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.

–

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.

–

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.

–

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!

DURABLE POWER OF ATTORNEY FROM DON LEWIS TO CAROLE BASKIN dated November 21, 1996

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.

Family law attorneys are increasingly using trusts to secure and safeguard the payment of financial obligations in their marital settlement agreements. Such trusts can provide the following key benefits:

• Security that payments will be made in a timely fashion
• Assurance that the monies will be spent exactly as directed: for the child’s health, education, support – not for the other spouse’s whims and enjoyment
• Third party over-sight by neutral fiduciary on a monthly or quarterly basis
• Protection against outside creditors of the child or spouse

Of course, each trust must be tailored to the specific needs of the children or spouse. Here are a few examples of trusts commonly structured as irrevocable grantor trusts:

• Educational Trust. Purpose: secure private school tuition for minors and/or quality college/university education after high school graduation.
• Life Insurance Trust. Purpose: secure payment of life insurance premiums for child support or alimony obligations; prevent rogue spouse from changing beneficiaries.
• Safe Harbor Children Trust (Spendthrift Trust). Purpose: secure funds to provide for the health, support, maintenance and education of the children. This trust would provide the following protections: (a) child cannot “blow it” (ex: buy a new yellow Mustang upon turning 18) as the trust funds are administered by a neutral fiduciary; (b) child’s creditors cannot grab it; (c) if child marries without a prenuptial agreement the funds are protected from claims of the child’s new spouse.
• Minor’s Trust for Paternity Support. Example: Father believes mother to be a poor money manager but is ordered to pay support for the minor child. Father wants no more contact with mother. Father establishes a Minor’s Trust to fulfill his support obligations administered by a neutral fiduciary.

For more information. We publish a periodic Florida Trusts and Probate Report that flags key issues of interest to family law attorneys. Recent reports are:

• Avoiding a Marital Settlement Sand Trap: Losing Control Over Insurance Policies Solution: Irrevocable Children’s Safe Harbor Trust (Includes suggested marital settlement language)
• 7 Point Checklist for Pre-Divorce Planning
• 9 Key Benefits Available to Florida Same-Sex Couples
• The “Son-In-law Problem”: Keeping Your Wealth Safe – And Out of Reach From Your Daughter’s Husband

Note: This newsletter is free; to subscribe click here: Subscribe

For over 20 years, Rarick Trusts & Wills Law has been the trust firm other lawyers have turned to for help resolving their client’s estate planning, asset protection, and business matters. Since 1993, more than 500 similar law firms located outside of Florida have asked us to help their clients resolve legal issues concerning trusts, wills, and guardianship. We are frequently being asked to assist family law attorneys; we would be pleased to work with you and your firm.

For more information contact Phil Rarick at info@raricklaw.com or call 305-709-2858.

We welcome your comments or questions.

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 trust attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

1. Show Loyalty To All Trust Beneficiaries. Even if the successor trustee is himself a beneficiary, as trustee he has the duty of loyalty to all the other beneficiaries, including the remaindermen. Remaindermen are beneficiaries who do not have a current interest in the trust income or principal, but have a future interest in the trust.
2. Deal Impartially With Beneficiaries. The successor trustee cannot favor the income beneficiaries over the interests of the remainder beneficiaries unless the trust specifically directs otherwise. Typically, the trustee must walk a fine line that balances the interests of the income beneficiaries against the interests of the remaindermen.
3. Make Trust Property Productive Of Income. The trust portfolio of assets is expected to achieve conservative growth. Therefore, this duty may be violated if the successor trustee keeps large amounts in a checking account that does not pay interest and does not grow in value. This duty can also be violated if the trustee keeps trust assets in land that does not produce income, such as vacant land or commercial land that does not produce rental income in excess of maintenance costs.

Remember: The sole reason for the trust to exist is to serve the beneficiaries. It is not an employment program for the trustee. If you are administering a trust that has or acquires unproductive assets, consult with us and we can advise you as to your options.

4. Follow the Prudent Investor Rule, F.S. §518.11. This rule generally means that the trust portfolio should be broadly diversified and invested in conservative investments designed to stay ahead of inflation but not in aggressive growth. As a Trustee, you are not expected to be Warren Buffet, but you better not lose money or you will need to account to the beneficiaries. Often, it is best to retain the services of a Certified Financial Planner (CFP) experienced in helping manage conservative portfolios. Note: The successor trustee is obligated to exercise reasonable care, judgment and caution in selecting an investment agent.
5. Account To Beneficiaries And Keep Beneficiaries Informed. Upon commencement of the trust administration, the successor trustee must inform all income and remainder beneficiaries of his or her acceptance of the trustee duties. If a beneficiary requests it, the successor trustee is required to provide that beneficiary with a complete copy of the trust document, including any amendments as well as relevant information about the assets of the trust and the particulars relating to administration. In addition, even without request, all beneficiaries must be provided with an annual statement of the accounts of the trust pursuant to F.S. 736.0813.
6. Keep Trust Assets Separate. The successor trustee must keep the assets of each trust separate and keep his personal assets separate from the trust assets. This requires separate bank accounts, brokerage accounts, and safe deposit boxes for trust assets. It is particularly important that you keep the assets of the Credit Shelter Trust (also known as the AB Trust, Marital and Family Trust, or Bypass Trust) separate from all other assets, since these assets will pass tax-free at the death of the income beneficiary. If the successor trustee comingles any other assets in with these assets (or even simply takes the assets out of the trust and mixes them with her personal assets), in addition to breaching fiduciary obligations, the successor trustee will have subjected these assets to taxation when she dies, whereas they would not have been subjected to tax otherwise.
7. Avoid Conflicts Of Interest And Self-Dealing. The successor trustee cannot buy assets from the trust or sell his personal assets to the trust. He cannot favor himself as a beneficiary at the expense of any other remainder or potential remainder beneficiary. He cannot make any distribution to anyone or any withdrawals from the trust unless specifically authorized by the trust to do so. The trustee is entitled to a reasonable compensation for trust services or compensation as otherwise set forth in the trust. However, the successor trustee cannot otherwise profit or benefit from the trust unless also a beneficiary. Conflicts of interest and self-dealing is a broad area with many traps. If you are a trustee and have any concern as to any specific action or situation, consult with a Miami trust attorney.
8. Preserve The Trust Assets And Uphold The Trust. The successor trustee is liable if trust assets are lost, misplaced or destroyed because of inattention or negligence. If the trust assets are equities, the trustee needs to monitor their performance. If the trust assets are commercial real estate, the trustee must monitor that the properties maintain a high occupancy level, rents are collected in a timely fashion, and of course deposited in a trust account. This may require hiring a property manager. The successor trustee should be certain that all trust assets are appropriately insured. For example, if the trust owns a house in south Florida, it is imperative that the home be insured for property and wind damage that may be caused by hurricanes, heavy rains, and the weather related events we experience here. If the house is vacant, there should be a security system for obvious reasons.
9. File Tax Returns And Pay Any Tax Due. Each trust has a tax year, which like the personal tax year, ends annually on December 31. The trust must have a taxpayer identification number and file a tax return no later than April 15 of the year following. The income tax return for the trust is Form 1041, the Fiduciary Income Tax Return. The best advice here is to use a professional CPA who routinely prepares 1041’s. As mentioned above, such an expense is a typical cost paid by the trust.
10. Minimize Income Taxes. Income generally includes interest earned on bank accounts, CDs, bonds or mortgages, and dividends on stocks and mutual funds as well as all rental income. The trust has a high tax environment: income not distributed may be taxed at 39.6%. Therefore to minimize income taxes, the trustee may need to distribute income out to the income beneficiaries if the trust terms so allow.
11. Pay Trust Expenses. The administration of the trust necessarily requires certain expenditures. Example of expenses include insurance, real estate taxes, CPA fees, and legal services.
12. Good Record Keeping. The trustee needs to keep accurate records of every dime that comes into the trust and every dime that goes out. For small trusts, we recommend using Quickbooks or Quicken. If the successor trustee does not know these programs, it is highly advisable to hire a professional bookkeeper. If the successor trustee becomes disabled or dies, another person must be able to seamlessly step into her shoes and understand the current status of trust matters.

Note: Before the trust is terminated or before the trustee can be released, the trustee will need to provide a detailed accounting to all beneficiaries for all expenses, income and distributions during the time the trustee served.

EXPERIENCE MATTERS

Miami trust attorneys at Rarick Trusts & Wills Law, P.A., have assisted families and business persons for over 20 years. Our firm has worked with over 400 similar law firms located in states outside of Florida to represent their clients in legal matters concerning trust administration and probate. To schedule a meeting with a Miami trust attorney call (305) 709-2858, or e-mail info@raricklaw.com. We look forward to meeting you!

In today’s modern medicine, coupled with our information age, where virtually every procedure can be scrutinized by an “expert” easily found on Google, it should be standard procedure for every doctor to have a comprehensive asset protection plan – one that is up-to-date to meet the challenges of our fast-changing legal system.

In keeping with this spirit, we have prepared practical checklists for the Florida physician who is in group practice and one for the physician in solo practice or employed with a hospital or clinic:

Asset Protection Checklist for Florida Physicians in a Group Practice Asset Protection Checklist for Florida Physicians With A Solo Practice or Employed by a Hospital or Clinic

The checklist should not take more than 10 minutes to complete. The checklist is not designed as a substitute for a consultation with an experienced asset protection attorney. However, it is a good stress test and a way to prepare for such a consultation.

For further information, contact Phil Rarick, a Miami asset protection attorney and Weston, Florida resident. Call Mr. Rarick at (305) 709-2858 or email prarick@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 Weston 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.

First, if your client gets a letter that looks like an “official” letter from the state of Florida, or an email from a company called Compliance Services (not to be confused with the Florida corporation, Compliance Services, Inc.) asking for a fee of $125 for corporate minutes BEWARE. Minutes are not required to be posted with the Florida Secretary of State. Rather, they should be prepared and filed in your client’s corporate book. This company is trying to masquerade as a Florida government agency and scam your client out of $125. These messages should not be confused with notices from the Florida State Division of Corporations remindng each business entity to file its 2012 Annual Report. Such messages were sent out via email by the Florida Division of Corporations in early January.

Second, while not a scam, there is a web site that can easily confuse your client and trick them into paying extra money for filing their annual report. The “trick” site is sunbiz.com; the official web site for the state of Florida is www.sunbiz.org. Avoid sunbiz.com.

We welcome your comments or questions.

Sincerely,