Life is unpredictable—and so is financial risk. These risks make asset protection critical. A single car accident, an economic downturn, or a business closure can trigger lawsuits, debt, and creditor claims that threaten everything you’ve worked for. Many Floridians don’t realize how exposed their assets are until it’s too late.
That’s where strategic legal planning comes in. At Kramer Green, our Pembroke Pines asset protection lawyers help individuals and families use various tools to safeguard wealth from creditor reach. In this blog, we’ll explore whether Florida trusts are the best choice for giving you peace of mind and protecting your legacy for those who matter most.
Understanding Trusts
Most people think that establishing a self-settled or asset protection trust is an effective way to protect their assets from creditors. While a trust can be very effective in avoiding probate after one’s death and keeping your financial matters private, you generally can find better ways to protect your assets under Florida law.
First, it is essential to understand how a trust works. A grantor (also referred to as a settlor) creates a legal entity known as a trust and transfers ownership of assets to it. The named trustee of the trust then has a fiduciary duty to manage the assets that the grantor has placed in the trust for the benefit of one or more beneficiaries. Different types of trusts exist for various purposes, and state law determines the effectiveness of any trust in achieving its purpose.
Self-Settled Trusts for Asset Protection
In the case of a self-settled trust, the grantor is also the beneficiary of the trust. In other words, a grantor transfers ownership of the assets to a trust solely for his or her own benefit. Trusts are self-settled trusts if the grantor is also the beneficiary, even if they are irrevocable trusts.
Several states have established laws that make self-settled trusts a valuable tool for protecting assets from creditors. For instance, Wyoming, Nevada, Delaware, Alaska, and Hawaii are some states that have laws allowing individuals to form domestic asset protection trusts. However, Florida is not one of those states; Florida does not have a law authorizing trusts for asset protection. In fact, several Florida courts have uniformly expressed the state’s public policy against the formation of asset protection trusts.
As a result, self-settled trusts created in Florida do not protect assets from creditors. Under Florida law, a creditor can collect from a debtor’s interest in a self-settled trust, which undermines the primary purpose of an asset protection trust.
Many people relocate to Florida for retirement, and some may have existing asset protection trusts from states that specifically authorize this type of trust. However, it is unclear what state’s law would apply if a creditor in Florida tried to reach assets held in an asset protection trust formed in another state. In considering cases such as these, some courts have determined that Florida law, not the law of the state in which the trust was created, applies. Therefore, even if you have a valid asset protection trust created in another state, you have no guarantee that the trust will be effective as an asset protection tool in Florida.
Trusts to Benefit Others
While Florida law does not permit you to create a self-settled trust, i.e., a trust to benefit yourself, it does allow you to create a trust to benefit – and offer asset protection – to others. For example, under the Florida Trust Code, a married couple can create a revocable living trust. Typically, you and your spouse are the grantors, trustees, and beneficiaries of the trust, which makes it a self-settled trust. Therefore, you and your spouse cannot use the trust as a means of asset protection.
However, after you and your spouse both pass away, the trust automatically becomes irrevocable. Your beneficiaries, as named in the trust, then receive the trust assets according to the terms of the trust document. Since these beneficiaries become entitled to trust assets only after the grantors (you and your spouse) have passed away, those beneficiaries are not also grantors of the trust. Therefore, the trust is not self-settled, and the beneficiaries of your trust can enjoy asset protection for the trust assets. In other words, if properly drafted, the trust can provide the beneficiaries’ inheritance with asset protection from divorce, their creditors, and bankruptcy.
Frequently Asked Questions (FAQ)
Can I use a trust to protect my assets from creditors while I’m still alive in Florida?
Not effectively. Florida law does not recognize self-settled asset protection trusts—trusts where you are both the grantor and beneficiary—as a valid shield against creditors. Even if the trust is irrevocable, Florida courts allow creditors to reach your interest in the trust. For asset protection during your lifetime, you may need to explore alternative strategies such as limited liability entities, tenancy by the entirety (for married couples), or the homestead exemption.
If I created an asset protection trust in another state, will it still protect my assets after I move to Florida?
Not necessarily. Florida courts typically apply Florida law to determine creditor access—even if the trust was validly formed in a state like Nevada or Delaware. That means your out-of-state asset protection trust could lose its effectiveness if you become a Florida resident and a creditor tries to reach your assets. It’s important to consult a Florida-based asset protection attorney to reassess your strategy.
Shielding Your Future: Protect Your Assets from Creditors
If you’re ready to explore the most effective means for shielding your assets from creditor claims, an Aventura asset protection attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is here to guide you. Our team provides strategic, personalized guidance to help you protect your financial future. Call us today at (954) 966-2112 or contact us online to schedule a confidential consultation.