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Asset Protection – It’s Easier than You Think

When people think about asset protection, they tend to conjure up images of complex financial instruments arranged by offshore agents. Though this sophisticated planning may be an option for certain high-net-worth individuals, most of us don’t need it. Florida residents can use some relatively simple, “low tech” techniques to protect assets.

Spousal Ownership

Married couples in Florida possess an extremely powerful asset protection tool, called “tenancy by the entireties.” It provides legal protection lasting as long as the marriage is intact and both spouses are alive. It cannot be destroyed by one spouse acting alone. Assets owned jointly by a husband and wife as tenants by the entireties are protected from creditors of one spouse. All types of marital property are protected, including financial accounts where tenancy by the entireties protection is presumed unless a contrary intent is expressed on the account signature cards. If a protected asset is sold, this protection follows the sale proceeds. However, if both spouses owe a joint debt to the same creditor, their joint assets are no longer protected. If an asset is owned by just one spouse, that asset is exposed to that spouse’s creditors. To solve this problem, that spouse can convey the individually-owned asset to both spouses jointly, which would create tenancy by the entireties protection.


Florida homestead law makes the phrase “a man’s home is his castle” true in many respects, enshrining asset protection of the home in the state constitution. Florida homestead law protects a principal residence from the claims of most non-bankruptcy creditors with no monetary limit.

Homestead protection is only available to “natural persons” meaning a house owned by a corporation doesn’t have this protection. A revocable living trust owning a house qualifies as a natural person, although specific language is recommended in the deed.

Homestead protection is subject to a ½ acre limitation within municipality. A creditor can force a sale of homestead sitting on more than ½ acre and claim a proportionate amount of the sale proceeds attributable to the non-exempt portion.

Homestead protection continues after a home is sold as long as the sale proceeds are reinvested in a new homestead; although it’s advisable to deposit the sale proceeds into a dedicated “homestead” bank account. The Florida homestead protection is so strong that assets otherwise exposed to creditors can be shielded by investing them into a homestead property or paying down a mortgage on an existing homestead. Certain creditors are not bound by the homestead shield: most notably the IRS, homeowner associations and consensual lien holders.

If a Florida debtor files for bankruptcy, the state homestead protection is curtailed. For full protection, the debtor must’ve been a Florida resident for two years and the homestead property must’ve been owned by the debtor for 40 months before bankruptcy petition is filed.


Trusts come in a variety of flavors. Revocable living trusts are the most well-known, yet are not an asset

protection tool, since these trusts are revocable at any time. Irrevocable trusts are quite different because they can’t be revoked. Although they provide effective asset protection, they come with a price, namely loss of control. Testamentary trusts are wonderful asset protection tools. They’re drafted into wills or revocable trusts but do not come into existence until death. They even offer the option to make a bequest to a child without worrying he or she is irresponsible with money or married to an untrustworthy spouse.

Life Insurance

Florida law offers very generous creditor life insurance protection. For life insurance insuring the policy owner, the cash surrender value is protected from the insured’s and beneficiaries’ creditors, provided the insured is a Florida resident. High risk professionals such as doctors can benefit greatly by investing otherwise exposed assets into a permanent life insurance policy, shielding those assets while also achieving income tax-free build-up of cash value. The death benefit paid on an owner-insured policy is protected from the insured’s creditors, unless the insured’s estate is designated as the policy beneficiary. If the death benefit is payable to the insured’s revocable trust, careful attention must be paid to the language used in the policy beneficiary designation to avoid exposing the death benefit to the insured’s creditors.

IRAs and Other Retirement Plans

IRAs and other retirement plans are great vehicles for protecting assets. Traditional and Roth IRAs (but not (SEP and SIMPLE IRAs) are protected if both the account and holder reside in Florida. There’s no dollar limit to the protection under Florida law, although monetary limits exist in bankruptcy. Protection continues if an IRA is inherited, although protection is uncertain in bankruptcy cases. Once made, required minimum distributions and hardship withdrawals aren’t protected, although rollovers have protection under both Florida and bankruptcy law. Protection is also lost if the account holder engages in a “prohibited transaction,” such as taking a loan from the IRA. Other retirement plans are protected without limit if they are ERISA “qualified plans.” The plan assets are protected from creditors of the employer-sponsor and participants. Uncertainty exists about whether plan assets are protected when the sole participant is the business owner. Protection can be ensured if the owner covers other non-owner employees as participants. As with IRAs, protection is lost once distributions are made. Plan assets aren’t protected in divorce. Finally, deferred compensation isn’t protected because it doesn’t qualify as wages. Asset protection isn’t just for the wealthy. These easy ways can protect your assets, regardless of income level.

William A. O’Leary is an estate planning, probate and tax attorney with Glazier & Glazier, P.A. in Jacksonville. He can be reached at (904) 997-1033 or woleary@glazierlawfirm.com.