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Asset Protection in Florida: Practical Tips for Small Business Owners. Part 1: Introduction to Florida Homestead and Other Protected Assets. Phillip B. Rarick, Esq. Rarick & Beskin, P.A. 6500 Cowpen Rd., Suite 204 Miami Lakes, FL 33014 www.raricklaw.com (305) 556-5209

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asset protection in florida practical tips for small business owners

Asset Protection in Florida: Practical Tips for Small Business Owners

Part 1: Introduction to Florida Homestead and Other

Protected Assets

Phillip B. Rarick, Esq.

Rarick & Beskin, P.A.

6500 Cowpen Rd., Suite 204

Miami Lakes, FL 33014

www.raricklaw.com

(305) 556-5209

prarick@raricklaw.com

introduction
Introduction
  • Integrated Estate & Asset Protection Planning
    • Definition
    • Why important to integrate Estate Plan with Asset Protection Plan
    • The “Living Trust Pink Pill Myth”
  • The Asset Protection Ladder: Not all Entities are Equal
  • Timing: When the Waters are Quiet
introduction cont
Introduction Cont.
  • Not based upon concealment. In a good plan, you want the creditor to know the estate is structured for maximum protection – this is simply good, prudent business practice, not unlike insuring your property.
  • If planning is based on concealment, advise client under our modern discovery rules it is doomed for failure.
introduction cont1
Introduction Cont.
  • Selecting An Asset Protection Attorney
    • Established Estate Planner & Asset Protection
    • On-shore vs. Off-shore Bias
    • National Asset Protection “Experts” selling “Bullet-proof” plans vs. Florida Attorneys
  • Whom Not to Mess With: SEC, FTC, and IRS
    • Regardless of what you think of the SEC
step 1 what is exposed what is protected
Step 1: What is Exposed & What is Protected
  • What is Protected: General Exemptions from Creditors
    • Homestead
      • Unlimited
      • The “three-headed” homestead Chameleon
      • Note: The following discussion concerns only the Florida Constitutional protection against forced sale. This “homestead” is often confused with the $50,000 homestead tax exemption and the 3% Save Our Homes cap that applies only to homestead property.
the three qualifiers for homestead
The Three Qualifiers for Homestead
  • Acreage
    • The acreage is limited to ½ acre of contiguous land within a municipality and 160 acres of contiguous land outside a municipality.
    • Note: Municipal property exceeding ½ acre can be protected using other entities, such as a 99 year lease to a limited liability limited partnership (LLLP).
the three qualifiers for homestead cont
The Three Qualifiers for Homestead Cont.
  • Residency
    • The debtor must be a permanent Florida resident and the homestead property must be his primary place of residence.
    • Property under construction is not protected until the owner secures a Certificate of Occupancy and in fact occupies the property.
    • A second home or investment property does not qualify as Florida homestead.
    • There is no waiting period: the homestead protection attaches the day you first occupy the property with the intent to make it your permanent home.
the three qualifiers for homestead cont1
The Three Qualifiers for Homestead Cont.
  • Ownership
    • Only “natural persons” qualify for homestead protection, thus eliminating property owned by irrevocable trusts, limited liability companies, corporations, and partnerships.
    • Property owned by a living trust can be homestead property, as well as property owned by a land trust.
exceptions to florida s homestead protection
Exceptions to Florida’s Homestead Protection
  • Tax liens,
  • Mortgages,
  • Homeowner association assessments, or
  • Mechanics liens associated with labor or materials to repair or improve the homestead property.
proceeds from sale of homestead property
Proceeds from Sale of Homestead Property
  • Proceeds are protected if the homeowner uses the money within a reasonable time to purchase a new homestead.
  • This protection can be lost if the funds are commingled or not used within a “reasonable time” to purchase a new home.
  • It appears that 2 years is a “reasonable time.”
take away points for protecting florida homestead
Take-away Points for Protecting Florida Homestead
  • Never transfer homestead to a corporation, LLC, or any entity other than a revocable trust.
  • If you rent & don’t occupy, you loose the protection.
    • Caution for Medicaid Recipient Clients: Don’t ever rent if you must go to an assisted living facility
  • You can only have 1 homestead.
  • If you have more than ½ acre in a municipality, only ½ acre is protected.
  • A QPRT – a qualified personal residence trust – does not qualify as homestead unless integrated with a 99 year lease.
  • Non-Citizens can rarely qualify for homestead.
  • If you sell your homestead, keep proceeds in a separate account.
wage exemption
Wage Exemption
  • Wages cannot be garnished if:
    • Head of Family: Providing more than ½ the support for a child or other dependent may exempt 100%
    • Not Head of Family: may exempt 75%
  • Take-away Points for Protecting Wage Exemption
    • If you have your own business, make sure you have an arms length employment agreement.
    • Don’t use business for personal expenses – unless provided for in the employment agreement.
    • Deposit wages in separate and discrete account denominated as a Wage Account. Do no commingle earnings with other income.
life insurance
Life Insurance
  • Term Portion
  • Cash Value
  • Take-away Points
    • Use an Irrevocable Life Insurance Trust (ILIT) for maximum protections and estate planning.
annuities cash value cash surrender value
Annuities & Cash Value (Cash Surrender Value)
  • Unlimited (outside of bankruptcy)
ira qualified plan benefits
IRA & Qualified Plan Benefits
  • Key Points
    • No dollar limitation
    • Rollover to spouse: Protected
    • Rollover to non-spouse beneficiary: Does not lose exemption generally unless commingle inherited IRA proceeds with other funds
  • Take-away Points
    • Never designate estate as beneficiary
    • If no beneficiaries are designated, the estate is default
    • Always have contingent beneficiaries and/or name trust as contingent beneficiary
    • Avoid dumb “Prohibited Transactions”
      • Example 1: borrowed from his IRA and lent to his closely held corporation
      • Example 2: transfers escrow accounts to IRA
    • Most Important: Have an experienced Retirement Plan Advisor who knows ERISA.