upon as a sole means of protection.
Are My Assets Protected If They Are Held In A Trust?
In general the answer is No. Most trusts are revocable trusts otherwise known as living trusts or grantor trusts. Florida Statutes specifically states that the assets of a revocable trust can be used to satisfy the claims of the settlor. This is a common misunderstanding shared by the general public and even some attorneys and unlicensed asset protection consultants. Only a special kind of trust known as an irrevocable trust can provide asset protection, however, irrevocable trusts must be carefully drafted because they are permanent and can never be revised or revoked.
Can I Protect My Assets After I Get Sued?
In general the answer is No. The law states that it is illegal and fraudulent to transfer assets with the actual intent to hinder, delay, or defraud any creditor of the debtor. Once a Claim becomes present the ability of your attorney to protect your assets becomes extremely limited or even impossible. The time to do asset protection is before a Claim arises.
Will All Of My Assets Be 100% Protected?
The answer is it depends. Certain assets such as qualifying homestead are protected by the Florida Constitution. Other assets, such as life insurance are protected by specific statutory provisions. The remaining assets are put into a form which makes them extremely difficult to get at such that the creditor is forced to come to the bargaining table to reach a more reasonable settlement. The better the asset protection the more reasonable the settlement will be. Any lawyer or other firm which promises 100% protection is making a false promise.
Can I Protect My Assets From The Government?
The answer is No. I get asked this question often. The government, in particular the IRS, is what is known as a “Super Creditor" and different laws and procedures apply when it comes to their ability to collect their Claims. The collection abilities of the Federal Government and the IRS are broad and supersede all State laws.
Can I Protect My Assets From My Spouse Before Divorce?
In general the answer is probably not unless you have a premarital or post-marital agreement. Marital Assets are subject to equitable division by the Judge who can do whatever he thinks is fair considering all of the laws, facts, and circumstances. Many times last minute asset protection efforts during a divorce can do more harm than good.