From Stan’s interview for the Masters of the Courtroom series on ReelLawyers.com.
Keeping What’s Yours
In simplest terms, asset protection is about keeping what’s yours, using it as you see fit, and passing it to your family when you’re gone. There are many asset protection tools available for use at the appropriate time. You need advice from professional advisors who understand how and when to employ them to protect you.
The level of protection of any asset is determined largely by how you title the asset. Normally, an asset titled in your name has NO asset protection. The equity in that asset can be taken by any of your creditors at any time.
An asset protection analysis begins with gathering data about each of your assets; what they are, where they are, what they’re worth and what you owe on them, and how you own them (whose name is on the title). Once that data is gathered, formulating an asset protection plan requires the professional advisor to figure out which ones are protected under federal and Florida law, and then figuring out the most cost effective method of protecting the rest.
Which of your assets do you want to protect?
The best answer is all of the ones you don’t want to lose.
Assets that are protected from the claims of creditors (referred to as exempt assets) vary from state to state, and often include the equity in your primary residence (homestead), cash values of life insurance or annuities, and IRA’s or other retirement plans. Florida protects unlimited equity in a primary residence under its homestead provision, while other states protect as little as $10,000-$20,000 for a married couple. In addition, since Florida’s homestead protection is in its constitution, the Florida Supreme Court has ruled that the fraudulent conveyance law cannot be applied to a person’s homestead. You can use your cash or liquidate other non-exempt assets to pay off the loan on your primary residence, and there’s nothing a creditor can do to prevent it.
A second area of wide diversity in asset protection is the cash value of life insurance and annuities. Florida is a pro-debtor state and protects unlimited cash value of life insurance and annuity contracts issued on the lives of Florida residents. Other states protect as little as $2,500 of life insurance cash value.
A third area of divergence from state to state is the level of protection of IRA accounts. Federal law protects qualified pension plans under the Employee Retirement Income Security Act (ERISA). IRA’s, however, are not qualified plans, and are protected only under state law. Florida protects 100% of the value of an IRA. Other states protect only the amount necessary for the support of the debtor and dependents. Do you want a court to determine what’s “necessary” for the support and of your dependents?