In the wake of the Great Recession, many people suffered severe losses and some continue to find themselves subject to creditors’ claims. Often, the first instinct is to try to “shelter assets” through transfers to family, friends, or protective structures such as retirement accounts or trusts. Like all states, however, Florida has “fraudulent transfer” laws that prohibit transfers to avoid creditors. Fraudulent transfers generally arise when an individual waits too long to engage in “asset protection.” To be effective, protective planning must be accomplished early — before claims arise.
One exception — and a salvation for debtors who haven’t properly implemented an asset protection plan — is the safe haven offered by Florida’s homestead protection. In the precedent-setting case of Havoco v. Hill, an out-of-state debtor being pursued by a creditor invested unprotected funds in a Florida home and claimed his intent to reside in Florida. The purchase appeared to represent a classic fraudulent transfer. Nevertheless, the Florida Supreme Court allowed the debtor to keep the home and established the principal that fraudulent transfer laws do not apply to homestead purchases.
Although it is more prudent to engage in asset protection before the need arises, for those who have not properly planned, Florida’s homestead protection offers shelter. The services of a REALTOR® in these situations can be crucial since any person subject to a judgment, whether or not a current Florida resident, can shelter liquid assets by purchasing and properly homesteading Florida property.