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

"Can I still do asset protection planning after there is a judgment against me?" A very common question. The answer is "yes" in many cases. Here’s an example from last week’s clients of legitimate and effective post-judgment planning.

This elderly lady had guaranteed her son’s business loan which the son could not repay when the business failed. The business and loan was made in another state with a national bank. The bank just got a judgment against mother and son for several hundred thousand dollars. The mother lived in Florida in a home with a $40,000 remaining mortgage. She had about $60,000 savings in accounts at the same bank that got the judgment. She lived primarily off monthly checks from her deceased husband’s pension and social security.

Here are the post-judgment planning steps she is considering. First, she pays off her remaining mortgage leaving her with about $20,000 at the creditor bank. Paying a homestead mortgage cannot be reversed under Florida law. Next, she’ll move the financial account from the creditor bank to a small bank in Florida; she is not "hiding" the money, but she is removing the money from the "creditor’s doorstep." The mother’s litigation attorney can probably delay discovery of new bank accounts for a few months after judgment.

The mother will stop using her exempt pension proceeds and social security to pay monthly living expenses. Instead she will use her savings to pay expenses until the money is depleted and hopefully before it is located and garnished. She can use money to make repairs and improvement to her homestead as well as pay her legal bills and taxes.

The unspent pension and social security money can be used to purchase an immediate annuity. Florida statutes exempt from creditors annuities and all annuity distributions. Using pension and social security money to buy an annuity is not a fraudulent conversion because the pension and social security checks are themselves exempt from creditors. When her cash is spent, the debtor mother can revert to living off the pension, social security, and her new annuity.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Often, a high-risk professional will title all assets in the name of their non-professional spouse as an asset protection plan. The professional thinks they are a lawsuit target, but in the event they are sued, they could tell their adversary that they "have nothing in my name." It’s a simple plan, but it sometimes backfires. Here’s an example where putting everything in the name of low risk spouse did not work out.

A woman physician worked in a high-risk specialty. Her husband worked for a large company in a non-professional job. The couple bought investment real estate and titled all parcels in the husband’s name alone. Their bank accounts were in the husbands name, as were some non-retirement stock accounts. You can probably guess what happened.

The husband called me for asset protection advice because he had been at fault in a serious car accident. He had only $20,000 liability insurance. All of the assets titled in his name, and bought mostly with his wife’s earnings, were at risk. Fortunately, the car he was driving was also in his name only so his wife would not be liable for the car accident. What did they do wrong?

This couple made two mistakes. First, they should have titled their investment assets as tenants by entireties rather than in the husband’s name alone. Assets titled in the entireties would be exempt from the husband’s car accident liability as well as from the wife’s professional liability. Entireties protects against any judgment against just one spouse. If each spouse has a judgment from a different lawsuit and for a different reason the entireties protection works against all the judgments.

The second mistake is lack of adequate insurance. In Florida, both the driver and all car owners are responsible for car accidents. If one spouse is driving a car owned jointly or in the name of the other spouse both spouses are held liable for the full amount of damages. If you have significant assets in the family you must get a large umbrella insurance policy to cover automobile and homeowner liability.

You may think you know whom in the family is going to be sued and for what reason- such as, the dreaded professional malpractice liability. Sometimes its what you don’t expect that gets you. Both spouses and all assets must be protected in a property asset protection plan.

• Email This
• Print
• Comments
• Trackbacks
• Share Link