One of the prevalent theories behind wealth preservation is to move assets away from a potential creditor’s reach. To prove that a fraudulent transfer has occurred, the creditor has to show that the debtor had actual intent to hinder, delay, or defraud creditors. According to Florida Statute 726.105, in determining actual intent, consideration may be given to:
- The debtor removed or concealed assets.
- Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with a suit.
- The transfer or obligation was disclosed or concealed.
- The debtor retained possession or control of the property transferred after the transfer and many other factors.
Florida Statutes also give creditors remedies to obtain relief from fraudulent transfers. Creditors may void the transfer or obligation to the extent necessary to satisfy their claim or put an attachment or other provisional remedy against an asset that has been transferred.
Unfortunately today, far too many professionals and business owners are at risk for frivolous lawsuits and overzealous jury verdicts. As a result, the ideal time to create a wealth preservation plan is prior to being sued or threatened with a suit. By creating layers of insulation between individuals and their potential creditors, you can significantly reduce your vulnerability to lawsuits and other claims.
Asset Protection Tools to Utilize
These are three asset protection tools that can be immediately utilized.
- Limited liability company. When properly structured, assets in a limited liability company are legally separate from its owner and can provide significant protection from creditors.
- Irrevocable trusts. An individual may segregate an asset from the claims of creditors and remove the asset from their taxable estate by placing the asset into an irrevocable trust.
- Retirement benefits. Qualified plans, which include 401(k) plans and profit-sharing plans, are protected from the claims of creditors by federal law. Inherited IRA accounts are also creditors protected under Florida law.