There are some assets that are exempt under federal law, but most exemptions
come from state law. Exemption planning is the process of reorganizing
one's wealth so that as much as possible is protected (or 'exempt')
by law from creditor attachment, even though it is still owned by that
individual. State protected assets vary greatly from state to state as
do the extent to which these assets are protected. However, there are
general categories of exempt assets set by both the federal government
and each state. Bankruptcy has its own exemptions which may or may involve
federal and/or state exemptions which apply only in bankruptcy.
Assets that are commonly exempt include:
- home equity
- wages
- pensions and retirement accounts
- profit sharing plans
- annuities and insurance
- tools of the trade
- certain household items
- burial plots
- jewelry and other personal possessions
Since the exemption laws do vary between states, you must check your own state laws to see which assets are specifically exempt in your state. List of Financial Planning Exemptions by State.
At first glance, you would think exemption planning is simple. After all,
if the law says an asset is exempt, then it's exempt. That's not
always so. There are always exceptions, caveats, and conditions to the
exemption laws. Knowing when an 'exempt' asset is really exempt
from a certain creditor and when it is not is what you would expect the
asset protection planners to know.
With our own clients, we mostly discuss exemption planning in a non-bankruptcy
context. However, when one files for bankruptcy the exemption rules change
considerably. Therefore, with exemption planning one must consider the
likelihood of an individual declaring bankruptcy in the future. Even if
bankruptcy is unlikely, one must plan for the contingency that it could happen.
The law of the state where one resides determines whether one may use
state exemptions only, or whether one may choose between state or federal
exemptions when they are in bankruptcy. If a state allows one to choose,
then one may choose one set of exemptions – but not both. The federal
exemption amount, in bankruptcy, may be doubled for a married couple,
although this may or may not be the case with the state exemptions. Note
that moving to a more exemption-friendly state before one files bankruptcy
only works if the move is made at least 730 days (about 2 years) before filing.
Financial Planning Exemptions on a Federal Level
To maximize your exemption protection, reach out to us today to receive
your complimentary preliminary consultation.
The Presser Law Firm P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(800) 999-9992 or e-mail Info@AssetProtectionAttorneys.com
www.AssetProtectionAttorneys.com
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