Big Question: Can your practice survive if you suddenly die or become incapacitated?
Recently, a highly respected physician suddenly died owning 100% of his practice in a Professional Association. No other person was listed on Florida’s Sunbiz.org as an officer. Payroll was paid on a weekly basis. Even though the Professional Association had been assigned to the doctor’s living trust, the bank (a large Florida bank) refused to give the successor trustee access to the Professional Association’s bank accounts citing F.S. 621.06, 621.09 and 621.11.
The statutes cited limit ownership of a P.A. to a licensed professional. We contend the Bank’s interpretation is overly narrow because no court has held that transfer of any interest to a living revocable trust is a transfer of beneficial interest. A living revocable trust is essentially the settlor. Although we believe the bank’s interpretation of these statutes is wrong it is not worth fighting the bank. The bank holds all the valuable cards: the King, the Ace and of course all the money.
What to do? In this case the only practical solution is get what the Bank wants, which is a court order from the probate division.
Is there a way to avoid this? Yes! The quick answer is name a family member or trusted friend as an officer in your annual filing with the Florida Department of State on Sunbiz.org and put this office on your account as a co-signer. Of course, Sunbiz.org is not the official, legal corporate record for your Professional Association – your records that you hopefully maintain in your corporate black book are the official records. However, most banks (wrongfully) take Sunbiz.org as the gospel for your corporate record.
If you name a family member as an officer have you exposed them to any additional liability? While one cannot completely dismiss this concern, here is where you need to weigh the minimal risk of being an officer of a small Professional Association to the benefit of avoiding business interruption. As long as the officer is passive with no corporate voice, the risk is de minimus.
Therefore, rather than try to fight City Hall – or the Big Bank – do all of the following:
- Keep your corporate record up to date (i.e. when is last time you did your yearly minutes?) and name a family member or trusted friend as an officer of your Professional Association – such as Vice-President or and/or Treasurer.
- Name the family member/friend a co-signor on all Professional Association bank accounts.
- Since your Florida Secretary of State annual report filed at Sunbiz.org should be consistent with your corporate record, make sure that your Sunbiz.org report accurately reflects your corporate record and lists a family member as an officer.
- Have a living revocable trust – and have a springing assignment that assigns your Professional Association to the trust in the event of disability or death. Your revocable living trust is essentially you – it carries your social security number. Although, I am not aware of any court ruling in the context of transfer of a Professional Association to a living trust, no courts (state and federal) in my experience as a Weston estate planning attorney, have held that transfer to your living revocable trust is a change in beneficial interest.
For more information, contact Phil Rarick, a Weston estate planning attorney, at (305) 556-5209 or firstname.lastname@example.org.
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.