Asset Protection Law Journal : Asset Protection Lawyer & Attorney : Kenneth J. Laino : Schneider Smeltz Ranney & LaFond Law Firm : Trusts, Estate Planning

The Florida Supreme Court recently ruled that a charging order is not the only remedy for creditors of LLC owners. My blog post of August 2, 2010 outlines the Florida Supreme Court decision. While the decision applied to a single member LLC, it could apply to multi-member Florida LLC’s as well. For the time being, Florida LLC owners – particularly single member LLC owners – must consider alternatives for protecting assets (such as a Florida limited liability partnership or reorganizing the LLC in another state such as Delaware).

It is important to keep in mind, however, that Florida is still a very debtor-friendly state. Florida has a virtually unlimited homestead exemption, and its statutes and case law are generally favorable to debtors from an asset protection standpoint.

For example, a Florida appellate court recently ruled that certain trust assets were beyond the reach of a beneficiary’s creditor, even though the trustee had improperly allowed the beneficiary to manage the trust assets. The court in Miller v. Kresser noted that the trustee had clearly abdicated his responsibilities, but nevertheless upheld the so-called spendthrift provisions of the trust. 

So despite the recent decision of the Florida Supreme Court in Olmstead v. FTC, Florida is still generally a very good jurisdiction with respect to asset protection.

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Trusts are not only for the rich.  Anyone with minor children (and even children in their 20's) should consider a trust for their family.

If any property passes to a child under your will, from a bank account "payable on death" or otherwise, the child will generally get all of that money at age 18.  The same holds true if you have named a child under a life insurance policy, IRA or other retirement account.  Even if money is held in a Uniform Gift to Minors Account, the child gets everything at age 18.

Some people are very responsible and financially sophisticated at that age.  But let's face it -- many are not.  A lot of teenagers and twenty-somethings would rather party than manage their investment portfolio.

Many parents do not think about how much their children could inherit at age 18.  While most Americans are strapped for cash and living paycheck to paycheck, the value of their estates (including house, life insurance, retirement accounts, etc.) could be substantial.

By creating a trust, funds can be held by a trustee and used to pay education, housing and other expenses.  Any remaining balance can be distributed at a later age.

While I deal with many more complex asset protection vehicles, a fairly simple family trust arrangement can prove to be a huge benefit.  It can greatly increase the odds that your hard-earned money will not be wasted away in the event of your death.

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An article by Kate Murphy in the September 2, 2010 New York Times provides a good discussion of homestead exemptions.

"Homestead exemption" can have two completely different applications.  Some states and localities use that term to refer to real estate tax breaks for senior citizens and others.  The term can also refer to the extent to which your house is shielded from creditors.  For example, Florida shields virtually all the equity in your house from most creditors.  Other states provide little or no shelter for your home.  Having your permanent residence in a state like Florida can provide great advantages from an asset protection standpoint.  I provided some detailed information on this topic in a post on June 30, 2009.

Dwight Merriam, chairman of the state and local government law section of the American Bar Association, makes an important point in the New York Times article: each state is different and anyone concerned about having the homestead exemption available to them should check carefully and perhaps engage an attorney to advise them. 

Whenever I am working with a client on asset protection matters, the client's home is generally at the center of our discussions.  So I am always glad to see homestead exemptions getting some media attention.

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