Does Moving Assets Under One Spouse Protect Your Assets?

Asset protection is a key consideration for many married couples, particularly those in professions prone to legal liability. One question that often arises is whether transferring assets to a spouse can shield them from creditors, lawsuits, or other financial risks. While this strategy might sound appealing on the surface, it’s important to understand the potential limitations and consequences, especially under Florida law.

Understanding Tenancy by the Entireties in Florida

One of the most important legal concepts for married couples in Florida is tenancy by the entireties. This is a special form of joint ownership available only to married couples, and it provides unique protection from creditors. When assets are owned as tenancy by the entireties, they are considered to be owned by the marital unit as a whole, rather than by each spouse individually. This means that if only one spouse is sued, the creditors cannot reach assets held in tenancy by the entireties to satisfy the debt.

Common assets that can be titled under tenancy by the entireties include real estate, bank accounts, and even certain personal property. As long as the asset was acquired during the marriage and is held in both spouses’ names, it may qualify for this protection.

However, this protection is limited. If both spouses are liable for a debt—such as a joint credit card or mortgage—the creditor can still pursue assets held in tenancy by the entireties. Additionally, not all assets can be easily retitled to take advantage of this form of ownership.

Transferring Assets to a Spouse: Is It a Safe Strategy?

Transferring assets into one spouse’s name to protect them from creditors might seem like a straightforward solution, but it’s not always foolproof. In Florida, this strategy may offer limited protection in some situations, but it can also raise significant legal risks.

If a creditor sees that you transferred assets to your spouse shortly before a lawsuit or other legal action, they may claim that the transfer was fraudulent. Florida’s Uniform Fraudulent Transfer Act (UFTA) allows creditors to challenge transfers that were made with the intent to hinder, delay, or defraud creditors. Even if the transfer was made in good faith, the timing and circumstances could lead to the reversal of the transaction.

Moreover, simply moving assets to your spouse may not protect those assets in the long run. If your spouse is later sued or incurs their own financial liabilities, the assets in their name could be vulnerable to their creditors. In many cases, couples may think they’re safeguarding their wealth, only to discover that they’ve inadvertently exposed it to new risks.

The Impact of Marital Status and Divorce

It’s also crucial to consider what happens to transferred assets in the event of a divorce. Florida is an equitable distribution state, meaning that marital assets are divided fairly—though not necessarily equally—between spouses during a divorce. Assets transferred into one spouse’s name could still be considered marital property, especially if they were acquired during the marriage or used for the benefit of both spouses.

In some cases, couples who transfer assets to one spouse may find that they are unintentionally contributing to a complicated divorce settlement. If the marriage dissolves, those assets might not be as protected as initially intended. This makes transferring assets as a form of protection a double-edged sword, particularly in states like Florida, where equitable distribution laws can complicate asset division during divorce proceedings.

Homestead Protection: A Unique Florida Advantage

While transferring assets to a spouse carries risks, Florida offers one of the strongest forms of asset protection in the country: homestead protection. Under the Florida Constitution, a primary residence (the family home) is exempt from forced sale by creditors, regardless of whether it is owned by one spouse or both.

This means that even if one spouse has significant personal debts or legal judgments, the family home is generally protected from creditors as long as it is their primary residence. This protection applies regardless of the home’s value or size, making it a powerful asset protection tool.

However, homestead protection does not extend to all types of creditors. Certain exceptions, such as mortgage lenders, tax authorities, or contractors with mechanic’s liens, may still have a claim on the property. Additionally, this protection only applies to your primary residence, meaning that vacation homes or investment properties may not receive the same level of immunity.

Alternatives to Asset Transfers

If moving assets to one spouse does not offer the level of protection you’re looking for, there are other strategies that may be more effective in Florida. Consider the following alternatives:

• Asset Protection Trusts: These trusts are specifically designed to shield assets from creditors. By placing assets into an irrevocable trust, they are no longer legally owned by you or your spouse, which can protect them from creditor claims. However, this strategy is more complex and may require the assistance of an experienced estate planning attorney to ensure compliance with Florida law.
• LLCs and Business Entities: For business owners, forming a limited liability company (LLC) or other business entity can help separate personal assets from business liabilities. This strategy ensures that personal assets are shielded if the business is sued or incurs debts.
• Retirement Accounts: Florida law provides strong protections for certain retirement accounts, including IRAs and 401(k)s. These accounts are generally exempt from creditor claims, making them an excellent way to safeguard your financial future without transferring assets to your spouse.
• Prenuptial or Postnuptial Agreements: For those concerned about the implications of divorce, prenuptial or postnuptial agreements can help protect assets in case of marital dissolution. These agreements allow couples to decide how their assets will be divided in advance, rather than relying on Florida’s equitable distribution laws.

Conclusion

While transferring assets to a spouse may offer some level of protection, it is not without risks, particularly in Florida. The effectiveness of this strategy depends on various factors, including the timing of the transfer, the nature of the assets, and the potential for creditor or legal challenges. More importantly, this approach can backfire if the spouse receiving the assets faces their own financial liabilities or if the marriage ends in divorce.

About the Author

Gideon Alper is an attorney who specializes in asset protection planning. He graduated with honors from Emory University Law School and has been practicing law for almost 15 years.

Gideon and the Alper Law firm have advised thousands of clients about how to protect their assets from creditors.