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

read an interesting and important article in this months Florida Bar Journal about limited partnerships and limited liability companies in bankruptcy. The article was, "Asset protection Proofing Your Limited Partnership or LLC for the Bankruptcy of a Partner or Member", by Thomas O Wels and Jordi Guso. The LP and LLC have effective asset protection features outside of bankruptcy. If a debtor files bankruptcy, the bankruptcy trustee has greater powers to attack and liquidate the interest of the debtor partner or member, to the detriment of both the bankruptcy debtor and his other business associates. The Bar Journal article cited a bankruptcy decision in the case of In re Ehmann and certain sections of the bankruptcy code which provide powers to the trustees to attach partnerships and LLCs which powers are not available to normal judgment creditors.

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I received an interesting question about the difference for asset protection purposes between bank accounts titled "ITF", or in trust for, and bank accounts titled "POD", pay on death. An example of each account title would be as follows: "John ITF Mary" and John POD Mary. Both accounts are set up by John and funded with John's money. In both cases, when John dies all the money in the accounts passes to Mary outside of any probate of John's estate. The writer reported that one Florida bank permits only ITF accounts whereas a different Florida bank uses only POD accounts. Does the choice of these two titles make any difference in terms of protecting the money from John's creditors during his lifetime.

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I received a couple homestead e-mails this week; one is easy to answer, the other is more interesting. The first question is whether Florida homestead protections can apply to more than one home owned by a Florida resident. No. Homestead by definition is your primary residence. Other real estate in your name which is not your primary residence is not under the definition of homestead. The second question is whether a person who owns an apartment building and lives in one of the apartments can protect the entire building under homestead provisions.

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I receive many calls people, and often retain new clients, who have previously established Nevada corporations or who ask me if I can help set up a Nevada corporation as part of an asset protection plan. I almost always respond that Nevada corporations are not necessary or beneficial asset protection tools for Florida residents. Nevertheless, many people have been convinced by some other source of the benefits of establishing business through Nevada corporations. There are on the internet many services which market services to help set up business in Nevada. Based on an article in today's Wall Street Journal, the purported benefits of a Nevada corporation may be tax evasion rather than asset protection.

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Interest in the Nevis LLC is increasing. I received an email from a physician who lives and is licensed in Florida. He wanted to know if he could establish a medical business through a Nevis LLC. Under Florida statute, any licensed professional business has to be designated as a professional corporation (a PA) or a professional limited liability company (PC or PL). Nevis has no statute permitting a professional LLC. Even if it did, I suspect Florida law requires that the PA or PL be Florida entities. Nevis LLCs have limits, and this is one of them. I do not think they are appropriate for a professional practice.

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