Statutory Protection
Simply by being a permanent resident of Florida you enjoy certain asset protections under the Florida Statutes. Here are some:
Salary or Wages. Under Section 222.11 of the Florida Statutes, wages, earnings or compensation of a head of household which are due for personal labor or services, including wages deposited into a bank account (provided they are traceable and identified as such) are exempt from garnishment. A Florida resident is classified as “head of household” if they financially support someone for whom they have a legal or moral support obligation (spouse, child, or parent). For eligibility purposes, the dependant does not have to reside in the debtor’s primary residence. With a married couple, only one spouse can be a head of household. However, there are special precautions you should take so as not to commingle your hard earned money with funds that are not your wages or salary. Also, your wages and salary may only be protected for 6 months after depositing them into a bank.
This statutory exemption will not protect Florida debtors if they owe money to a federal government agency. Federal agencies can garnish up to 15% of your earnings even if you are exempt from garnishment under Florida law. Most people are aware that the IRS has extraordinary collection tools, but these powers are available to the federal government to collect all non-tax debts.
A federal agency may, without court order, order an employer to withhold 15% of your salary or, garnish distributions from your own business to satisfy a non-tax debt even if state law does not permit wage garnishment. However, a federal agency may not garnish your wages if you have not been in your current job for at least 12 months and you were involuntarily separated from your previous job.
Life Insurance Policies and Annuity Contracts. The Florida Statutes protect the cash value in insurance and all annuity policies from creditor claims. The insurance protection applies only to the cash surrender value of a life insurance policy for an owner or insured. Death benefits are not protected from the creditors of the policy beneficiary. The Florida courts have liberally construed the statutory exemption for annuities contracts and arrangements. It will also apply to the proceeds of personal injury settlements structured as an annuity.
Florida courts have liberally construed protection of annuity contracts and arrangements. Under this liberal interpretation, private annuities between family members are entitled to the exemption as are the proceeds of personal injury settlements structured as an annuity. Clients can gain additional protection by purchasing international annuities. Switzerland, perhaps provides the best option for international life insurance and annuity contracts.
In addition, the proceeds of the assets you purchase from the surrender value of your insurance and annuities are protected. Florida courts have also held that funds withdrawn from a cash value insurance policy and annuity payments are protected when deposited in a financial account, if the funds can be traced back to the exempt assets. A separate bank account will help.
Pension and Profit Sharing Plans, IRAs. In efforts to defer paying high tax rates during your years of employment many readers are well advised to contribute maximally to Pensions, IRA’s and other such retirement plans. Section 222.21(2)(a) of the Florida Statutes provides that any money or other assets payable to participant or beneficiary in a qualified retirement or profit sharing plan is exempt from all claims from creditors of the beneficiary or participant. Florida law also specifically protects pension plans designated for teachers, county officers and employees, state officers and employees, police officers, and firefighters. It is important to note that a debtor’s IRAs are exempt from creditor claims, but that inherited IRAs are not exempt from creditors.
Disability Income. The right to and the distributions of Disability income benefits are also exempt from creditors in Florida.
Automobile Exemption. A Florida resident may protect up to $1,000 of equity in an automobile. This amount is the same for bankruptcy purposes. If you have more equity in a vehicle, trustees are authorized to use your equity (above $1000 – you get to keep this) to repay creditors on a pro-rata basis.
Miscellaneous Exemptions. The Florida Statutes provide asset protection exemptions for professionally prescribed health aids, qualified prepaid college tuition, hurricane savings accounts, medical savings accounts, and unemployment benefits. A minor’s custodial account (Uniform Gift to Minors Account) will be protected from the debtor’s creditors because the account is considered property of the minor beneficiary.
*** Some Florida residents may be under the misconception that their IRA or other accounts will be protected in a state other than Florida. This is not the case. Your accounts are deemed to be located in the state in which your account was originally opened. Residents should investigate the protections of those states and move them to FL if necessary.
