Asset protection is an excellent estate planning tool to help ensure the efficient transfer of assets to another party and to protect, with certain limitations, said assets from creditors. The primary restriction on the transfer of assets is the Florida Uniform Fraudulent Transfer Act (FUFTA). Fla. Stat. § 726.105 (2020). If a transfer is deemed fraudulent, a creditor can petition to court to avoid the transfer or seek payment for the value of the asset. Thus, it is critical to avoid any “badges of fraud”.
Fla. Stat. § 726.105 provides as follows:
(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: 1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or 2. Intended to incur or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due. When determining whether a transfer is fraudulent, the courts look to the following statutory criteria: whether (a) The transfer or obligation was to an insider; (b) The debtor retained possession or control of the property transferred after the transfer; (c) The transfer or obligation was disclosed or concealed; (d) Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (e) The transfer was of substantially all the debtor’s assets; (f)The debtor absconded; (g) The debtor removed or concealed assets; (h)The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (i) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (j) The transfer occurred shortly before or shortly after a substantial debt was incurred; (k) The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
Florida Homestead Property
Florida Property Art. X, 4(a), Fla. Const. provides protection for a homestead against the judgement of creditors. Specifically, the section states: There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, . . . the following property owned by a natural person: (1) a homestead, . . . if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family; (2) (2) personal property to the value of one thousand dollars. Thus, a person’s homestead, within a municipality, it protected up to ½ of an acre, that acre being contiguous and including the dwelling.
If your house is on one parcel or land that is connected to an adjacent vacant parcel of land that you also own, the vacant land might not be protected. part of your homestead property is vacant land connected to the homestead proper. The Middle District bankruptcy court held that “[t]he Debtor is not entitled to exempt the Second Parcel under the Florida constitutional homestead exemption. The Second Parcel has its own address, house, and driveway and is not used by the Debtor as her residence. So, even though it is contiguous to the Debtor’s home, the two parcels are not used in connection with one another.” In re Fowler, 2016 WL 1444195, *3 (Bankr. M.D. Fla. 2016). In that case, the court found that the separate parcel was not protected “because the Debtor’s home is a separate structure on a separate parcel with another address than the home occupied by the Debtor’s adult daughter. For all legal purposes, it is a separate and distinct residence from the Debtor’s home . . .” However, the homestead protections of the Florida constitution or liberally construed in favor of the debtor. JBK Associates, Inc. v. Sill Bros., Inc., 191 So.3d 879 (Fla. 2016); Lopez; Callava v. Feinberg, 864 So.2d 429 (Fla. 3d DCA 2004); Hospital Affiliates of Florida, Inc. v. McElroy, 393 So.2d 25 (Fla. 3d DCA 1981); In re Yettaw, 316 B.R. 560 (Bankr. M.D. Fla. 2004).
However, in the case of In re Mohammed, 376 B.R. 38 (Bankr. S.D. Fla. 2007), the debtor was able to establish that the vacant lot attached to there was part of their homestead as it was consistently used as the backyard of the property. We recommend putting up a fence around the exterior of the vacant lot, or adding patio furniture/outdoor BBQ area, storage shed, garden…something that shows you use the vacant lot, in its entirety, as one property.
If you are not sure whether you are taking advantage of Florida’s homestead protections, you should contact us immediately to set up a free 30-minute consultation with a qualified member of our team.
Florida is a debtor friendly state. However, it is our philosophy that it is better to be safe than sorry. We highly recommend proper estate planning BEFORE there is even a hint of being sued – in any capacity.
Asset protection strategies include:
- Estate Planning
- Properly incorporating your business (limited liability)
- Obtaining the proper type and amount of insurance,
- Utilizing Florida Homestead protections
- Utilizing Tenancy by the Entireties if applicable
At the Horton Law Group, we treat our clients like family. We want you to have peace of mind that both, your family and your estate, are protected.
Why Hire the Horton Law Group, P.A?
The principal partner at the Horton Law Group, P.A., Attorney Sommer C. Horton, has been drafting quality estate plans for 20 years. She is also an experienced and aggressive estate litigator. She anticipates issues that may be the subject of litigation and she tries to dispel those issues when drafting estate plans, so litigation can be avoided in the future. She is highly regarded for her creativeness, strategic judgment and her uncanny ability to deliver persuasive legal arguments in the courtroom. She has a tremendous skill for being an aggressive advocate for her clients, while being one who understands and appreciates how trying litigation can be, thus, she is extremely sensitive to her clients’ needs.
Ms. Horton is passionate about the law and believes in seeking justice for her clients in an ethical and economic manner. Ms. Horton fights for each and every one of her clients – every step of the way. Ms. Horton will spend time with you to make sure you understand the law, understand your rights and she will draft your estate plans for you so that you and your family are protected. In addition, she can assist you with your business planning, estate planning, and asset protection needs too.
The Horton Law Group, P.A. is a boutique civil litigation law firm that only takes on a limited number of cases so that personal attention can be given to every client. Make the right call – schedule a free 30-minute consultation with Ms. Horton. You can make an appointment by calling 561-299-0018 or emailing email@example.com.