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.

May the odds be with you – but frankly they are not:

• A recent study indicated that the average lawyer can now expect three legal malpractice claims during his or her career.
• The overwhelming majority of legal malpractice claims — over 65% — are brought against firms with five or fewer attorneys.

Our firm concentrates on estate and asset protection planning – helping small business owners protect their business and savings in good times and bad. Although most of our high risk clients inquiring about an asset protection trust are doctors, we are getting more calls from attorneys. For good reason. Our over-all goal is to make you an unattractive target against a hostile creditor. We call it our “Porcupine Strategy”: the goal is to take full advantage of Florida law and laws outside of Florida to make your assets as unattractive to attack as a Porcupine would be to a wolf.

The conventional wisdom to minimize legal malpractice risk is a professional insurance policy. No attorney with a small firm needs to be told how the premiums for these policies have been skyrocketing over the past five years. These high premiums should force you to ask if there are other ways to protect you from personal liability. The first letter you will get will demand disclosure of your insurance limits. Insurance is absolutely necessary as a war chest to defend you, but it runs counter to our Porcupine Strategy because rather than make you a more unattractive target, it makes you an enticing prey.

Asset Protection Analysis: Where To Start

Basic asset protection analysis for Florida attorneys starts with taking a look at your complete bundle of assets and dividing them into two columns: Protected and Exposed. Assets such as your homestead, IRA, 401k, life insurance, pre-Paid Florida Tuition, and 529 plans are well protected by Florida law if acquired before the threat arises.

Note: Creditors have a civil remedy to claw back transfers made “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Florida Uniform Fraudulent Transfer Act, F.S. 726. Therefore, timing of transfers is critical.

Assets that are exposed may be your vacation home, investments in rental real estate (this is the lowest of the low hanging fruit), brokerage account, savings account, and boat.

Multiple Options, But Consider a Nevada Asset Protection Trust

A rigorous asset protection plan often has multiple defensive options. For example, your vacation home or rental properties may need to be transferred to a multi-member Florida LLC with a robust anti-Olmstead operating agreement. However, if you have significant non-qualified investments (investments that are not IRA, 401k, or SEP) you likely should consider a domestic asset protection trust (DAPT). Florida does not have laws favorable to creating a DAPT, but many other states do. Based upon a national analysis and my experience, the top tier states are Nevada, Alaska, Delaware and South Dakota, with Nevada routinely ranking first. See Domestic Asset Protection Chart Rankings by attorney Steve Oshins. For more information see our report: Nevada Asset Protection Trust: Your Best Option? A properly structured Nevada APT can protect your equity investments while still giving you control over distributions and how your money is invested.

Timing

As already noted, Florida has a civil remedy law that allows creditors to claw back transfers if there is a known or threatened creditor. This means that Asset Protection Planning must be done when the waters are quiet – before any threat arises.

Two Big Take-Aways

1. At a bare minimum, do an asset protection analysis of your bundle of investments and assets.  Consider a Domestic Asset Protection Trust as an option for your intangible assets.
2. Don’t wait.  Most attorneys fail to consider asset protection planning until it is too late.  The lesson is clear:  do not put this off.  Everyone is busy, but protecting your business and family comes first.

We are available for consultations; we charge a flat fee of $400 for the initial consultation and often can give you a flat fee for the proposed asset protection structure that we recommend. Let us know if we can help.

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

The Message.

Apparently the message has not got out: In 2011, the legislature threw Florida single member LLC’s under the bus. In a compromise with the bank lobbyists called the Olmstead Patch, multi-member Florida LLC’s (or limited liability companies) were given charging order protection, but a Florida single member LLC receive none. This means a Florida single member LLC can be easily attacked because creditors are not limited to a charging order; rather creditors can foreclose on their interests. See F.S. 605.0503. Olmstead V. F.T.C. Also See Olmstead Patch. If you have a Florida single member LLC you essentially have a sand castle fortress unless the single member is a limited partnership or multi-member LLC. Here’s why.

The Problem.The Problem.

In our law practice, we are still seeing small business clients come to us with Florida single member LLC’s because single member LLC’s were exceptionally popular prior to the Olmstead decision for several reasons:

1. Simplicity.   Many persons were under the false impression that to set up an LLC properly you only needed to file a simple two page Articles of Organization.  In fact, the core of every LLC is a robust Operating Agreement that defines ownership interests and rights – and severely limits creditor’s interests and rights.
2. Cost.   There are numerous online services where anyone without a legal education background can set up a LLC quickly and fairly cheap.   Unfortunately, you are not getting what you expect and may be setting yourself up for a blind attack.  You may think you have created a fortress against your creditors – but when the rain falls you find out that your fortress quickly collapses.

Warning:  On line services should warn you of the severe limitations of a Florida single member LLC.  However, I have found none that do.  Use such services at your own risk.

3. No Tax Filing.  A Florida single member LLC can be a disregarded entity and not required to file a tax return.  All income is attributed to the single member and reported on the member’s IRS 1040.

So you can set up a Florida single member LLC  fairly cheap – but if it does not give you charging order protection what good is it?

What Is Charging Order Protection – and Why Is It So Important

The exclusive remedy for creditors against a Florida multi-member LLC is a charging order. A charging order is usually an unattractive remedy for a creditor because it means they cannot foreclose on their interest; they only have a lien. The creditor only has the right to distributions from the LLC. Typically, if you have a well written LLC Operating Agreement, this will mean that the creditor has to wait until the LLC Manager decides to make a distribution. Rather, than make distributions, the Manager may be able to pay reasonable management fees to other owners or family members for bona fide management services.

Note: A well written Operating Agreement is necessary to help ensure that a hostile creditor has no voice in the management of the company; this means the creditor cannot vote, manage, or liquidate the LLC. No LLC should be formed without an Operating Agreement drafted by an experienced Florida business attorney.

The Fix.The Fix.

There is good news.  While Florida law does not provide much (if any) protection for a single member LLC, the law is quite strong for multi-member LLCs.  See Young V. Levy

Here are a couple options for making your Florida LLC a multi-member LLC:

1. If married, you can take a 95% interest as tenants by entirety with your spouse, and 5% interest with one spouse.  Note:  We advise a minimum second interest of 5% but there is no ruling or law defining what interest constitutes minimum interest.
2. If you have children, a second option may be to create an irrevocable grantor trust for the education and support of your children. Such trust could hold a 5-10% interest in the LLC.

These are just two options; there are others that you may wish to discuss with your attorney.  If it is not feasible or cost effective to have a second member, then you may wish to consider a Delaware LLC because Delaware law does provide charging order protection for a single member LLC.

The Take-Aways.

1. Do not rely upon a Florida single member LLC to protect your assets.
2. Make sure you have a multi-member LLC and a strong Operating Agreement.
3. Consider a Delaware LLC if a multi-member LLC is not feasible.

For more information, contact Phil Rarick, Weston Asset Protection attorney, at (305) 709-2858 or 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.

One of the most common questions I get as a Weston estate planning attorney is, do I need to record my living trust? Some persons believe that a trust needs to be publicly recorded like a corporation or a deed. This is generally wrong; not only is recording not required or needed for most trusts, in most cases recording would negate one of the chief benefits of a trust: confidentiality. Let’s look at more specific questions.

Does a Living Revocable Trust Need To Be Recorded During the Life of the Trustmaker?

The short answer is no. One of the great benefits of a living trust in this era of Google – where is it difficult to keep anything private and out of the public domain – is that a living trust is confidential. It does not need to be recorded, filed, or registered except in certain circumstances I will discuss below. A living trust, properly drafted by an experienced Weston estate planning attorney is a powerful legal instrument to protect the privacy of your personal and financial information.

Does a Living Revocable Trust Need To Be Recorded Upon Death of the Trustmaker?

No. Unlike a Will that does need to be filed with the Clerk of Court within 10 days of death, a trust can allow you to keep personal financial information out of probate. Probate is the legal and very public process many families must go through upon death of a family member. A properly “funded” living trust does not need to go through a public probate process.

Note: Funding of your trust is transferring all major assets to your trust by changing title or beneficiary designation. For example, the primary beneficiary of your life insurance should usually be your living trust. We advise reviewing the funding of your trust at least every three years with a Weston Estate Planning Attorney.

What Are the Exceptions?

The most common exception are real estate truncations, and even in such cases, it is not necessary to record the entire trust. Sometimes in real estate transactions it is necessary to file a Certification of Trust, but this Certification will not contain any personal or financial information about the trust. A Certification of Trust may be required by a title company or bank to prove that the trust exists, the names of the trustees, and that the trustees have powers under the trust to transfer the real estate or secure financing. The Certification of Trust is often a short, 1-3 page document summarizing these key elements.

Take Away Point: Avoid Snooping, Meddling Persons

One of the great benefits of a living revocable trust is that it is private and confidential – it does not need to become a public record; it does not need to be recorded, registered or filed. This is just one reason why a living trust has become the preferred planning legal instrument for most persons. The alternative, a Last Will and Testament, must be deposited with the court and usually must go through a public legal process called probate. Properly funded, a living trust will avoid probate and keep your personal and financial information off of public records and away from snooping persons that may wish to meddle in your affairs.

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.