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

I came across a bankruptcy case which is important for debtors contemplating moving to Florida from another state and filing bankruptcy immediately. In this case, a debtor lived in a state which had little or no homestead protection. In April, the debtor and his wife moved to Florida and bought a piece of property titled in their joint names. Two months later, in June, they filed Chapter 7 bankruptcy, and one month after filing bankruptcy the moved into a house on the same property. The issue was whether the debtor could claim an exemption for the property. The bankruptcy judge said he could exempt the property. Here's why and how:

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A debtor has long-established bank accounts in Florida titled jointly with his spouse. The accounts are protected from creditors as tenants by entireties property. The debtor and his family then move out of Florida to Texas. Texas is a community property state which does not recognized the concept, or exemption, of tenancy by the entireties. The debtor asks me whether his Florida bank accounts are protected after he moves to Texas.

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Often, asset protection clients asked me for recommendations about offshore banking. Many have preferences for banks in Caribbean islands which are reputed offshore asset protection havens. I always tell people that I do not have any first hand experiences with offshore banking, no offshore banking recommendations, nor any advice about how to open offshore bank accounts. I do, however, collect recommendations from other attorneys and my own clients and pass on these reports of other peoples' experiences.

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Florida Statute 222.14 protects from creditors annuities and the proceeds of an annuity. A client posed an interesting question about what happens when annuity proceeds are invested in a different type of asset which other asset is not asset protected. The issue is when do annuity proceeds turn into another type of asset. For example, suppose a Florida resident uses annuity proceeds to purchase a CD or stock, is the CD or stock protected if it is purchased solely with annuity proceeds? Does it make a difference if the annuity was held in a brokerage account and the CD or stock is purchased within the same account?

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I've warned many times on this Blog that a court's asset freeze can stop asset protection planning in its tracks. As a result, speed is essential when trouble first appears on the distant horizon. For instance, a debtor had his financial advisor call me several weeks ago from New Jersey to discuss asset protection options including buying a Florida homestead. There was a potential civil lawsuit in sight, but no lawsuit was anticipated in the near future. During the next three months the advisor called several times to schedule and reschedule consultations, each time asking a few preliminary questions about moving to Florida. Neither the client nor the advisor ever scheduled a consultation nor took any action on their own toward moving from New Jersey. This week the same advisor called again and said that while the client's civil suit was the main issue, the client was also going through a divorce and the divorce court just issued an order prohibiting the sale or transfer of any of the client's assets. The advisor asked if it was still possible for the client to sell the New Jersey home and buy a primary residence in Florida to protect the client from the potential civil suit. Its too late.

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Reverse mortgages tap into home equity by providing a lifetime income stream in exchange for a mortgage on your residence. A caller asked this week whether proceeds from a reverse mortgage on his homestead would be exempt from future creditors. Specifically, the caller was considering placing the reverse mortgage, moving from the property into a new homestead, and renting the initial homestead subject to the reverse mortgage

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reader asked about the protection of annuity proceeds. Florida statutes protects both annuities and the proceeds of an annuity. The reader said he deposited annuity proceeds in a normal checking account and then moved the money to a separate money market account. The funds in both accounts, he said, are traceable to the annuity

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I often get asked how a licensed professional with a money judgment entered against him can get money out of his professional business. If the professional is head of household he can exempt and protect salary paid him from his own business (subject to some conditions). If the professional's business is a professional limited liability company then his creditor cannot levy upon profits, after salary, which are retained in the business, but the creditor could get a charging lien on any profit distributions made from the professional business to the owner. For tax purposes, many professionals would prefer to pay themselves in profit distributions rather than salary, yet with a charging lien profits would be trapped inside the llc.

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Florida Statute 222.11 protects from creditors' garnishment earnings of a debtor who is a head of household. The wages are protected for six months after they deposited in the debtor's financial account. Some people set up financial accounts where nothing but wages are deposited. These so-called wage accounts are used to clearly isolate and trace protected wages after they are deposited. A reader asked me whether a Florida resident can establish a "wage account" at an internet bank or an out-of-state bank with no Florida branches.

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Homestead protection from your creditors persists after your death. An attorney from another state asked me the following question. Suppose creditor C has records a civil judgment against debtor D in Florida. D is a Florida resident and lives in a valuable Florida homestead property. D dies leaving his estate, including his homestead, to his adult children. The question is whether D's personal representative has to sell the homestead to pay C's money judgment after D's death.

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A man is going through a divorce proceeding in California. The man and his wife sell their California house. The husband takes all the sales proceeds and gives his wife other assets including his retirement account. The husband then moves to Florida and buys a homestead property with the proceeds from the sale of the California house. . The man becomes a Florida resident. At the end of the divorce proceeding the judge orders the man to pay additional money to his ex-wife from the house sale proceeds now invested in the Florida homestead. The man asked whether his homestead is protected from the order of the California divorce court.

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