Florida offers enormous benefits for its residents with respect to asset protection and estate planning. A comprehensive asset protection plan will provide a level of protection for your assets in the event of an external creditor attack. Florida maximizes protection opportunities and thus is an excellent location to call “home.” Generally, an asset protection plan will consist of several layers of defense from creditors and will take into account estate planning and thus tax planning considerations.
In addition to the statutory homestead protection, Florida provides additional exemptions via statute. These exemptions are predicated on Florida residency. In order to establish residency, you may need to cut ties with your former state of residence and become domiciled in Florida. This may be accomplished by obtaining a Florida driver's license, establishing a Florida bank account, changing your voter registration to Florida, joining civic/religious/philanthropic organizations in your local community, and, of course, filing for Florida homestead status, if you own your home. Many affluent individuals establish Florida as home, while maintaining contacts in the state they spent most of their adult lives.
Florida's additional exemptions consist of the following:
Automobile Exemption: Up to $1,000.00 of equity in a vehicle is protected. Equity is determined by subtracting the debt owed on the vehicle from its fair market value.
Salary or Wages: The head of household may protect his or her wages, earnings, or other compensation. If the compensation is due for personal labor or services, it will be exempt from garnishment.
Life Insurance: The cash value of any life insurance policy is exempt from the claims of creditors. The death benefits received by a beneficiary are exempt from the insured's creditors, but not from creditors of the beneficiary.
Annuities: Qualified annuities are protected from a creditor's attack. This protection extends to identifiable proceeds which are withdrawn from the annuity by the owner.
Disability Benefits: Generally, disability income benefits are exempt.
Prepaid College Plans: Any prepaid college plan, as well as Florida 529 plans, are protected.
Retirement Plans: Money payable to either a participant in, or a beneficiary of, a qualified retirement plan is exempt from creditors' claims. This exemption includes IRAs.
In addition, adequate levels of insurance should be seriously considered. While you may already have homeowner's insurance, or a renter's insurance policy, you may want to consider purchasing a supplemental umbrella insurance policy. This type of policy will expand the protection provided by your other policies, and will likely cover most of your legal fees in the defense of certain claims against you.
Please keep in mind, a good asset protection plan will not make you judgment proof, but it will add layers of complexity which may give you some leverage in negotiating settlements, while protecting many of the assets which matter the most.
We would be very happy to discuss asset protection planning, estate planning, the requirements for becoming a Florida resident; and we can also assist in directing you to other professionals whom we have worked closely with (such as real estate brokers) that may help you achieve your goals.
If you are a permanent Florida resident, file your Florida Homestead Exemption by March 1, 2020, in order to take advantage of the 25k deduction from your property’s assessed value and 50k deduction if your property is worth at least 75k. “Save our Homes” caps any increase to the assessed value of a homestead exempt property to a maximum of 3% per year. This tax savings is transferable to a new Florida residence if you move. Not bad Florida!
There are plenty of good reasons to use a “land trust” under Florida Statute 689.071 in which real estate is held by a trustee who holds both legal and equitable title to the property. There are many reasons in holding property ( especially investment property) in a land trust and they include: the identity of the equitable owner remains private which is very attractive to high profile individuals; transfer of the property is relatively easy and cost effective; judgments against the beneficiary will not attach to the property and cloud title; an ancillary estate may be avoided, as the interest is deemed to be “personal property” and not real property; there is business and tax planning flexibility; and non-resident aliens can avoid U.S. gift and estate taxes if they hold their trust interest in a foreign holding entity.