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

Over the years I have recommended Nevis limited liability companies to many asset protection clients. Most people who have formed a Nevis LLC has asked about how and where his money will be invested within the LLC entity. I do not get involved in the transfer of assets to offshore LLCs or the financial management of LLCs assets, yet I have learned through experiences of many clients and discussions with their chosen LLC managers how assets are maintained and invested within a Nevis LLC. .

Asset management within a Nevis LLC is similar to discretionary financial accounts offered by most U.S. financial institution. A discretionary account is when you, the client, appoints a financial entity to invest your money on your behalf. The financial manager makes all decisions about what to buy and sell subject to your stated objectives. If you appoint a financial company as offshore manager of your Nevis LLC the management company and its employees do not actually manage the LLC assets. Instead, the LLC manager hires a financial institution outside the U.S. in a discretionary capacity. Offshore money management firms used by my own clients include BNP Parabas (France) and Clariden Leu bank and RBS Coutts (Swiss). Fees charged by the offshore financial managers are similar to fees charged in the U.S.

Just as the case in U.S. discretionary accounts, you set the direction and limits of financial investment within a Nevis LLC. You can instruct the money manager about degree of risk, percentages of cash invested in either stock or bonds, amount of investment in U.S. or international equities, income tax strategies, and general risk appetite. The offshore manager can transfer stocks currently in your U.S. brokerage account to the Nevis LLC account without you having to sell securities and accelerate taxation. The money manager of the Nevis LLC can send monthly statements and trade confirmations if requested.

The point is that when you set up an offshore asset protection entity like a Nevis LLC your money is not in Nevis, and the offshore LLC manager does not personally control your money and assets. The offshore LLC manager acts as a conduit to hire money mangers who invest your money according to your individual goals and guidelines.

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Effective asset protection planning requires anticipation of what creditors’ attorneys may and will do to collect their judgments. The best way to learn creditor attorney strategy is to ask them. My social relationships with creditor attorneys are very valuable to me professionally, as well as personally, because they give me the opportunity to learn about their methods.

I recently had a lunch with one of Orlando’s preeminent collection lawyers. We discussed collection practices and asset protection strategy, and I found some of his comments to be interesting. I asked him what was the most effective debt collection tool. His answer was, without hesitation: bank account garnishments. Bank garnishments, he explained, was the only way to capture a significant amount of a debtor’s cash quickly and without lengthy legal proceedings. Bank accounts are where the money is. Bank garnishments strike a surprise blow to debtors which freeze their funds and usually force them to settle the remaining debt.

I next asked him whether wage garnishments were effective assuming the debtor is not head of household. He said that garnishments were not a good collection tool. First, the creditor collects small amounts of money each month toward the judgment, and his clients are not interested in long-term payback. Next, he explained, that wage garnishments usually force debtors to file bankruptcy because debtors will not work for an indeterminate future for the benefit of creditors. Wage garnishment, he felt, usually backfire against his clients' debt collection.

Many of my clients spend much time asking about charging liens a creditor could get against their LLC which operates their small business. This creditor attorney has not sought a single charging lien for many years. He cannot recall the last time he used a charging lien. From the creditor perspective, he explained, charging liens are ineffective against an LLC business managed by the debtor or the debtor’s family. The attorney explained that charging lien collection against a closely held LLC depends upon the honesty of the debtor; the creditor collects money only if the debtor voluntarily reports an LLC distribution subject to the lien. He found that most debtor LLC owners circumvent the charging lien with salary and loans, and that neither he nor his clients are able to monitor effectively the Debtor LLC distribution practices. It seems that an LLC properly formed and clear of fraudulent transfer challenges is practically a very effective asset protection too.

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