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

I attended a luncheon where the speaker was a local circuit court judge who spoke about bankruptcy and exemption issues in State court proceedings. One of the attorneys asked whether a husband and wife who both worked and together supported two or more children can both claim head of household status to exempt their wages from garnishment. I have always believed and told clients that a family unit may only exempt wages of one person who is the head of household. The judge believed the issue was not decided.

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A client asked whether tax elections by an LLC effect the LLC's asset protection benefits. An LLC is often employed as an asset protection tool because Florida statutes restrict creditors' ability to collect money from a debtor's LLC to a lien on distributions made by the LLC to the member/debtor. If the LLC manager makes no distributions to the debtor then the creditor is not entitled to any money from the LLC. For tax purposes, an LLC may elect to be taxed as a partnership, a corporation, or in the case of a single member LLC, a disregarded tax entity.

A corporation has no asset protection benefits. A creditor can levy upon the debtor's stock in a corporation. The client asked if he forfeits the asset protection protections of an LLC if he tells the IRS to tax his business as a corporation rather than as a partnership or disregarded entity.

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Frequently callers ask me if they have to file something in order to qualify for homestead protection against creditors. Some of these questions are probably due to Florida Statute 222.01, Designation of homestead by owner before levy. Subsection 1 of the statute states that a person desiring the benefits of homestead protection may file a statement of homestead with the circuit court. The filing is discretionary and not required to qualify for homestead protection. Filing or no filing, the primary residence of a Florida resident is protected from forced sale. As a practical matter most people do not file a designation of homestead until they try to sell or refinance a house and find a judgment lien on the title report. In that case, subsection 2 of the same statute provides a procedure to remove the judgment lien from the title report.

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have had several calls within the last two weeks from people about to refinance their house who find that a judgment lien has shown up on their title report as an encumbrance on their homestead. The callers want to know why and how a creditor can place a judgment lien on their homestead which they thought is exempt from creditor liens.

Creditors do not place liens on selected properties. In Florida, a judgment creditor files its judgment with the Florida government in Tallahasseee, and that judgment then becomes a lien on all the debtor's Florida real estate. The lien is not selective, but instead is an indiscriminate blanket lien. The state registry of judgments does not distinguish homestead property. The debtor must take affirmative steps to rid his homestead of the blanket judgment lien.

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