By Phil Rarick, Weston Trust Attorney, and Jasmine Benitez, Legal Assistant

Many real estate investors wrongly believe that a Florida Land Trust can offer asset protection. While this type of trust is known for providing privacy and simplifying estate planning, they do not provide comprehensive protection from creditors or legal claims. A better option is often a multi-member Florida limited liability company with a strong operating agreement that takes advantage of Florida’s anti-Olmstead law.

What Is a Florida Land Trust?

A Florida Land Trust is a legal structure where a trustee holds the title to a piece of property, but the beneficiary (property owner) maintains control. The beneficiary has all rights to use, manage, and profit from the property, while the trustee’s role is to handle administrative tasks. One of the most notable benefits of a Land Trust is that the beneficiary’s identity remains private, as the trustee’s name appears on public records instead.

Note: This means that if you wish to protect your privacy, then you cannot be the Trustee; you need to find a third party whom you trust to serve as Trustee.

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Can a Florida Land Trust Protect Your Assets?

While a Land Trust offers privacy, it is important to clarify that it does not provide true asset protection in the way that many people assume.

1. Limited Protection Against Creditors

A Florida Land Trust does not protect property from creditors or legal judgments because it is typically a self-settled Trust. If you face a lawsuit or have outstanding debts, creditors can still pursue the property held in the trust. Even with a Florida Land Trust, a creditor who obtains a judgment against you can still gain access to the property. The trust does not block creditors from identifying the beneficiary or forcing the sale of the property.

2. Lack of Lawsuit Protection

While the Land Trust keeps your name off public records, it does not prevent lawsuits or other legal actions from impacting on the property. If you are sued personally, your real estate holdings may still be at risk, as the trust doesn’t offer the same protection as forming an LLC or other business entities that legally separate assets.

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How Can a Florida Land Trust Be Used in Your Estate Plan?

While this trust itself does not fully protect assets, it can still be part of a broader asset protection strategy.

• Simplified Estate Planning: A Land Trust facilitates the easy transfer of property to heirs without probate. However, this advantage does not extend to asset protection against creditors.
• Combined with an LLC: For stronger asset protection, pairing a Florida Land Trust with a Limited Liability Company (LLC) can help separate your personal assets from your real estate holdings. An LLC offers protection from creditors by shielding your assets from liability tied to the property.

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Conclusion

Get it right the first time. To explore your best legal options to protect your real estate investments, contact an experienced Weston estate planning attorney who also concentrates on asset protection.

For more information, contact Phil Rarick, Weston Trust Attorney, at info@raricklaw.com.

Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on the information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney who is experienced in Florida trust law. Your receipt of information from this website, blog, or Miami trust attorney does not create an attorney-client relationship and the legal privileges inherent therein.

Here is the good news/bad news I received from my bank today regarding my Paycheck Protection Program (PPP) Application: The good news: your application has been approved; the bad: the SBA is out of money and you must wait for Congress to refund the program!

Although I have heard of a few small businesses that have received funding I am guessing that most persons reading this letter have encountered similar frustrations. Note: if you have received funding, please so reply.

We predicted in my first letter regarding PPP that the $349 billion fund would run out of money and this Thursday it did. It lasted two weeks! For an interesting map on where the funds were distributed nationwide see PPP Loan Allocation Map.

My message to you now is don’t give up. Yes, many small businesses with average monthly payroll over $1 million got preferential treatment by the big banks. However, the banks are incentivized under the SBA program to make small loans under $1 million.

And more encouraging: there is strong bi-partisan pressure to refund the program. (If only Congress could stop the bickering and see the urgency of the threats to millions of small businesses.) Regardless, if you have applied and are waiting to get approval, keep checking with your bank to make sure they have all necessary documentation and try to get confirmation your application has been approved. If you have not applied, do so immediately.

My son-in-law is a senior manager for a major regional bank in the western states and is working over-time this weekend to continue to process applications. My bank advisor also tells me she is working this weekend on her bank’s back-log of applications. Both banks believe the program will be refunded. I think that is a good bet.

The Covid-19 Pandemic has changed the world as we know it and presented daunting challenges we have not encountered in our life time. It requires a total review of your estate plan and business entities to assure you are taking full advantage of Florida laws designed to protect your family and business.

The hard new reality: What plan was best for you prior to 2020 may not be what is best for you today

Take this three minute survey for a quick assessment:

If single: Special 2020 Asset Protection Checklist for Single Professionals

If married: Special 2020 Asset Protection Checklist for Married Professionals Note to All: Two important legal documents for everyone over age 18:

• An up-to-date Florida specific Durable Power of Attorney
• A comprehensive Florida Health Care Surrogate

Special note to all parents with college students and young adults:

We now know that COVID-19 can attack any age. The last people who consider a DPA and Health Care Surrogate mentioned above are young adults. If you are a parent with adult children over age 18, I urge you to convince your sons or daughters to secure these important legal instruments. For a flat fee, we are available to prepare these documents, review the key legal provisions with your adult children, and email them for signing.

We will get through this together, as we did after Pearl Harbor and 9/11, and will be a stronger, more united country. Stay well and stay safe!

You can always count on the Americans to do the right thing – after they’ve tried everything else. – Winston Churchill.

Millions of small business owners and self-employed have filed for loans under the Paycheck Protection Program because part or all of the loan can be forgiven if you retain your employees and maintain their salary levels.

Okay, we know, as of this writing, millions have applied and few have received!

But assuming SBA gets through this current bottle-neck and the funding starts to flow, then your focus will be on maxing out the amount that can be forgiven.

The SBA will forgive the part of your loan that covers the first eight weeks of payroll, mortgage interest, rent, and utility payments immediately after you receive funding. You must use 75% of the borrowed loan for payroll costs; only 25% can be for mortgage interest, rent, and utilities.

The SBA will not forgive the portion of the loan used for other expenses; this part of the loan will be maintained at a 2 year loan at 1% interest rate. Loan payments are deferred for the first 6 months of the loan although interest will accrue during this time.

So even if part of your loan is not forgiven, the loan terms are exceptionally favorable for you – maybe this explains why many banks have been lying low in the grass and not soliciting applications because they simply do not want to take on a boat-load of low interest rate loans or short term loans that are quickly forgiven.

So here are 5 quick tips for maxing out your loan forgiveness:

1. If possible, do not reduce the number of full time employees during the 8 week period. The SBA will do a Head Count Analysis for this period and reduce the forgivable portion of your loan according to a head count formula.

Note #1: The CARES Act allows the business to remedy the forgiveness amount by June 30, 2020, but it is still unclear how mechanically you do this. Expect further SBA guidance on this point.

2. If possible, do not reduce employee salaries during the 8 week period. The SBA will do a Wage Analysis and reduce the forgivable portion according to their wage analysis formula for any such reduction. But see Note #1 above.
3. Keep the loan funds in a separate bank account and only withdraw to cover eligible expenses.
4. Keep a separate expense account to accumulate all eligible costs.
5. Document all eligible costs.

For a deep dive into the tax benefits for small business under the CARES act I highly recommend for other attorneys and professional advisors the recent webinar by estate tax lawyer, super-guru and friend Alan Gassman: Update On The Paycheck Protection Act Loan Rules.

Here is an updated calculator from Turbotax: Stimulus Check Calculator When Will Checks Arrive?

If you signed up for direct deposit on either your 2018 or 2019 tax return, the IRS reportedly will start issuing electronic deposits on April 9 and they should show up in your bank account by April 14. However, remember, this program is fluid and these target dates are subject to change.

If you receive Social Security Benefits and usually don’t file a tax return, the IRS will use the information from your Social Security benefits statement to calculate the stimulus check amount. They will send the check electronically if that is how you typically receive your Social Security payments.

Note: For persons who don’t file a tax return, the IRS plans to create an on-line portal where you can file a “simple return” to provide your bank account information. This portal should go live within the next few weeks.

If the IRS has to send you a paper check, priority will be given to lower income persons; higher income persons will wait longer to get their checks.

Quick Tip: If you want to try to get your check sooner, then file your 2019 tax return as soon as possible and sign up for direct deposit.

In these challenging times, we are here to help you, your family and small business successfully navigate this massive but temporary storm. We will get through this together! Look for our future alerts.

1. No state income tax
2. Two year statute of limitations for future creditors
3. Two year statue of limitations or .5 year from date of discovery for pre-existing creditors
4. No spouse/child support exception for creditors
5. No pre-existing torts exception creditors

Conclusion

Choosing the right jurisdiction for your asset protection structure is only one of many key considerations in preparing a structure that is best for you, your family, and your budget. This is a specialized area of the law where you need a trust attorney experienced in asset protection.

For more information about Nevada trusts or to schedule a consultation, contact attorney Phillip B. Rarick, Miami Trust Attorney, with over 20 years of experience, at info@raricklaw.com or call 305-709-2858.

Special Note The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult a Miami asset protection attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

Here is a simple fact: most small businesses cannot afford or even survive a major dispute between partners if the dispute ends up in court. Such disputes can doom the small business due to interruption of the company business, distract the principal partners from focusing on growth, and soak up all capital needed to sustain the company.

The following are 5 Take Away Points for avoiding court intervention in your business:

1. Find a creative business attorney with a proven track record in resolving business disputes – outside of court. You often need a creative asset protection attorney with a good business and tax background. Typically, each side has to realize they will not get 100% of what they want – there will need to be compromise. But this compromise will be far less costly and destructive than having a bureaucratic court intervene.
2. Do the economic analysis. In other words do the math. Compare the cost, time, business interruption, and uncertainty of going to court with the minimal costs and certainty of reaching an agreement outside of court. Even a simple dispute can cost $20,000 to resolve if each side has to file court pleadings.
3. Do the litigation risk analysis. Litigation always involves risk. You risk getting a judge or jury who may not understand your case regardless of how strong it is. Every good litigator will emphasize this fact in their engagement letter with you: he or she cannot guarantee any results – there is no such thing as a “slam dunk” legal case.
4. Find a friendly forum. A court venue is by definition a non-friendly forum, and is designed to encourage expensive discovery and expand the contentious issues. A mediation venue is designed to encourage compromise, narrow the issues, focus on the big ones, and reach settlement quickly.
5. Preemptive Planning to avoid disputes. By far the best solution is to pre-empt disputes in the first place by having a clear agreement for resolving disputes, and a clear exit strategy if disputes cannot be resolved. This means that whenever you have one or more partners you should have an Operating Agreement, if you have an LLC, or a Shareholder Agreement, if you have a corporation. You may be best of friends with your partner now, but of course, just like you, your partner is going to put his or her interests, and the interests of his family first if disagreements arise.

Jay Beskin and I have over 50 years of combined experience helping business partners reach amicable agreements even though the differences between the partners first appeared to be insurmountable. Helping the small business owner grow and succeed while avoiding court intervention has been a major theme of Rarick Trusts & Wills Law for many years. For more information about our Miami asset protection services, contact us as (305) 709-2858 or info@raricklaw.com Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami asset protection attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

Some people believe that the living trust is like a “pink pill” solution: it solves everything. While the living trust is a powerful legal instrument that virtually every person should have because, among other benefits, it minimizes or prevents the intervention of a court into your personal or financial affairs, it does not solve all legal problems.

Specifically, the living revocable trust is not an asset protection entity. If you have any concern that you might be sued due to a foreclosure or some other matter, I would advise you to schedule an asset protection consultation with this firm. There are many options to consider.

At this consultation we will review your assets and identify those that are protected by state law (such as your homestead, annuity, IRA, or 401k) and assets that are exposed.

Note: Real estate that is not your homestead is a highly exposed asset since it is so easy to find. Now, with the internet, if you own real estate you might as well publish it in the Miami Herald. It can be discovered in minutes. To protect such property, you need to consider establishing an asset protection limited liability company (LLC), limited partnership, asset protection trust, or other entity. There is not one size fits all. We need to discuss which entity is the best one for your circumstances.

One Final Note: This type of planning should to be done when “the waters are quiet” – before you are sued. You may still have options after you are sued, but they may be limited.

Conclusion

For over 19 years Rarick, Beskin & Garcia Vega, P.A. has been asked by more than 400 similar law firms located in states outside of Florida to help their clients resolve legal issues concerning Florida probate, trusts, wills, asset protection, trust administration, tax controversies,guardianship or similar legal work. We welcome the opportunity to assist you.

Disclaimer

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney that is experienced in Florida estate planning law. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

Phil Rarick

In the United States there are multiple estate and gift tax traps if you are not a U.S. citizen or your spouse is not. If you are a non-resident, or a resident with a Green Card and own property in Florida or other parts of the United States, you need to know about these tax traps. U.S. estate and gift taxes are very harsh for the non-resident who has not done the proper planning.

Scenario: A non-resident, non-U.S. Citizen with no Green Card who purchases a $1.5 million house would trigger upon death in 2011 an estate tax of $495,000 and likely probate fees in Florida of at least $15,000.

U.S. citizens in 2011 have a $5 million estate tax exemption upon death; non-resident aliens (“NRAs”) have only a $60,000 exemption. A U.S. citizen at death can give an unlimited amount to his or her U.S. spouse if that spouse is a U.S. citizen using the unlimited marital deduction. However, this unlimited deduction is not available if the surviving spouse holds a Green Card or is a non-resident alien.

Special Note: The IRS has two definitions for residency: one for income tax purposes and one for estate and gift tax purposes. These rules are complex. Tax treaties for certain countries will also impact planning. You should consult an estate planning attorney experienced in off-shore planning for clarification of how these rules and possible treaties apply in to you.

Trap #1: Non-U.S. Resident; Non-U.S. Citizen Owning Florida Real Estate

In the Scenario presented earlier, because the NRA has only the $60,000 exemption, the value of his Florida home over the exemption would be hit with a tax of $495,000 (34.4% tax rate on the balance, assuming no other assets).

Potential Solution: This non-resident needs to consult with an estate planning attorney immediately. A possible option is creating a Florida limited liability corporation (LLC) and a discretionary, irrevocable, off-shore trust. The Florida home is then deeded to the LLC, and the LLC membership interest transferred to the off-shore trust.

Trap #2: U.S. Citizen with a Spouse holding a Green Card

If the U.S. citizen dies first and the surviving spouse holds only a Green Card, then the decedent’s estate could be subject to a 35% estate tax due within nine months of death on all assets owned world-wide over $60,000.

Potential Solution: The decedent may need a special trust for the surviving spouse known as a Qualified Domestic Trust (QDOT). One of the trustees of the QDOT must be a U.S. citizen or a qualified U.S. trust company.

Trap #3: Gifts to Non-Citizen Spouse

Gifts from a U.S. citizen to a non-citizen spouse exceeding the $136,000 annual gift tax exclusion for non-citizen spouses are subject to the U.S. gift tax rate of over 30%.

Potential Solution: Consider consolidating all U.S. properties in a limited partnership (or in Florida a limited liability limited partnership, an LLLP) and gifting each year $136,000 of limited partnership interest to the non-citizen spouse.

Take Away Points:

1. Federal estate and gift tax laws impose onerous restrictions on non-citizens, even if the non-citizen has a Green Card.

2. There are multiple solutions to minimize or avoid estate and gift taxes, but such solutions require planning.

3. A real estate agent or title company cannot tell you the best way to title your property and pass your real estate to your loved ones. You should consult an estate planning attorney experienced in domestic and off-shore planning.

Phillip B. Rarick, Esq. and his law firm Rarick & Associates in Miami Lakes, FL have been concentrating on probate, estate and asset protection planning for their clients for the past 18 years. Mr. Rarick can be reached at (305) 709-2858 or at prarick@raricklaw.com.

Gene C. Sulzberger, CFP^®, JD, TEP is a Senior Vice President and Client Relationship Officer at PRS Investment Advisory in Miami, FL. PRS is a 30 year old registered investment advisory firm that provides wealth management for domestic and international clients. Mr. Sulzberger can be reached at gene.sulzberger@prs-efg.com or 305.459.5450.

Disclaimer

The information in this article is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney that is experienced in Florida estate planning law.

______#2. Successor Trustee. This is the person you have appointed to step into your legal shoes if you become incapacitated – in other words, one of the most important decisions you can make. Who have you appointed to take charge if you are incapacitated? What is the order of succession of trustees who will take over management of your financial affairs if you are unable to do so? If you have any question whatsoever about your order of succession, please call the office.

______#3. Transitions. Has there been a marriage, divorce, or separation of anyone named in your will or trust? Has there been a birth or adoption of a child or grandchild? If so, your estate plan may need to be amended.

______#4. Asset Protection. The recession may be over, but will your business survive the recovery? Do you know which assets you own that are protected and which are exposed? NOTE: While a living revocable trust helps avoid probate and keep legal control in your family, it does not protect your assets. We have a number of other legal tools to help make you an unattractive target for a lawsuit. If we have not done a recent asset protection analysis, now may be a good time to do so.

_____ #5. Life Insurance. When is the last time your checked (a) the owner of your life insurance policies; and (b) the beneficiary designations for those policies? Most life insurance either should be owned by an irrevocable life insurance trust or name your trust as the primary beneficiary. Why? If the policy is owned by a life insurance trust that is properly maintained, you protect the full value of the policy by avoiding estate taxation if you have a taxable estate. If the policy does not name your trust as a beneficiary, all the instructions in your trust to safely manage that money will be useless.

______#6. Corporate Minutes. If you have an incorporated business, when is the last time that you filed corporate minutes? It is important, at the least, to keep annual minutes. Remember, the corporate veil can be pierced and your personal assets attacked if you do not follow the corporate formalities. We will review your corporate minutes at no charge; if the record needs to be updated, we will advise you of the total cost to bring the record current.

______#7. $13,000 Gift Allowance. Do you wish to consider making gifts to family members to reduce your estate tax exposure? Current law allows you to make gifts of $13,000 per person per year ($26,000 if married) with little or no tax consequence to you or the recipient. For many persons, this is an effective tool to reduce your estate tax liability. However, see the warning in Point #8 for gifts to minors. NOTE: Gifting must be done prior to January 1; preferably November or early December. ______#8. Gifting To Minors. Beware of UGMA accounts! The full name is Uniform Gift to Minors Act. Unless your child is a future Warren Buffet, it is not advisable to give minors any substantial gifts without placing those funds in a trust. UGMA accounts should be used for only small amounts – such as $1,000 or less. Otherwise, the minor can have complete access to the funds when he or she turns 21.

______#9. Estate Tax Check. Do you know your current estate tax exposure? Absent congressional action the exemption will fall back to $1 million per person with a top rate at 55% on January 1, 2011. Following the Republican mid-term election successes, Congress may act to change the estate tax law. Stay tuned – we will be sending out an Alert via e-mail if Congress does so act. Note: If you have a trust with a Marital and Family Trust (technically called a credit shelter trust) and we have not recently reviewed your estate plan, we should run the numbers to see if the funding formula in the trust allocates the exemption to achieve appropriate tax planning for your family.

______#10. Health Care Surrogate. If you have a child over 18 who is now in college it is highly recommended that he/she give you legal authority to make medical decisions on their behalf. Remember, once your child turns 18, he/she is sui juris, and you have no legal authority to make any legal decision on their behalf. Also note, if we have not met to review your estate plan since 2004, it is likely that your health care surrogate is not current.

______#11. Estate Plan Review. Has it been more than two years since we sat down and reviewed your estate plan? If so, I recommend we schedule a meeting before the end of the year to assess whether it continues to meet all the needs of your family.

APPOINTMENT: To schedule an appointment to review or update your estate plan or the funding of your trust, call Rarick & Associates at (305) 709-2858 or email Phil at prarick@raricklaw.com.

Anyone with ownership interest in a single member Florida limited liability company (LLC).

Executive Summary:

On June 24, 2010, the Florida Supreme court held that a single member Florida limited liability company does not protect against an outside creditor with a judgment against the sole member of the LLC. Olmstead V. F.T.C., — So. 3d.—, 2010 WL 2518106 (Fla. June 24, 2010.)

Analysis: Facts: The facts in this case could not have been worse for the debtor. Shaun Olmstead, the debtor, ran a credit card scam operation, and the creditor in this case was the ultimate gorilla, the Federal Trade Commission (FTC). The FTC sued Olmstead and his corporate entities for deceptive trade practices and obtained a judgment. Olmstead’s assets were frozen and placed in a receivership. To partially satisfy a 10 million dollar judgment against Olmstead the FTC obtained an order compelling Olmstead to endorse and surrender to the receiver all of his right, title and interest in his various single member LLCs.

Issue: May a court order a judgment-debtor to surrender all interest in a single member LLC to satisfy an outstanding judgment pursuant to F.S. 608.433(4), or is a charging order the exclusive remedy available to a creditor of a single member LLC?

Holding: Florida law permits a court to order a judgment debtor to surrender all right, title, and interest in the debtor’s single member LLC to satisfy an outstanding judgment and does not limit a creditor to a charging order as its sole remedy. Note: Justice Lewis wrote a strong and detailed dissent.

Discussion: The majority’s opinion rests on the uncontested right of the owner of the a single member LLC to transfer the owner’s full interest in the LLC, and the absence of any specific basis in the LLC act for negating the creditors remedy of levy and sale pursuant to Fla. Stat. § 56.061. The sole member of a single member LLC does not have to seek approval of the other members of the LLC to assign his interest in the LLC to a third party. The ownership interest is therefore fully alienable because there are no other members to fulfill the requirement of “approval of all members” for participation in management. The charging order is only a remedy for creditors when the debt is not freely transferable, but is subject to the right of other LLC members to object to the assignee becoming a member and exercising management rights that come with membership status.

In the Florida Partnership Act, which governs partnerships, a charging order is the exclusive remedy for a judgment creditor. In the LLC Act such language is omitted. Without the expressed language limiting the remedy of a judgment creditor to a charging order in the LLC Act the court reasoned there is no reasonable basis for inferring that the provision authorizing the use of charging orders under §608.433(4) establishes the sole remedy for a judgment creditor against a judgment debtor’s interest in a single member LLC.

Take Away Points For Clients:

1. If you have a single member LLC, consider adding an additional member, even if only a 5-10% interest.

2. If adding an additional member is not feasible, (a) convert to a limited partnership or specifically, a limited liability limited partnership (LLLP); or (b) consider an off-shore LLC, such as a Nevis LLC.

3. Every LLC should have a robust Operating Agreement that limits a creditor’s rights to a charging order, and has numerous other provisions preventing a creditor from interfering in the business operation of the LLC. If you do not have an up-to-date asset protection operating agreement, talk to your attorney immediately.

4. Prior to choosing an entity, consider the two primary advantages of the LLLP over the LLC: (a) A charging order is clearly the exclusive remedy against an LLLP; (b) In a LLLP, a bankruptcy filing by a debtor limited partner does not trigger a right to withdraw causing monetization of Partner’s interest; in an LLC such a filing does cause such a monetization absent contrary language in Operating Agreement.

5. Don’t mess with the FTC.

Conclusion:

If you have a single member LLC, contact your attorney to discuss options to restructure the company to provide a higher quality of asset protection. Whether you have a single member or multi-member LLC, make sure you have a strong Operating Agreement that severely limits a creditor’ rights to interfere in your business.