A significant benefit of being a Florida resident is the constitutional homestead protections from claims of creditors or forced sale. This protection also applies to those who receive Medicaid benefits, as the homestead is considered an exempt asset and is not considered when determining whether one qualifies for benefits. Even after death, homestead cannot be used to pay creditors or to pay the State for reimbursement of Medicaid benefits provided.
FLORIDA TENANTS BY THE ENTIRIES PROPERTY
Property titled as tenants by the entireties (“TBE”) is a form of ownership between husband and wife is called tenants by the and is exempt from the claims of creditors. The property can be homestead, bank accounts, or anything that you can hold in joint name. This type of ownership considers the two spouses as one. Ownership is equally and fully owned by both spouses and neither person can sever the property on their own.
Life insurance passes free of tax and creditor claims with proper planning. Life insurance can also be used to offset any estate taxes paid, provide support for dependents, to fund burial and estate settlement costs, to pay off debt, to fund buy/sell agreements, to leverage gifts to charity, to pay death taxes and for a variety of other purposes. The best technique when owning life insurance is to hold it in an irrevocable life insurance trust to allow for it to be exempt from taxes and creditors.
In Florida, annuities are exempt from creditors. This protection even works even after receiving the annuity proceeds. If funds are withdrawn from the cash value of the annuity and annuity payments can still be protected if the deposit can be traced back to the annuity. This also applies to life insurance. While it is recommended that the funds be segregated, for ease of tracing back to the annuity, it is not required.
Qualified Retirement Plans (401(K), 403(B), Individual Retirement Accounts, College Savings 529 Plans, and Medical Savings Plan are also recognized in Florida as being exempt from the claims of creditors, with some exceptions, and as such, are important asset protection strategies.
A variety of planning options with trusts, including domestic and offshore trusts, can be utilized to exempt the assets from the claims of creditors, such as an irrevocable life insurance trust.
DOMESTIC BUSINESS ENTITIES
The use of entities such as a Florida limited liability company and a Florida limited partnership are popular asset protection techniques. Planning strategies can include a layering of entities along with trusts for protection planning.
Prenuptial or postnuptial agreements between engaged or married couples serves to delineate the ownership of assets. It is an asset protection technique in case of divorce or death. It can allow one spouse to be able to disinherit the other spouse or limit their rights given to a married spouse in Florida. It can serve to exempt one creditor’s reach from the other spouse’s assets. It should be considered when the couple have had multiple marriage and/or there is an intent to keep their assets separate for their own children (of prior marriages).