Job loss, serious illness, car accidents, and business closures are devastating events that happen to ordinary people every day. Most people don’t fully understand the ramifications of these catastrophic events for their financial security until they begin to affect them directly. Unfortunately, these situations can result in the loss of the financial resources that you have worked so hard to build over time.
While asset protection is best done proactively and as early as possible, you may still have limited options for preserving your assets from creditors, no matter your situation. A Boca Raton asset protection lawyer at Kramer Green can address your concerns and guide you through effectively protecting your assets from the reach of creditors. Together, we will work to implement all measures possible to safeguard your assets for the benefit of your family.
Risks of Waiting Too Long to Protect Your Assets
Planning early may allow you to use many strategies available to protect your assets before it becomes necessary. Waiting too long, such as after a creditor files suit or even the moment that his rights under law accrue (e.g., automobile accident that is your fault), make it much more difficult and greatly limits your options.
One of the most serious risks of waiting too long to protect your assets is being accused of committing fraud to protect your assets from creditors. Fraudulent conveyance or transfer laws prevent people from transferring their assets solely to avoid creditors or obligations they are legally obligated to pay. For example, if a creditor sues you and obtains a judgment against you, and you transfer assets to an LLC or a trust, a court can see that move as an attempt to hide your assets or avoid paying your debt The court has the power to overturn that transfer, leaving your assets open to the judgment creditor’s claims. As a result, the timing of asset protection efforts can be crucial. Likewise purchasing exempt assets (e.g., annuity contracts) while you have a creditor problem (broadly construed) is also vulnerable as a fraudulent asset conversion.
Asset Protection in Florida
Florida law provides various ways for you to protect your assets from creditors. By taking advantage of these strategies as early as possible, you can better protect your assets in case of lawsuits, bankruptcy, and other financial troubles.
Homestead Protection
Article X, Section 4 of the Florida Constitution exempts your homestead property, or your primary residence, from creditors. Florida law places no limits on the value of the homestead property that you can protect, although it does limit the amount of property. Florida law limits individuals to a homestead of a ½ acre lot within a municipality or 160 acres in an unincorporated area. However, Florida law establishes a few exceptions to the protection offered by the homestead property, such as for property taxes owed, state real estate tax debts, federal tax liens, and a few other types of liens.
Another potential means of protecting your primary residence is if you are married. When married persons jointly own property, they hold it as tenants by the entireties, which envisions the property as a single, indivisible unit. Therefore, a judgment creditor of one spouse cannot generally reach property owned by tenants by the entireties.
Trusts
Some trusts are specifically designed to shelter assets from creditors. If you place assets in the right type of trust that removes your ability to control the assets, creditors may be unable to reach your assets. For instance, if you place your assets in an irrevocable trust, you will no longer have control over those assets. Instead, a trustee can distribute the trust assets according to the terms of the trust agreement, free from the claims of creditors. This assumes you are not a beneficiary.
Limited Liability Companies (LLCs)
If you operate a business, you can create a limited liability company (LLC) to separate your business assets from your personal assets. Therefore, the creditor cannot reach your business assets if you are sued personally. Likewise, if an individual sues your business, they cannot reach your personal assets in many cases.
Insurance Coverage
Maintaining sufficient insurance coverage in all aspects of your life is crucial to proper asset protection. Malpractice insurance for professionals, homeowners’ insurance, and motor vehicle insurance can help protect your assets if you are sued. Personal disability insurance policies can help maintain your income if you become injured or ill. Various types of corporate insurance coverage also protect you if you own a corporation that becomes the subject of a lawsuit.
Retirement Accounts
Placing assets in retirement accounts, such as 401(k) plans or IRAs, is another way to protect them from creditors. These accounts can hold unlimited amounts of money, although annual contributions are limited, depending on the type of account(s) involved. However, the money in these accounts can continue to grow on a tax-deferred basis, free from the reach of creditors.
Let Us Help Protect Your Assets Today
An Aventura asset protection attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is here to assist you with the necessary steps in the asset protection process. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal issues with our attorneys.