How do celebrities, like OJ Simpson, who lose their fortunes still live seemingly lavish lifestyles?
In: Other
By becoming judgement proof.
If you expect to be sued, you can liquidate the majority of your assets and then purchase the most expensive mansion you can outright buy in a state like Florida. That state’s homestead exemption, which does not let a court force you to sell your primary residence to satisfy a civil lawsuit, is very strong.
The Florida homestead exemption is unlimited. Whether your homestead is worth $100,000 or $10 million, it is protected against the claims of creditors. Otherwise, you could be forced to sell or relinquish many assets, except those with protections, i.e. pensions, primary residence.
In Tennessee, for example, the homestead exemption is limited to just $5,000, an amount set in the 1800s to protect the family farm from creditors. It is largely useless now to protect assets from creditors.
In bankruptcy, the Florida homestead exemption allows a primary residence of unlimited value to be protected from creditors as long as the debtor has lived in Florida for 40 months or more, and the property is not larger than half an acre in a municipality or 160 acres elsewhere.
Once the creditor’s case or the debtor’s bankruptcy has been discharged, then you sell the residence and there is all your money again. If you own the property outright, you can often borrow against it and use those funds.
However, fraudulent conveyance to avoid a judgement is illegal. Proving that crime requires ‘intent,’ which can be hard to judge. In most cases, you need to make these arraignments in advance, and certainly before you are subject to a lawsuit.
Rules vary by state, so definitely beware of advice from the Internet.
Latest Answers