boatsWhat is Asset Protection and can it help me? Asset protection laws are different in each state.  There are also Federal asset protection laws.  While federal law exemptions apply in all states, Florida’s state exemptions have no extraterritorial effect. Florida residents cannot export Florida exemptions to protect tangible and intangible personal property located in states other than Florida, especially against a judgment obtained or domesticated in another state’s court. Florida residents who work and maintain accounts or other property outside of Florida are subject to the exemption laws where of the state where the work is performed and the property is situated.

Florida’s asset protection laws are among the most liberal, debtor-friendly laws in the country. Florida’s asset protection laws apply to permanent residents of Florida.  There laws also people in other states who own real property in Florida.  Thus, People anticipating substantial civil judgments often move from other states to Florida just to become a Florida resident for asset protection purposes.  Much asset protection benefits for Florida residents are contained within Florida Statutes. There are extremely valuable Florida Statutory exemptions available only to those who permanently reside in Florida.  If you have questions about Florida Asset protection Laws and whether they can help you, please call an experienced asset protection lawyer at the Horton Law Group, P.A. (561) 299-0018.

So what is asset protection?  It is very much like insurance.  It is used as a means to protect an individual’s wealth. It is defined as the manner in which a person uses various planning techniques so as to protect those assets during his or her lifetime from future potential creditors.

87817ff49e3c3b54ccc3390eae3a0c3fFlorida law provides many ways to protect assets from creditors. The most important and well-known Florida protection is the Florida homestead exemption. Florida Statutes exempt many types of financial assets from creditor execution.  Florida also protects property owned jointly by a husband and wife from the creditors of either spouse – this is called tenancy by entirety.  Limited Partnerships and LLCs are used for asset protection because the creditor has limited collection rights against the debtor’s ownership interest in these types of business entities.  Also, some types of financial accounts and some properly-drafted estate planning trusts protect the beneficiaries’ interest and inheritance from their creditors.

There are many asset protection tools available to protect what is rightfully yours.  So what assets can I protect?

  1. Your Homestead (your house).

“Florida’s homestead exemption providing an exemption from forced sale before and at death are among the most protective in the United States. It provides “no limit” to the value of certain real property that can be protected from creditors. The property tax exemption clause of Article VI renders property tax-free to the extent of certain dollar amounts in the value of the homestead.  The definition of a homestead is not necessarily co-extensive for Article X, Section 4 (a)-(c)exemption purposes (exemption from creditors and restrictions on descent and distribution) and Article VI purposes (exemption from taxation). Both provisions apply automatically upon the establishment of a primary residence in Florida, but to reap the tax assessment benefits, the homestead exemption must be claimed by a filing with the local county property appraiser’s office. Homestead can be lost if the homeowner abandons use of the real property as a homestead.  A fourth benefit, while not as clearly an exemption as the above three, is also accorded to one’s homestead in Florida per Art. VII, Section 7 of the Florida Constitution. For tax purposes the year-to-year increase in assessed value of the homestead is limited to the lesser of 3% or the percentage change in the Consumer Price Index.

Homestead in Relation to Death, Descent and Distribution

Florida law restricts who you can, and cannot, leave your Florida homestead to after you die. This will depend on whether or not you were married at the time of your death and whether or not you were survived by minor children.

  • Not survived by a spouse or any minor children. if you own a Florida homestead residence and you are not survived by a spouse or any minor children, then you can leave the homestead to whomever you want.
  • Survived by a minor child.  If you are married and your homestead is titled in joint names with your spouse, then that’s OK, you can leave your protected homestead to your spouse through tenancy by entirety.   But what if you are a single parent and the homestead is titled in your sole name? Then, at least up until October 1, 2010, your homestead had to pass equally to all of your children and a guardianship for the minor had to be established for any of your children who were under the age of 18 at the time of your death. On October 1, 2010, a new law went into effect that allows a single parent of a minor child to establish a special type of irrevocable trust  for the minor child’s benefit until an age selected by the parent. This will prevent the need to set up a minor guardianship and give the parent control over when and how the child will inherit the homestead, but, as mentioned above, this special type of trust must be irrevocable and should only be established with the assistance of an estate planning attorney.
  • Survived by a spouse. if you did not leave your homestead to your spouse outright and without any strings attached, then your spouse would receive what is referred to as a “life estate” in the homestead and your children would receive the remainder in equal shares after your spouse dies. Receiving a life estate in the property means that while the surviving spouse has the right to live in the property for his or her remaining lifetime, it also means that the surviving spouse has to pay all of the property taxes and insurance to maintain the residence. In addition, the surviving spouse cannot force the children to sell the property, and the children cannot force the spouse to sell the property. Today there are two ways around this strict rule:
  1. You and your spouse can enter into a prenuptial agreement or postnuptial agreement where the spouse who does not own the property waives all of his or her rights to the protected homestead. This will allow the owner of the homestead to leave the property to whomever he or she wants.
  2. Effective October 1, 2010, the surviving spouse who is initially stuck with a life estate in the homestead can elect within a limited amount of time after the deceased spouse’s death to divide the property so that the spouse will receive one-half and the children of the deceased spouse will equally divide the other half.
  1. Your Salary and Wages.

Wages, earnings, or compensation of the head-of-household which are due for personal labor or services, including wages deposited into a bank account (provided they are traceable and identified as such) are exempt from garnishment under Section 222.11 of the Florida Statutes. A debtor is head-of-household if he/she financially supports someone for whom he has a legal or moral support obligation, such as a spouse, child, or parent.   Head-of-household should not be confused with rules regarding tax dependents. You may support someone for purposes of establishing head-of-household status even if you do not claim that person as a tax dependent on your federal income tax return.   A debtor can waive his wage exemption provided the waiver is informed and done in writing.  Thus, it is critical to have an experienced attorney represent you whenever you sign a promissory note and other loan documents. Many lenders include head-of-household exemption waivers inside their loan documents, and a debtor may be surprised when a creditor garnishes his wages to execute a judgment even though the debtor is a head-of-household.

  1. Annuities and Life Insurance

Cash value in annuities and life insurance policies are protected from creditors’ claims by Florida Statute 222.14.   Annuities issued to Florida residents are exempt from creditors pursuant to Florida Statute 222.13.  Florida courts have liberally construed this statutory exemption to include the broadest range of annuity contracts and  arrangements. Private annuities between family members are entitled to the exemption as are the proceeds of personal injury settlements structured as an annuity. Additional protection is available by purchasing international annuities.   International planning is a highly specialized field and careful consideration should be used when engaging in said techniques.

While a Florida resident is alive, the cash value of any insurance policy he/she owns on his/her life or on the life of another Florida resident is exempt from creditor claims. The protection afforded to the cash surrender value of a life insurance policy is only for the benefit of the owner/insured. Death benefits are not protected from the creditors of the policy beneficiary. The law does not protect the cash value of life insurance when the insured is someone other than the debtor; for instance a husband cannot exempt the cash value of a policy issued on the life of his spouse or child.

The protection of cash value of life insurance and annuities extends to proceeds of these assets after receipt.   Florida courts have held that funds withdrawn from the cash value of a life insurance policy and annuity payments received by a debtor remain protected after they are deposited in a financial account as long as the funds can be accurately traced back to the exempt assets.

  1. Pension, Profit Sharing Plans and IRAs

It is simple – In Florida, retirement money not only defers income taxation, but it is protected from creditors as well. Florida Statute 222.21(2)(a) provides that any money or other assets payable to participant or beneficiary in a qualified retirement or profit sharing plan is exempt from all claims from creditors of the beneficiary or participant. There is a strong public policy in favor of protecting retirement plans to avoid having debtors become dependent upon the State because a creditor has left them without any means of support after they retire.    There are further protections afforded to Florida teachers, county officers and employees, state officers and employees, police officers, and firefighters. A debtor’s IRAs are exempt from creditors. A 2011 Florida statute expanded the definition of an IRA to include both rollover and inherited IRA accounts.

  1. Disability Income.

Disability income benefits under any disability insurance policy are exempt from legal process under Chapter 627 of the Florida Statutes.   The exemption includes health, life, and accident disability insurance. Federal law protects Social Security Disability benefits from judgment creditors.

  1. Vehicle Exemptions

Florida residents may protect up to $1,000 of equity in their car under Florida laws located at Florida’s motor vehicle exemption at Fla. Stat. Ann 222.25.  Florida has one of the lowest automobile allowances in the country. The Florida motor vehicle exemption allows you to protect $1,000 in car equity, $2,000 if you are married and filing jointly. You may be able to cover additional equity with other exemptions. Florida exemptions helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy.

  1. Florida Pre-paid College Plans.

Florida prepaid college tuition plans and Florida’s 529 College Saving Plan are protected from creditors by Florida Statute 222.22.

  1. Minor Child’s Custodial Account.

A debtor’s bank account held in a custodian financial account for the benefit of a minor child under the Florida Uniform Transfers To Minors Act is also protected from the debtor’s creditors because the account is considered property of the minor beneficiary.

  1. Irrevocable Trusts, including GRATs, GRUTs, QRPTs, Charitable remainder trusts and supplemental needs trusts for disabled children.

There are a plethora of additional asset protection tools and exemptions available to the Florida resident. Florida Statutes include several narrow asset exemptions such as professionally prescribed health aids, hurricane savings accounts (with restrictions), medical savings accounts, and unemployment benefits.

In addition, there are federal exemptions available.   Some of these benefits include – Social security benefits, including both social security income and disability, are exempt from creditor garnishment under Section 207 of the Social Security Act. Social security benefits retain their exemption after being deposited in to the beneficiary’s financial accounts. If a creditor actually attempts to garnish social security income, or even threatens garnishment to collect a debt, the creditor is in violation of federal law, and the debtor may be entitled to damages.



An asset protection trust is a vehicle for holding an individual’s assets to shield them from creditors. Asset protection trusts allow, if it is difficult for a creditor to seize assets, settle with the debtor on favorable terms instead of engaging in costly litigation. This vehicle has complex regulatory requirements, such as being irrevocable and contains a spendthrift clause. An asset protection trust does provide for occasional distributions, but those distributions must only occur at an independent trustee’s discretion.

Only a few U.S. states allow asset protection trusts. As of 2012, there are approximately 13 states that do recognize asset protection trusts, these include Alaska, Delaware, Rhode Island, Nevada and South Dakota. However, one can establish an asset protection trust in these states without residing there. Offshore financial centers allow individuals to establish asset protection trusts. The trust’s documents and administration, along with some or all of the trust’s assets, must be located in the same jurisdiction where the trust was established.

The Public policy in Florida cringes at the thought of Domestic Asset Protection Trust instruments being created to avoid paying creditors or estate taxes. However, an experienced Florida Estate Planning Attorney may prepare a Spendthrift Trust for asset protection but must ensure the instrument is not prepared as a self-settled trust or the trust is not protected from creditors.

Only Florida residents may take advantage of Florida’s liberal asset protection laws. Whether or not you qualify as a Florida resident depends on whether your circumstances and your actions demonstrate your intent to establish a Florida domicile.  If you have questions about Florida residency requirements and/to how to protect your assets, please call the Horton Law Group, P.A. today for your free legal consultation. (561) 299-0018.