You can use estate planning as an asset protection tool. Asset protection is the steps you take to keep your property from being taken away if a lawsuit is filed against you and you lose. How can you protect your assets from being liquidated by a judgment creditor?
The first, and easiest, step in Florida is your Homestead property. Florida’s constitution protects homestead property is from the claims of creditors.
The second step is to have proper asset protection planning done. You can achieve this through estate planning instruments in a number of ways. You must do the planning before the cause of a lawsuit occurs. The law considers transfers fraudulent and reverses them, If you file after a suit is started.
Once the assets to be transferred have been identified, the proper instruments to draft and place them under should be discussed with an estate planning attorney. Two common tools used for estate planning and asset protection planning are irrevocable trusts, and family limited partnerships.
An irrevocable trust, by design, cannot be modified, changed or revoked. An irrevocable trust provides asset protection in the form of ownership. The client is no longer the owner of the asset and it is no longer in their name, once they transfer assets to this type of trust.
Under a family limited partnership structure, the assets contributed to the structure are no longer owned by the person that contributed those assets. Therefore, creditors cannot attach personal judgments of the limited partners against the assets under the partnership structure. A family limited partnership can also help minimize estate tax liabilities.
As long as done correctly and on time, estate planning can serve as a valuable asset protection tool. Always consult with an experienced estate planning attorney to analyze your situation and advise on the best course of action.