Florida Asset Protection : Asset Protection Law & Planning in Florida - Florida Homestead Exemption

The word on the street is that involuntary bankruptcy petitions are on the rise- as expected. Florida residents have unlimited homestead protections outside of bankruptcy, but once they are in bankruptcy court the same debtor's homestead protections are limited by the new bankruptcy law. Where several creditors have substantial claims against a debtor it is usually to the creditors' advantage to have the debtor in bankruptcy.

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Sunday's Washington Post included an article by syndicated columnist Michelle Singletary in which I was quoted as an expert on bankruptcy law and consequences of bankruptcy. http://www.washingtonpost.com/wp-dyn/content/article/2006/07/22/AR2006072200106.html?sub=new. I post the article primarily because it address a frequent and serious financial planning mistake that can lead to ruined credit and bankruptcy. The article warns about risks you take when you let someone else become an authorized user on your credit card. The most frequent problems I see are parents who lend their credit card, or their signature, to children to help the children buy something a lower interest rates. If the child fails financially the well-intentioned parents bear the financial burden, often leading to their own bankruptcy. You should read the article and pay attention to what Ms. Singletary's grandmother, "Big Mama" , had to say about this subject.

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One of my clients last week reminded me of an infrequently mentioned financial asset protection tool: the "hurricane account." Hurricane accounts were established to encourage people to save money to cover uninsured losses from Florida hurricanes. The statute provides that a property owner can set up a segregated financial account to cover insurance deductibles and other uninsured risks of windstorm and flood losses. Deposits into the account are protected up to twice the amount of the insurance deductible. The statute also protects income from the account.

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Many businessmen who are interested in asset protection also are concerned about reducing income taxes. Some people mistakenly believe that asset protection involves tax reduction by utilization of offshore entities. Asset protection and tax planning are for the most part separate issues. When asked about income tax savings in offshore planning I quickly explain to people that I am not experienced in income tax law and cannot offer competent tax planning advice. Last week, I had lunch with a local tax attorney who gave me interesting information about how some of his wealthy business clients have substantially reduced their income tax.

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A man is appointed trustee of a trust for the benefit of himself and another, younger beneficiary. The trust agreement provides that the trustee should use the assets for his own benefit only if his other resources are depleted. Nevertheless, at a time when the trustee has significant other financial resources he uses the trust assets to purchase a primary residence in California for himself and his spouse, as joint owners with survivorship. The trustee dies. Title to the home passes to the surviving spouse. The surviving spouse sells the home, moves to Florida, and invests the proceeds in a Florida homestead. The other beneficiary sues to recover proceeds invested in the California house. A California court finds that the trustee wrongfully appopriated trust property in violation of California statutes and his general fiduciary duty, and as remedy, holds that the surviving spouse holds her Florida house in a constructive trust for the surviving beneficiary. Can the beneficiary enforce the California court order in Florida so as to force conveyance of the spouse's Florida homestead to the California beneficiary?

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Two people asked me similar questions today about "wage accounts" The first question was whether you have to have a separate account titled "wage account" to have your salary or commissions protected after they are deposited in a bank account. The answer is no. However, whatever the account is titled it makes the wages easier to defend if only wages are deposited. You could deposit wages in a tenancy by entireties account and still qualify for the protection. The statute that protects wages of the head of household does not require segregating the wages in a distinct account.

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