Here a few methods and techniques that should be integrated into an asset protection plan with careful consultation with an attorney at law and thorough evaluation of facts with particular attention to avoiding any type of fraudulent transfers or any other transfers that may be construed as fraudulent under the law.
1. Forming Business Entities: One of the most important methods to protect your assets, if not the most important, is by creating a separate entity, such as a limited liability company, corporation, partnership, or limited partnership rather than conducting business in your individual capacity. This may protect the assets of the owners from the liabilities of the business. It is best to spread your assets out amongst various entities to limit the potential liability of any given entity. An experienced attorney can guide you as to what business entity will best suit you or business’ needs.
2. Homestead Protection: Your Florida primary residence, or homestead, is protected from most creditors under the Florida Constitution. A homestead can include up to 160 acres outside a municipality or a half acre inside a municipality that is owned by an individual. Homesteads are typically exempt from the claims of creditors except, for example, mechanics liens, mortgages, construction liens, and tax debts to the Internal Revenue Service.
3. Know What You’re Getting Into: Signing a contract or document without having read it thoroughly may expose you to liabilities and obligations you never thought you had before you signed such documents. It can be as simple from documents signed during a white water rafting trip, purchasing a car or property, getting into a joint venture or partnership or anything you may be asked to sign on a daily basis. It is imperative to know what you could be getting yourself into if for some reason things don’t pan out the way you imagined them to be. If you don’t feel at ease with what you are signing, it may be in your best interest to have such contracts and/or documents reviewed by an attorney.
4.Tenancy by the Entireties: Tenancy by the entireties is one type of exemption available and applies to joint ownership of assets by husband and wife in the state of Florida. Creditors of an individual spouse may not attach and sell the interest of a debtor spouse under tenancy by the entireties. Generally, creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. It is also important to know which properties and which assets should and should not be under tenancy by the entireties as such properties and assets could be exposed to joint liabilities such as your car. For instance, if husband and wife are both on the title of a car, both could be sued regardless of who was driving. Another example of where you may not want tenancy by the entireties would be where a couple applies for joint credit or a loan which may arise to an unnecessary liability where both individuals may be exposed. Obtaining proper legal advice as to these matters could save you a big headache and potential legal pitfalls.
5. Joint Living Trusts. Controlling your assets is an important aspect of asset protection. Having a Joint Living Trust may be used in addition to a Last Will and Testament. Any property of a person that is placed in the Joint Living Trust may stay in your control throughout your lifetime and protect the interests of your spouse and children after your death. Since the assets in a Living Trust during your lifetime are treated as if you owned them in your personal name they will still remain subject to claims in Florida. However, the interests of the beneficiaries may be protected from their creditors by a “spendthrift” provision in the Living Trust if the trust assets remain in the trust after your death. Situations vary greatly, so it is important to consult with an experienced attorney regarding the types of assets that provide creditor protection.
6. Make a Gift. Gifting property not only has tax implications and/or benefits but may also be one way to reduce the amount of your assets that may be exposed or subject to creditor claims. Gifting to trusts that benefit your children or grandchildren or directly giving a gift to your children and grandchildren may accomplish this.
While there are many options to consider, each decision made comes with its own set of benefits and legal ramifications. Retaining an experienced attorney is key to figuring out which asset protection strategy works best for you as asset protection is very complex and each individual situation is different. It is imperative to start protecting your assets now. If you wait until you need it, it may likely be too late.
Disclaimer: This article is not intended to be legal advice. Legal advice depends on each and every person's particular circumstance. This article is for informational purposes only and must not be used for avoiding any penalties that may be imposed under the Internal Revenue Code. Arora Law Firm and Radhika Arora, Esq. specifically disclaim any responsibility for positions taken by readers in their individual cases or for any misunderstanding on the part of readers of this article or publication.
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