Asset Protection Glossary
Affidavit of Solvency
An Affidavit of Solvency is a sworn statement which indicates that the transfer of assets an individual or entity is about to make will not render that individual or entity bankrupt.
A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.
A person or entity to which a business owes money.
A charging order is the remedy a personal creditor has against Limited Liability Company (LLC) or Limited Liability Limited Partnership (LLLP) interests. A charging order gives a creditor only the right to receive capital distributions from the LLC or LLLP. The catch here is that the members of the LLC or partners of the LLLP will not be required to make a distribution while a lurking judgment creditor exists.
Fraudulent Conveyance/ Fraudulent Transfer
The illegal transfer of property to another party in order to defer, hinder or defraud creditors.
The Florida Constitution exempts homestead property from levy and execution by judgment creditors. Florida courts have liberally expanded the definition of homestead property to include more than just a single-family home. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres in any county in Florida.
A party to which a debt is owed that has proved the debt in a legal proceeding and that is entitled to use judicial process to collect the debt.
Limited Liability Company
A type of business entity formed upon filing articles of organization with the proper state authorities and paying all fees. LLCs provide the limited liability to their members, and can have pass-through taxation, partnership taxation, or corporate taxation. Asset Protection in this type of vehicle is generally superior than that provided in an “S” corporation due to the limited remedies available to the outside creditors of an LLC.
Limited Liability Limited Partnership
The limited liability limited partnership (LLLP) is a relatively new modification of the limited partnership, a form of business entity recognized under Florida and U.S. law. Like a limited partnership, an LLLP is a limited partnership and consists of one or more general partners and one or more limited partners. The general partners manage the LLLP while still maintaining limited liability. The limited partners typically only have a financial interest.
Offshore Asset Protection Trust
An offshore asset protection trust is an irrevocable trust formed in a foreign jurisdiction, such as Nevis, Grand Cayman, or Jersey. This type of trust, once established, cannot be amended or canceled. It typically provides certain asset protection and tax advantages because all control over the assets contributed to the trust has been relinquished. An offshore asset protection trust will typically have a Trustee in the foreign jurisdiction of choice. “Going offshore” permits clients to legally take advantage of foreign laws favorable to protecting their assets and privacy, while simultaneously deterring creditors and lawsuits.
An offshore LLC is a business entity formed under the laws of a foreign jurisdiction, such as Nevis, Grand Cayman, or Jersey. The LLC will typically have a foreign manager who will manage both offshore and onshore investments in the name of the LLC. “Going offshore” permits clients to legally take advantage of foreign laws favorable to protecting their assets and privacy, while simultaneously deterring creditors and lawsuits.
A person or entity to which an individual owes money.
Tenants by the Entirety
A type of concurrent estate in real property held by a husband and wife whereby each owns the undivided whole of the property, coupled with the right of survivorship, so that upon the death of one, the survivor is entitled to the decedent’s share. A tenancy by the entirety allows spouses to own property together as a single legal entity. Under a tenancy by the entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety.