Asset Protection Planning is a specialized form of Estate Planning for those whose wealth may be exposed to risk of loss for any number of reasons. Doctors, lawyers, business owners and real estate developers are some of the types of occupations which are frequently exposed to personal liability.
Also, in cases of divorce and actions by personal creditors, individuals may wish to protect their assets.
This type of advance planning is increasingly important because once liability attaches to an individual, it is too late for any meaningful planning.
“Fraudulent Conveyance” laws prohibit transfers of assets following the determination of liability, and even prior to such a determination, where the possibility of liability is imminent.
Asset Protection Planning takes on many different forms — from the simple to the complex.
On the simple end, holding assets in joint ownership form may prevent the creditors of one of the joint owners from reaching the joint property. Creditors of Trust beneficiaries (except the Settlor in the case of a Declaration of Trust or Revocable Trust) may be unable to reach the underlying Trust assets where a “spendthrift clause” is included in the Trust Instrument.
In some circumstances, a Spendthrift Trust may be established with its main purpose being to shelter the beneficiary’s interest from the reach of his or her creditors.
The most well-known protection for property available to Florida residents is the Florida Homestead Exemption.
Article X, Section 4 of the Florida Constitution provides that the Homestead of a Florida resident (and natural person) is exempt from forced sale under the process of any Court. There is no limitation as to the value of the residence.
The only exception to this rule is for taxes and assessments, and voluntary liens for the purchase, improvement or repair of the Property. The term “Homestead” is defined as one-half (½) acre of contiguous land within a municipality or one hundred sixty (160) acres of contiguous land outside a municipality.
Personal property is also exempt up to the value of one thousand dollars ($1,000) under Florida Law.
Both of these Exemptions inure to the benefit of the surviving spouse or heirs of the owner.
Other types of property which offer Asset Protection features are life insurance policies, annuities and retirement plans.