While Florida is one of the best states to own a business in, it’s unfortunately not one that is easy to protect assets from creditors. Florida trust law is a complicated area best left to an estate planning attorney, especially if you want to use a trust for asset protection. A wills and estate lawyer can help you set up an estate plan to protect your assets from creditors, though it is not as easy as it is in other states.
What Is Asset Protection?
In a nutshell, asset protection is the act of protecting your assets against lawsuits, including divorce lawsuits, business lawsuits, IRS tax actions, real estate and landlord/tenant lawsuits, and lawsuits by creditors.
Setting up asset protection protects your assets from most of these types of creditors. However, a soon-to-be ex-spouse and the IRS could get access to assets in a trust – even an irrevocable trust – if it’s not set up properly.
The Domestic Asset Protection Trust
This type of trust, often referred to as a DAPT, is a relatively new asset planning tool. However, DAPTs do not fall under the uniform probate code, nor are they viable in Florida. A DAPT is an irrevocable trust wherein the grantor and the beneficiary are the same people. Depending on the state, the trustee might be another party, or the trust could name the grantor as a trustee, as long as he or she also names a co-trustee.
Creating DAPTs in Other States
Generally, when a trust is created in another state, the state where the decedent lives honors the trust. People living in one state could create a DAPT in South Dakota or Nevada, for example, and create a trust that protects assets from creditors while retaining control over their assets. However, Florida does not recognize DAPTs from other states when it comes to creditors attaching assets.
Florida looks at the trust, including the location of the property, the domicile of the decedent and other factors. If the decedent lived in Florida and the property in the trust is located in Florida, the probate courts will allow creditors to attach assets in the trust – much like a revokable trust.
While it would be nice to have such a vehicle to protect assets, Florida residents must use other methods to protect their assets – the problem with that is, the trusts that protect assets cannot be self-serving and they must be irrevocable.
When You Need to Access Your Assets
When you need access to your assets, you can create a revocable living trust, but that does not protect your assets. Instead, you can take advantage of the following methods to protect assets:
- Your homestead exemption
- Life insurance
- Certain accounts – qualified accounts, such as an IRA, 401(k) or a 403(b), and wage accounts
- A business entity, such as an LLC, a limited partnership, or a corporation
- Offshore business entities
- Pre-nuptial or post-nuptial agreements
- Certain trusts, including certain offshore trusts
However, many of these asset protection vehicles may not fully protect your assets. Asset protection attorneys can create a combination of some of these vehicles to better protect your assets. For example, putting property owned by an LLC into a revocable trust offers more protection than some types of trusts. This also depends on how the LLC is set up.
You can also put some property in an irrevocable trust with a spendthrift clause while you put property that you want to have more control over in other asset protection vehicles.
Contact Asset Protection Attorneys at France Law Firm
While Florida makes asset protection more difficult than some other states, you can do it with the help of business attorneys and estate probate attorneys. With a combination of irrevocable trusts and some of the methods listed above, you can not only protect your assets, but you can ensure that your heirs and their children are also financially stable.
Contact an estate planning attorney with business law experience at France Law Firm. We can discuss your estate planning needs and create an estate plan that benefits you whether you are healthy, become incapacitated, and after you pass.