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Florida Exemption Planning

Volume II, Number 2 – March 1993

Wage Accounts and Other Exemptions


Exemptions are provided by the laws of each state in order to protect specified property interests from being reached by creditors and bankruptcy courts. Each state may adopt its own exemption laws, or may choose to adopt the federal bankruptcy exemptions, or may permit its residents their choice. Florida Statutes Chapter 222 sets forth the exemptions available to Florida residents for both state and federal purposes, and provides, in addition to those exemptions, that an individual debtor may exempt, for bankruptcy purposes, the federal exemptions specified in Section 522(d)(10) of the Bankruptcy Act. In this issue we will examine some of Florida’s exemptions.


Florida Statute Section 222.11 provides that the wages of a “head of a family” shall not be subject to attachment or garnishment. This means that such wages cannot be reached by a creditor, except for alimony and child support payments. The exemption extends to any bank account maintained by the debtor when the funds in the account can be traced to and identified as wages.

In order to qualify for this exemption, payments must constitute “wages” owed to the “head of a family”. “Wages” are defined as the payment of money or “other thing” for personal labor or services. A person is a “head of a family” if he or she provides more than one-half of the support of another person. If the support test is satisfied, a person will qualify as a “head of a family” regardless of whether married, divorced, never married, legally separated, widowed, or otherwise living alone. The dependent need not live with the person seeking to qualify as a head of a family, and even supporting an ex-spouse can qualify the payor as a head of a family.

How would a creditor or bankruptcy trustee attack the wage exemption? Some attacks have been based upon the contention that the term “wages” does not include payments to independent contractors for personal services. The decided cases have held both ways on this issue, but the most recent case has held that payments to independent contractors for personal services will qualify as wages.

The exemption has also been attacked on the basis that the alleged wage payments were in fact disguised payments for something else. For example, a creditor might argue that a doctor taking a large salary from his P.A. is in fact receiving an income payment generated by the P.A.’s use of its equipment, and/or that the doctor is receiving a share of the fees paid to the P.A. for services of its staff. Carefully drafted employment and other agreements and careful recordkeeping will go a long way to mitigate this type of attack.

How can you preserve the exemption for wages received, but not spent? The funds must be deposited into a bank account where they can be traced and identified as wages. The courts have denied the exemption for wages, which might otherwise have qualified, when the wages werecommingled with interest payments, capital gains, and other funds.

The conservative approach: Incorporate your business, implement employment and other agreements where appropriate, set up your wage account so that no interest will be credited to it (have any interest earned on the wage account either mailed directly to you or credited to another account), deposit only the wages of the statutory head of the family into that account, and include the designation “WAGE ACCOUNT” in the account title.


Florida Statute Section 222.14 provides that the cash surrender value of life insurance policies insuring the life of a Florida resident and the proceeds of (ie., the payments from) annuity contracts issued to Florida residents are exempt from the claims of creditors. For this purpose, an annuity includes a properly structured private annuity — that is, an annuity received by a debtor from a trust he or she establishes.

This exemption has been unsuccessfully attacked in the Florida legislature in recent years, but the rumblings are that it will be attacked again in a forthcoming legislative session.

The previous bill would have “grandfathered” the exempt status of existing contracts, and there is no reason to expect a future bill would provide differently. We’ll keep you posted.

Unlike the wage exemption statute, the Annuity/Cash Surrender Value exemption statute does not specify how a debtor can maintain the exempt status of unspent annuity proceeds. However, recent cases have established the procedure to be essentially identical to that discussed above for wage bank accounts — the funds in a bank account must be traceable to and identifiable as annuity proceeds.

A corollary to this exemption is one found in Florida Statute Section 222.13, which exempts the proceeds of life insurance issued on a Florida resident-decedent from the claims of his or her creditors. This exemption will not be available, however, if the life insurance proceeds are payable to the debtor-decedent’s estate or personal representative.

The obvious way to make sure this exemption will be available is to be certain never to name your estate or personal representative as the beneficiary of your life insurance proceeds. In some cases, sound estate planning would dictate that not only should you not name your estate or personal representative as your life insurance beneficiary, but perhaps an irrevocable life insurance trust is indicated for estate tax savings purposes.


Under Florida Statute Section 222.18, disability income benefits received under any policy or contract of life, health, accident or other insurance is exempt from the claims of creditors.


There had been some uncertainty regarding the ultimate validity of Florida Statute Section 222.21, which exempts IRA’s and qualified pension benefits from the claims of creditors. Since the U.S. Supreme Court’s decision in Patterson v. Shumate last June (See AP NEWS, Vol. I, No. 2), we feel quite a bit more certain that the Florida exemption statute is valid. The statute provides that any money or other assets payable to a participant or beneficiary, and the interest of a participant or beneficiary in, any IRA or other ERISA qualified retirement plan is exempt from all claims of creditors of the participant and the beneficiary.


We are often asked about the efficacy of “11th hour” conversions of non-exempt assets into exempt assets, such as by paying down a mortgage on your homestead, or by the purchase of a life insurance or an annuity contract. Our best answer is that in some situations this type of planning will be permissible, while in other situations it will not be permissible. A thorough analysis by a qualified attorney is warranted prior to undertaking any such transfers on your own.

Donlevy-Rosen & Rosen, P.A. is a law firm with a focus on asset protection planning and offshore trusts. Attorneys Howard Rosen and Patricia Donlevy-Rosen co-founded the firm in 1991, and have since become recognized authorities in the field of asset protection planning. Let us explain the significant difference our experience can make when protecting your assets. Call 305-447-0061 or simply visit our contact page