1. No Lockboxes.  Asset protection planning does not depend on sure-fire techniques and strategies that are guaranteed to protect your assets from every creditor in every situation.  Instead, asset protection planning requires thoughtful decisions about the manner of owning your assets to cause your most important assets to be least desirable to potential creditors.

2. Act Now!  Asset protection planning techniques and strategies should be implemented before the event giving rise to a potential creditor’s claim has occurred.  After an event creating liability, there’s great risk that any deliberate change in the ownership of your assets will constitute fraudulent conversion or transfer.  Property which is fraudulently converted or transferred may not be protected from creditors. 

3. No Place Like Home.  Your principal residence—your homestead—is generally protected from creditors’ claims.  However, the homestead protection does not shelter the homestead from federal tax liens, taxes and assessments on the property, or obligations in connection with the purchase, improvement, or repair of the property, including any mortgages on the property. 

4. Two Become One.  Property that is owned by a husband and wife “as tenants by the entireties” is generally immune from claims against one of the spouses individually.  Such property is considered as completely owned by both husband and wife together, and only creditors of both husband and wife can seek to have their debts satisfied from such property.

5. Protection of Law.  The Florida Statutes protect certain exempt assets and accounts owned by Florida residents.  These include life insurance (both proceeds and cash surrender value), annuities, disability benefits, qualified educational accounts (like 529 plans or educational IRA), health accounts (like HSAs or MSAs), and retirement accounts (like traditional and Roth IRAs).  In some cases, federal bankruptcy laws limit the amount that can be protected in these exempt classes.

6. Who Owns What?  If one member of the family is at a much greater risk of creditors’ claims (because of his or her profession or hobbies, for instance), then important family property should not be owned in the individual name of that family member.  In addition, because owner and driver of a car are separately liable in a car accident, each car should be titled in the name of the driver only.

7. The Giving Spirit.  Property that is properly given to another person is not subject to the claims of creditors against the giver.  Gifts made to a “spendthrift trust” for the recipient are also protected from the recipient’s creditors.  However, a creditor may attach the interest of a beneficiary in a spendthrift trust when the creditor provided support for the beneficiary or his or her family.

8. Thus the Name.  Limited liability entities (like LLCs and LLPs), if properly organized and operated, can protect the owners from the liabilities of the entity and protect property owned by the LLE from the liabilities of the owners.  Creditors of an LLE owner can’t take the ownership interest; rather, they can only obtain a “charging order.”  The charging order gives the creditor a right to receive the owner’s share of distributions, but it does not allow the creditor to make decisions about how and when distributions are made.  Update:  The Florida Supreme Court’s decision in Olmstead v. FTC renders the charging order protection ineffective for single-member Florida LLCs, and calls into question the protection’s effectiveness for all LLCs in Florida.  More to come on this developing topic.

9. Too Good to be True.  Domestic asset protection trusts are available in other states (notably, Alaska and Delaware), but it is far from certain that these trusts will be respected in Florida.  Foreign asset protection (“offshore”) trusts do what they promise—make it difficult for creditors to get to your assets—but they make it difficult for you to get to your own assets as well.  Want to live in the Cook Islands?

10. Insurance Good.  Asset protection planning is no substitute for reasonable insurance against insurable risks.