Asset Protection

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Overview of Asset Protection concepts and techniques in Florida

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Asset Protection

  1. 1. Asset Protection Strategies in Florida David A. Holmes, Esq. Farr, Farr, Emerich, Hackett, and Carr, P.A. 99 Nesbit Street Punta Gorda, Florida 33950 (941) 639-1158 [email_address]
  2. 2. I. Overview The asset protection process; general areas of protection
  3. 3. Overview <ul><li>Risk Identification </li></ul><ul><li>Asset Review </li></ul><ul><li>Sources of Indemnification </li></ul><ul><li>Forms of Protection </li></ul><ul><ul><li>State law exempt assets </li></ul></ul><ul><ul><li>Partnership planning </li></ul></ul><ul><ul><li>Trust planning </li></ul></ul><ul><li>Fraudulent transfers </li></ul>
  4. 4. Sources of Risk <ul><li>Professional Malpractice </li></ul><ul><li>Business Liability </li></ul><ul><li>Premises Liability </li></ul><ul><li>Motor Vehicle Negligence </li></ul><ul><li>Special Circumstances </li></ul>
  5. 5. Sources of Indemnification <ul><li>Professional Malpractice Insurance </li></ul><ul><li>Automobile Coverage </li></ul><ul><li>Homeowner’s Coverage </li></ul><ul><li>Commercial Liability </li></ul><ul><li>Personal Umbrella Liability </li></ul>
  6. 6. Types of Assets <ul><li>Liquid Assets – Marketable Securities </li></ul><ul><li>Real Estate </li></ul><ul><li>Accounts Receivable </li></ul><ul><li>Motor Vehicles </li></ul><ul><li>Tangible Personal Property </li></ul>
  7. 7. Forms of Protection <ul><li>State law exempt assets </li></ul><ul><li>Partnership planning </li></ul><ul><li>Trust planning </li></ul><ul><li>Planning for Unique Assets </li></ul>
  8. 8. II. Basic Planning Under State Law Identifying and utilizing state asset exemptions
  9. 9. Homestead <ul><li>Land and Improvements Protected </li></ul><ul><li>Protected Value Unlimited </li></ul><ul><li>One-half Acre in Municipality </li></ul><ul><li>160 acres Outside municipality </li></ul><ul><li>Proceeds from Sale of Homestead </li></ul>
  10. 10. Tenants by the Entirety <ul><li>Specific form of Joint Ownership </li></ul><ul><li>Limited to Spouses </li></ul><ul><li>Assets protected from individual liabilities of either spouse </li></ul><ul><li>Presumptions </li></ul><ul><ul><li>real estate </li></ul></ul><ul><ul><li>personal property: Beal Bank v. Almond </li></ul></ul>
  11. 11. Limitations of Entirety Protection <ul><li>Joint Liabilities </li></ul><ul><li>Duration of Marriage </li></ul><ul><ul><li>Death </li></ul></ul><ul><ul><li>Divorce </li></ul></ul><ul><li>Fraudulent Transfer Statute </li></ul>
  12. 12. Sources of Risk <ul><li>Professional Malpractice </li></ul><ul><li>Business Liability </li></ul><ul><li>Premises Liability </li></ul><ul><li>Motor Vehicle Negligence </li></ul><ul><li>Special Circumstances </li></ul>
  13. 13. Limitations of Entirety Protection <ul><li>Joint Liabilities </li></ul><ul><li>Duration of Marriage </li></ul><ul><ul><li>Death </li></ul></ul><ul><ul><li>Divorce </li></ul></ul><ul><li>Fraudulent Transfer Statute </li></ul>
  14. 14. Life Insurance and Annuities <ul><li>Cash Surrender Value of Policies Insuring the Lives of Florida Citizens </li></ul><ul><li>Right to Payments under Annuity Contracts </li></ul>
  15. 15. Pension and Retirement Plans <ul><li>Balances in Qualified Plans Exempt </li></ul><ul><ul><li>Money Purchase </li></ul></ul><ul><ul><li>Profit Sharing </li></ul></ul><ul><ul><li>IRA </li></ul></ul><ul><ul><li>401(k) </li></ul></ul><ul><li>Nonqualified Rollover </li></ul>
  16. 16. Wages <ul><li>Exemption Limited to Head of Family </li></ul><ul><li>More than one-half support of… </li></ul><ul><ul><li>Minor child </li></ul></ul><ul><ul><li>Other dependent </li></ul></ul><ul><li>Exempt Wages can not be garnished </li></ul><ul><ul><li>At the source </li></ul></ul><ul><ul><li>At a financial institution for six (6) months </li></ul></ul>
  17. 17. III. Partnership Planning The business of asset protection
  18. 18. Limited Partnerships <ul><li>General Partner </li></ul><ul><li>Limited Partners </li></ul><ul><li>Asset Protection – Charging Order </li></ul><ul><li>Estate Planning </li></ul>
  19. 19. Family Limited Partnership GP LP 1 LP 2 LP 3 Partnership
  20. 20. Family Limited Partnership GP LP 1 LP 2 LP 3 Partnership Judgment= Charging Order
  21. 22. Understanding the Charging Order <ul><li>Lock Box </li></ul><ul><li>Assets protected </li></ul><ul><li>Access denied </li></ul><ul><ul><li>To the creditor </li></ul></ul><ul><ul><li>To the partners </li></ul></ul>
  22. 23. Partnership Rules <ul><li>Partnership = Business </li></ul><ul><li>Limited Partner = Owner </li></ul><ul><li>Distributions are pro rata </li></ul><ul><li>Use and Possession are pro rata </li></ul>
  23. 24. Tax Issues <ul><li>Income tax </li></ul><ul><li>Capital gains tax </li></ul><ul><ul><li>contribution of real estate </li></ul></ul><ul><ul><li>Contribution of securities </li></ul></ul><ul><li>Estate and Gift Tax </li></ul><ul><ul><li>Valuation and Discounts </li></ul></ul><ul><ul><li>Return </li></ul></ul><ul><ul><li>Inclusion </li></ul></ul>
  24. 28. III. Trust Planning Myth v. reality
  25. 29. Trust Basics <ul><li>Settlor </li></ul><ul><li>Trustee </li></ul><ul><li>Beneficiaries </li></ul><ul><li>Spendthrift Provisions </li></ul><ul><li>Florida EP Trust – No Asset Protection </li></ul>
  26. 30. Domestic Asset Protection Trusts <ul><li>Self-settled spendthrift trusts recognized </li></ul><ul><li>Potential Limitations </li></ul><ul><ul><li>Full faith and credit </li></ul></ul><ul><ul><li>Supremacy </li></ul></ul><ul><li>Fixed Assets </li></ul>
  27. 31. Offshore Trust Planning <ul><li>Non-recognition of foreign judgments </li></ul><ul><li>Favorable fraudulent transfer laws </li></ul><ul><li>Trust Protectors </li></ul><ul><li>Duress clauses recognized </li></ul><ul><li>Flee clauses recognized </li></ul><ul><li>Established judicial track record </li></ul><ul><li>Secrecy is irrelevant </li></ul>
  28. 33. Cook Islands Trust CI Trust CI Trustee Offshore Accounts Trust Protector US Trustee
  29. 34. Cook Islands Trust/Nevis LLC Trust LLC 100% Manager Domestic Accounts
  30. 35. Cook Islands Trust/Nevis LLC Trust LLC Domestic Accounts Swiss Accounts Investment Advisor
  31. 36. Related Issues <ul><li>US Co-trustee </li></ul><ul><li>Tax Neutral </li></ul><ul><ul><li>No Benefit </li></ul></ul><ul><ul><li>No Burden </li></ul></ul><ul><li>Trust Protector </li></ul><ul><li>Investment Advisor Agreements </li></ul>
  32. 37. Partnership vs. Trust <ul><li>Charging Order </li></ul><ul><li>GP Control </li></ul><ul><li>Limited Partners </li></ul><ul><li>Distributions </li></ul><ul><li>Real Estate/Business </li></ul><ul><li>Trust Protection </li></ul><ul><li>Settleor Control </li></ul><ul><li>Beneficiaries </li></ul><ul><li>Withdrawals </li></ul><ul><li>Liquid Assets </li></ul>
  33. 38. Unique Assets <ul><li>Motor Vehicles </li></ul><ul><li>Accounts Receivable </li></ul><ul><li>Other Tangible Personal Property </li></ul>
  34. 39. Accounts Receivable lien P.A.
  35. 40. Fraudulent Transfers <ul><li>Intention to Avoid, Hinder, Delay </li></ul><ul><li>Known or Anticipated Creditors </li></ul><ul><li>Facts Control </li></ul><ul><li>Timing is Key </li></ul><ul><li>Ethics </li></ul><ul><li>Urgency </li></ul>
  36. 41. Thank You! David A. Holmes (941) 639-1158 [email_address] © 2003 David Holmes

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