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

Wages of a head of household cannot be garnished in Florida pursuant to a Florida statute. A caller stated that he agreed to sign a non-compete agreement with his current employer, and that under the agreement the employer was paying him an amount monthly in consideration for the non-compete. The caller asked whether a creditor could garnish payment owned him under the non-compete clause. He believed that the non-compete payments from his employer were not subject to garnishment under the wage exemption statute assuming he was head of household.

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A well- conceived asset protection plan can fail because attorneys use standard, off-the-shelf business forms to create legal entities to hold the debtor's assets. Case in point is a case I worked on with a creditor's attorney to penetrate a very complex asset protection plan involving domestic limited liability companies whose membership interests were owned by domestic trusts. The planning attorney used llc forms typically used for operating business and standard estate planning trust forms.

Standard llc forms and estate planning forms are designed to provide current income to the llc owners and trust beneficiaries. These typical forms often provide for mandatory distributions of all current income. In this instance, we convinced the trial judge to compel the llc manager and trustee of the trust to follow the terms of their documents and make current income distributions to the debtor and his family. We were then able to seize the llc required distributions with charging liens and garnishment proceedings.

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I received an interesting question about whether Florida Statute 222.25(3) exempts all income tax refunds. The statute exempts a debtor's interest in a refund or a credit from a financial institution pursuant to s. 32 of the Internal Revenue Code. I looked up Section 32 of the Revenue Code and found that it applies to the earned income tax credit. Earned income tax credits are exempt from creditors, and in bankruptcy, any portion of a debtor's tax refund which comes from the earned income credit is not part of the bankruptcy estate. All other income tax refunds are non-exempt and are subject to levy by general judgment creditors and bankruptcy trustees.

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An email posed an unusual question about homestead protection of contingent improved residential properties. The writer owned land which initially consisted of separate lots but which he joined legally into a single parcel. On each side of the parcel he built two separated residential buildings. Assume that the lots could be legally separated back to separate parcels. The writer states that he uses both houses as a principal residence although he did not say whether either house was a primary residence. I inferred that both structures were used by the writer and his family for day to day family life. The question is whether homestead protection would apply to both buildings.

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