Farr Law Firm’s asset protection attorney team makes recommendations and implements strategies to minimize the exposure of clients’ assets to creditors. To advance a client’s wealth preservation goals, each asset protection attorney utilizes techniques including state and federal exemptions, limited partnerships, limited liability companies, trusts and other entities, and implementing these solutions in a manner consistent with estate planning and other objectives.
Based on our clients’ objectives and a comprehensive review of their financial holdings, our asset protection lawyers provide advice on all aspects of restructuring holdings to insulate them from creditor attack, allowing our clients to face creditors from a position of strength, rather than defensively when assets are at risk.
A Family Limited Partnership can provide the highest form of asset protection currently available for non-homestead property under Florida law. In general, a limited partnership provides for the division of ownership among groups of partners that include general partners and limited partners. The general partner retains absolute control over the partnership property and the business of the partnership.
Limited partners maintain an interest in the partnership and receive distributions, but exercise no control over the assets held in the partnership. Creditors obtaining a judgment against the holder of a general or limited partnership interest in a Florida limited partnership obtain only a limited remedy known as the charging order.
Once issued by the court, a charging order will entitle the judgment holder to receive whatever distributions or other payments that partner would otherwise receive until the judgment is paid in full. However, the charging order will not permit the creditor to reach or force liquidation of partnership property or exercise control over partnership business.
During a time that a judgment is in place, the general partner can simply refuse to make distributions to the partners, thereby denying the judgment creditor any benefit from the charging order. This is significantly more advantageous than holding assets individually where they are at risk of outright seizure by creditors.
In addition to asset protection, Family Limited Partnerships provide significant estate planning benefits. These include the ability to divide ownership of assets along multiple family members and generations while retaining a level of control with the client.
For appropriate assets, Asset Protection Trusts provide the most effective form of protection, surpassing the benefits of Family Limited Partnerships under Florida Law. A number of jurisdictions outside of the United States permit trusts to provide asset protection benefits that are not available under the trust laws of Florida and most other states.
In addition to advantageous trust laws, many of these jurisdictions do not recognize foreign judgments, have very short statutes of limitations for fraudulent transfers, and allow trustees to disregard instructions issued under duress or the compulsion of a foreign court for fraudulent transfers. Taken together, these factors (along with the psychological and financial impediment of pursuing assets overseas) make off-shore asset protection trusts one of the most effective methods of asset protection.
Many clients are reasonably concerned about transferring assets overseas, giving up control of those assets to an unknown foreign trustee, and the potential tax scrutiny that may follow when interests in a foreign trust are reported. When properly established, an offshore trust can permit assets to remain in the United States until a significant threat develops, give the trust settlor managerial control over trust property (including the ability to move money in and out of the structure at will).
In application, off-shore asset protection can be less complicated than a domestic limited partnership and, unlike a partnership, will preserve the ability of the trust settlor to directly access the protected property—even when a judgment is in place. For these reasons, the asset protection trust provides one of the best forms of protection available.
A properly implemented Family Limited Partnership can achieve significant estate tax savings through the leveraged giving of limited partnership interest. This strategy involves making gifts during a client’s life and properly valuing the gift at a significant discount over the value of the underlying assets.
One of the main concerns with an Asset Protection Trust, as well as other forms of asset protection strategies, is that they not be voided under the law as a fraudulent transfer.
Like all states, Florida has a Fraudulent Transfer Statute. This statute prohibits transfer of assets from a holding in which they are subject to creditor’s claims to a holding to which they are exempt from creditor’s claims, when the transfer is undertaken with the intention of avoiding, hindering or delaying creditors.
Thus, in simplest terms, once a claim is made or litigation is commenced, the ability to transfer assets beyond the reach of creditors is significantly limited. Accordingly, advance planning is the key to a successful asset protection strategy.