Is It Too Late to Protect Assets from Creditors?

Is It Too Late to Protect Assets from Creditors?

Because every person’s finances are different, it is often difficult to judge when it is too late to adequately protect someone’s assets. However, generally speaking, once bankruptcy or divorce proceedings have been initiated, or a person has become engaged in a lawsuit, it becomes much more difficult to protect assets from creditors. Fortunately, there are steps you can take now to make sure that your hard-earned assets are protected in the future.

Plan Ahead

Asset protection is most easily implemented before a person has become embroiled in a legal matter. As with any issue having to do with estate planning, the earlier you start, the better your chances of protecting your assets from creditors will be.

While reorganizing asset titles or transferring assets can help protect your property to a certain degree, timing is essential. When these tactics are begun after the initiation of a legal matter, you run the risk of having these actions undone by the court as fraudulent transfers or conversions. While a court could possibly reverse this ruling after entering a civil judgment, there are effective asset protection tools that are much less risky.

Business

If you own a business, it is important to separate your personal assets from those of the business. Creating a separate business entity, such as a corporation, limited liability company, or limited partnership, will help protect your personal assets from being seized by creditors in lawsuits related to your business activities.

Retirement Plans

Under federal law, ERISA-qualified retirement plans get unlimited asset protection. Because of this, these accounts are a good place to put long-term savings, but make sure you stay within the annual contribution limit to avoid penalties.

Homestead Exemption

In Florida, the state constitution prohibits courts from awarding home equity to creditors as long as the home is your primary residence, you have owned it for more than 1,215 days, and it is located within a municipality and is on less than half an acre. The same rule applies to residents who live outside of municipalities, but have a primary residence located on no more than 160 acres. Because Florida’s homestead exemption is so liberal, you may want to think about investing extra principal on your mortgage payments to help protect those assets.

Life Insurance

Florida provides unlimited protection to assets in cash value life insurance policies as well as annuity balances, If you are thinking about asset protection, life insurance is a good place to invest.

Technically, it is not too late to start planning how to best protect your assets until a creditor actually obtains an interest in your property, whether by lien or execution. However, starting your protection planning long before any legal threats arise will ultimately give you a much better chance of protecting your property, while also giving you peace of mind in the long run. If you have questions regarding how to best protect your own assets in the Keys, please contact an asset protection attorney at the Silver Law Group for your initial consultation.