Asset Protection For High-Net Worth Individuals

What Is Asset Protection?

Asset protection refers to the use of legal tools and financial investment to protect your assets from civil judgments. Florida law has made several types of assets exempt from the collection of money judgments.

Asset protection involves the judicious use of these asset exemptions prior to the onset of legal claims.

High Net Worth Invites Legal Risk

Civil judges and juries may award a plaintiff money damages, but a civil judgment is nothing more than a piece of paper. The same judges and juries do not write checks to the plaintiff for the amount of damages.

Plaintiffs must execute their money judgments to collect money from their judgment debtor.

Plaintiffs and their attorneys are more likely to sue someone if they believe has sufficient non-exempt assets from which the plaintiff can satisfy the judgment. High-net-worth individuals are inviting targets for litigation, and high-net-worth people have a greater need for effective asset protection.

Asset Protection Works If Done Early

Making money from a business or profession is one thing; protecting money earned is just as important.

We see many clients who were preoccupied with accumulating wealth only to see their wealth dissipated by one misjudgment, accident, or imagined harm concocted by a plaintiff attorney.

We also see high net-worth people who have planned their assets successfully so that these types of lawsuits are dismissed or settled for little money when the plaintiff’s attorney realizes that judgment collection would be extremely difficult.

How Do High Net-Worth People Shield Their Assets?

Florida law provides several asset protection tools. Here is a summary of the legal and financial tools high-net-worth clients can use to protect their wealth from lawsuits and judgments.

Legal Asset Protection Tools

• Homestead exemption. The Florida Constitution protects your primary Florida residence from judgment liens. There is no dollar limit on the exemption, but there are lot size limitations within a city.
• Statutory exemptions. Florida statutes exempt certain types of assets from creditors, including, without limitation, retirement money and college savings plans. Salary earned by a head of household is also exempt from garnishment by Florida statute.
• Tenants by the entireties. Florida court decisions over the years have established protection of real and personal property owned by a married couple as tenants by the entireties.
• Irrevocable Trusts. Your interest as a beneficiary of a properly drafted irrevocable trust cannot be attacked by a creditor (including federal government creditors). You cannot establish a protected trust for your own benefit.
• Life Insurance. The cash value of life insurance is an exempt asset in Florida.
• Annuities. Annuities are exempt from judgment execution in Florida. Any type of annuity is exempt regardless of the issuing annuity company.  

Financial Asset Protection Tools

Too many of our clients overlook the basic protection of liability insurance. We see too many high-net-worth clients who try to save money on liability insurance and end up underinsured.

Your liability coverage should increase as your wealth increases.

Offshore Asset Protection

Offshore asset protection is the best protection for assets not otherwise exempt under Florida statutes and case law.

Many of our clients have successfully defended collection actions by having transferred liquid financial assets and business interests to offshore trusts established in favorable asset protection jurisdictions.

Offshore trusts are less effective in protecting real property.

Misconceptions About Asset Protection

Asset protection may not make you judgment-proof. The goal of asset protection planning is to maximize your negotiating position and help favorably resolve creditor disputes.

It is never too late for asset protection. There are tools you can use legally to boost asset protection even after a lawsuit has been filed.

Asset protection does not involve hiding assets or concealing your connection to certain business entities. Debt collection procedure enables a judgment creditor to discover any interest you have in any asset.