Ask Joe Live Q&A | Asset Protection & Estate Planning

Transcript

Hey everybody, welcome to an Ask Joe Anything session tonight. Thank you for coming and spending an hour with me this evening. Uh if you don’t know who I am, I’m surprised because you’ve obviously subscribed to our channels on YouTube, Facebook, Instagram, and everywhere else you can possibly get to us. Um also, uh you may also subscribe to our uh weekly newsletter. It comes out at 8:15 every morning. Every Friday morning, not every morning. uh 8:15 every Friday morning. It’s called Trust This. Uh it goes along with the Trust This podcast and Q&A sessions like this.

And one of the things that we did uh before this began was we asked people to go ahead and submit some questions. Uh we also asked our crew internally what questions they’re receiving very often and over and over so that we could get those answered this evening for everybody as best we could. So, we’ve already got some questions and if you want to ask more questions, go ahead. We’ll try to get to them all tonight. If we don’t get to them all tonight, then we’ll just do uh future videos uh or newsletter articles.

So, if you’re not subscribed to uh our channels, if you’re not subscribed to all of our social media or the uh newsletter, we definitely ask you to do that and get subscribed and like. It helps our numbers. It also helps you to see whenever something like this uh event is happening so that you can get questions answered pretty easily. But again, if you got any other questions, just please put them in down there. Rick’s going to let me know uh what questions we have uh and I will answer those as we go along and help you guys out as best I can.

So the first question we got it just says property ownership and entity structure uh single family home business structure. Uh also another question put my rental properties under LLC or trust. So I’m going to use our handy dandy big whiteboard up here to sort of uh illustrate a typical plan that we put together for folks. So let’s imagine a small, you know, family business. They have four rental properties. So, I’m going to have the four rental properties up here. And we’ll have to make a couple of runs around the boxes so we’ve got room here. And I’ll put another one over here. So, they’ve got their four rental properties uh where they have tenants living in them.

Now, a lot of folks come to us and they already own these four properties and they’re already in their sole name, which is not safe because if someone slips and falls on that property, of course, if they get hurt at the property, they are going to come after whoever owns that property. They will be named uh in that lawsuit. Number two, if someone comes at that owner from the outside, maybe they signed a contract, maybe they have a car wreck outside, then all four of the properties are at stake of being uh used to pay the judgment creditor whenever they win that lawsuit.

Separate each property with land trusts.

So what we do is we always are trying to separate properties from each other, but also from the owner. So we call this vertical as well as horizontal asset protection. One way we do this is with land trusts. So we would take each of these properties and put this into maybe the 123 land trust, the 456 land trust, the 789 land trust, and the 1011 land trust. So now each property is in a separate land trust.
To keep this simple, one of the things we can do is say, okay, well, the beneficiary of the land trust are the current owners of the property. That helps somewhat. That at least gets their name off the property records because the land trust is uh private. No one knows who the beneficiaries are except the trustee as well as you, the beneficiary. So that’s number one.

So, if anyone from outside tries to attack the the owner of the properties who or they sue you, the former owners of the property, they’re not going to sue your name. So, they’re probably going to do an asset search. Let’s say it’s a contract dispute. You signed a big contract and and you lose the lawsuit and they go, “Well, let’s just see what they have before we even sue them. Let’s go see what they have to see if it’s worthwhile to sue them.” And they’re going to search your name. and they’re going to search your assets and they’re not going to see these four properties that you own.

A lot of people go, “Yes, but don’t they search back what I used to own?” Typically not. No, they do not typically search what you used to own. They only search what you own right now to see if you’re a good target for a lawsuit. So, they’re not going to see that you own these four properties because they’re going to be in the trustes name uh for the trust. And of course, you’re going to have an agreement between you and the trustee that says very plainly that you are not uh the trustee is not allowed to do anything with that property with any four of these properties without getting written directions from you as the beneficiary telling them what to do. So that’s going to happen.

Yes. Yep. I can change the colors to let’s try blue. Um, yeah. Let’s see if Blues any better.

So, then we’ve got uh the the properties are separated from each other and they’re separated from you, but you it’s still uh Jane and Tom as the beneficiaries of every single trust. So if Jane and Tom do get sued and Jane and Tom lose, they will find the beneficial interest that they on these lawsuits. So this will go away, the uh protection away from creditors who may be suing Jane and Tom.

Wyoming LLCs, protected series, and operating companies.

So Jane and Tom, let’s just imagine that’s our family. So, our next step that we take is we’ll form a usually a Wyoming LLC uh that acts as the beneficiary. A lot of people ask us, why do you use a Wyoming LLC? Well, we use the Wyoming LLC because um no one uh sees who owns Wyoming LLC’s. Wyoming is a state where the corporate records are not like Florida’s. They don’t put your name as the manager. They don’t put your name as the member. They don’t use your address as the address to to to send mail for the the company. So, this is why we use Wyoming LLC’s.
Now, this now becomes what I call the ostrich LLC because it keeps its head in the sand. It never pops its head up. It is simply the beneficiary of each land trust right there. So, and it’s also owned by uh Jane and Tom. They own that as a as a married couple initially. Nine times out of 10, this is how a simpler plan is going to be put together.

Now, let’s say that uh Jane is an orthopedic surgeon and Tom is a real estate uh tycoon. So, let’s let’s put that together. So, Jane is probably going to be sued on a pretty regular basis for malpractice. Uh maybe she’s got uh some products that some some medical devices she has invented and she owns the patents on those. and there’s a real big risk of being sued under products liability because of Jane’s uh products that she has designed. So, we really want to make sure Jane and Tom are really separated from these properties but also uh away from each other and everything else.
So what we’ll do in that case is we will do a protected series LLC and then we have a separate protected series that is the beneficiary of one land trust another protected series uh two and protected series three and protected series four that are the beneficiaries of each of those land trusts. So now each one of these has its own bank account. So as tenants pay rent, the rent comes in and it is immediately dumped down to uh the protected series that corresponds to the beneficial interest in that trust.

But you’re probably saying, “Okay, but now my tenants know who the beneficiary is of the trust because they’re paying rent straight to the beneficiary.” So that takes me to the next step. We typically create another LLC out here. Let’s pick a different color for that. Uh, let’s do blue for that one. So, we’ll do another LLC out here. Now, if this property is in Florida, they’re doing business in Florida. We’re typically going to do a Florida LLC over here to act as their property operating company.

I don’t call it a property management company because property management company carries this connotation that it’s a licensed real estate company that manages properties for lots of other people. This company only manages or operates these properties for Jane and Tom uh for their family business. It does not operate any other uh uh properties for anyone else, any third parties. So that’s why I call it a property operating company. So just a little semantics there. It’s what we call it.

But this acts as your landlord. It is listed as the landlord on all the leases and it is the recipient of rents. It pays uh the bills. It pays taxes and insurance and it handles the dayto-day maintenance and repairs of all their properties. It also since it receives the rents, all the money flows down to it straight from the tenants. So the tenants see this Florida LLC. They don’t see Jane and Tom. They don’t see the Wyoming LLC. They know they have rented a property from 10-11 land trust with a third-party trustee as its trustee that’s completely unconnected to Jane and Tom in any way.

The money So, so the the trust signs the leases. In that lease, it has a line that says all rents shall be payable to Florida Operating LLC. And uh if you have any questions or problems, send an email or call the Florida LLC and they’ll get somebody to fix your your hot water heater or or your lights, whatever may not be working. They’re going to it’s going to fix it.

A lot of people still go, “But wait a minute. Now you’re in Florida and Florida’s going to have Jane and Tom Jane or Tom’s name on the company.” Well, what I typically recommend is yes, Jane and Tom can be the as a married couple will be the beneficiary or the members of the Florida LLC. It’ll be the members of it, but I would only pick either Jane or Tom to be the manager. In this case, since Tom is the real estate tycoon, we’d make Tom the manager of the company.

Management trusts and keeping names off public records.

Tom goes, “Wait a minute. I don’t want my name on Sunbiz and I don’t want anybody tying this to [clears throat] my name because I’m I’ I’ve got business. I’ve got a construction company. I’ve got development company and I don’t want these tenants to to attach my name in any way to their properties. Even if they look us up on Sunbiz, I don’t want them to see my name.”

In that case, what we do is we form what we call a management trust. Let me change the color there. That’s not right. We form what’s called a management trust for the LLC. And it’s just simply a trust, a very, very simple common law trust. There’s no statute that says that they can exist or how they exist. It all exists way under common law back in the day. But this common law trust and that’s we’re going to call it for simplicity we’re going to call it the uh the the uh cash and stop trust. Cash and stop trust is the manager of the LLC. So, the only name that shows up on Sunbiz is Cash and Stop Trust. It’s not Jane and Tom’s name or anything like that.
Now, what if anyone ever needs it? Jane and Tom will prepare that trust. Jane and Tom are the the trustees of that trust and the LLC is their their beneficiary or their member. Uh yeah, the beneficiary of that trust. So Jane and Tom still run daytoday the Florida LLC as trustees of the trust that is the manager of the LLC.
But to the tenants up here, what we call the inside creditors, the inside creditors only see this Florida LLC and then they see some some trust. That’s the the manager of it. they know that they send their money either by a uh or by check or by cash somehow some way to this Florida LLC. And then whenever they look at who owns their trust or owns their property, they they look it up and in most cases they see our company uh one of our companies that is part of the mindland trustee.com family of land trust companies. We have seven or eight companies that act as trustees uh of land trusts all over Florida. We usually have around 2,000 properties at any time in trust. So that is how that works.

Estate planning for incapacity and succession

But a lot of people then go, “Yeah, but what about um uh whenever we need uh uh estate planning?” Because right now it’s just Jane and Tom. So, if Jane and Tom uh are incapacitated, they’re hit by a bus, they’re incapacitated, they’re not they’re not dead, but now we’ve got they own this Wyoming LLC, they own this, they run this Florida LLC, they own this Florida LLC that owns all these properties. They’re no longer able to do that because they’re they’re in bed in a coma, both of them. Uh or worst case scenario, they’re gone. The it was it was a horrific accident. They’re both gone. So what happens for that reason we build everything and encourage our clients to build everything on a foundation of the estate planning documents. So, we’re usually going to have at least a revocable living trust, porover will, uh, durable power of attorney, living will, healthc care, uh, uh, power of attorney, surrogate, pree guardianship, and lots of other documents that are going to go along with that because it’s pretty certain that at some point they are either going to disappear u become incapacitated uh get divorced that could happen uh and of course they could just not be alive anymore.

So all of those things would be handled by this so that if anything does happen to Jane and Tom, their successor trustees will take over the Wyoming LLC and the Florida LLC so they can continue operating the company. So, for this reason, we typically recommend choosing a trustee, of course, who knows how to operate properties and operate the rest of your finances. Um, but that’s not absolutely necessary. You can name just a trustee who you who is someone you know and trust, but then you can name trust protectors or trust advisors who will advise the trustee when it comes to real estate.

Maybe they don’t own real estate. Maybe they have a mortgage up here that they hold in a land trust. They lent they they lent some money to someone and that mortgage is in a in a mortgage land trust. So now you got payments coming in. You got to make sure taxes are paid, insurance is paid just to make sure that servicing the loan as it comes in, providing payoffs and everything. So you’re going to want someone down here who can uh look at that and go, “Oh, okay. I know how to to service a a mortgage. So, you’re going to choose a friend uh or a family member who understands that. A lot of people choose their their children, their adult children to do it. Uh as long as the adult children know the professionals to go to for um advice and answers in doing that, that’s perfectly fine.

So, this is actually a pretty simple plan. Where we can get really complicated is down here in the estate planning for all of this up here because if uh something should happen that uh we need more members or maybe their estate’s pretty large and we’re worried about estate taxes, maybe they have income tax issues that they want to try to reduce their income taxes. there’s a there’s some things that we can do down here in this area to help them out with with both of those issues that they’re having.

Florida protections: TBE, revocable trusts, and charging orders.

And you heard me talking there about a lot of of um things with uh uh uh inside creditors, outside creditors, tents by the entirety, stuff like that. Let me just go through real quick some things in Florida that are exempt. So, if you get sued, these are things that people can’t take.

Number one is um TB, that’s tenants by the entirety. So, if you are a married couple, if you are a married couple and you own something together, whe it’s a a real estate or an account, uh bank account, anything like that, an LLC, anything that you own as a married couple, that is considered to no longer be owned by one spouse or the other. So, if something should happen, let’s say Tom signs a personal guarantee on a mortgage, but they don’t make Jane sign one for a big development he’s doing, a $20 million development he’s doing, and then it just goes bad and he can’t pay it off. Ends up with a deficiency judgment of $3.8 million or something like that. Now, they’ve got a judgment against Tom for 3.8 million, but it’s just against Tom. Anything that Tom and Jane own as a married couple is the the the creditor, the bank can’t touch it because it’s owned by Jane with Tom as one entity.

So that’s that’s a very important protection in Florida and one that we try to preserve every time we’re doing a plan. keep it. We We love it when there’s a married couple because we do as much as we can to use that TBE protection at the at the foundation of everything we do.

Now, one of the things that this plays into, a lot of people ask us uh whether we they should do a joint trust uh or a joint revocable living trust or whether they should do uh separate revocable living trusts. And there’s actually a bankruptcy case in Florida that says that if it is a joint revocable living trust that came in from the married couple into a joint revocable living trust, that is the same as if the property is still on TBE. So even if typically you’ll hear a lot of lawyers say, well, a revocable trust, revocable living trust provides you no asset protection whatsoever. Most of the time they are correct. But if a judgment comes in just against Tom and they’ve transferred a lot of their properties into a joint revocable living trust, that property is going to be safe.

But let’s say that uh for whatever reason, maybe uh Jane inherited a lot of money from her family, so she’s got her own trust and he’s got his own trust. And the problem with that is Tom’s trust can be completely unpacked. They call it decanting. They can completely pull everything out of that trust, pull it back to Tom, and everything that Tom has is at stake for uh asset protection.

So, this one of the things we we really are I I know a lot of lawyers estate who who only do estate planning, nothing else. if they do a state plan, a lot of times they’ll go ahead and say, “Well, let’s just go ahead and split.” And if the if the family is the type that they’re not engaged in really high-risisk behavior that is going to subject them to potential judgment creditors, sure, separate trust may work great. And also, there may be some tax advantages, estate tax advantages, and other things. And like I said, they may have uh a lot of times we see that with blended families where they got married late in life and they bring children from separate marriages together. they’ve got their own trust that they want to keep separate. That’s perfectly fine and normal.

It’s just we always let everybody know, well, if you got separate trusts, if something happens and it’s just you who gets sued, your separate trust provides no protection, even if your trust owns it with the other trust. What we typically try to do in that case is we try to set it up to where anything that they own like that would be either in a family limited partnership or it’s going to be in an LLC so that each trust is a separate member and we try to get charging order protections which brings me to my second big thing is charging orders.

This is another great asset protection term you need to understand. Florida, if you have a multi-member LLC, meaning you have more than one member of the LLC and one member gets sued, then that creditor cannot come and just take that member’s membership interest in the LLC and own it because Florida’s policy is that we don’t want to force another business partner into business with someone who doesn’t know them and has done nothing wrong. So instead, they get what’s called a charging order.
So that if that LLC ever distributes money, let’s say it’s Tom again, Tom gets sued. Tom gets sued a lot. So let’s say Tom gets sued and it’s James Trust and Tom’s trust who own that LLC together. They’re going to impose a charging order at most on Tom’s trust. So if any money is ever distributed from that LLC, instead of going to the tom, that distribution goes to the to the uh judgment creditor.

But you can actually put restrictions inside your operating agreement for the LLC that says, “Hey, if if any member ever has a charging order entered against them, then the company is directed that that it shall not disperse any money to that distribute any money to that member. Instead, that money shall be held in escrow until such time as the charging order is um extinguished.” So that’s that’s another, you know, tool that we we have in our tool box whenever we’re dealing with LLC’s.
Big thing here to keep in mind, that’s LLC’s, that’s partnerships. If you have a corporation, meaning literally the name of your company ends in corporation or Inc.
or incorporated, charging order does not apply. a judgment creditor can take the stock of the company from that shareholder and they own it. So, we have a lot of uh CPAs and and doctors who have the old professional association, which is nothing more than a professional corporation, and we just warn them, hey, if your corporation owns anything other than just your practice, your brain, they can take that stock from you if they get a judgment against you personally, and now they own everything that your corporation owns, your professional association owns. So, that’s a warning that we throw out there.

Insurance, retirement accounts, and homestead caveats.

Another great uh uh asset protection mechanism in Florida is life insurance. Little trick here though is everybody thinks, “Oh, they can’t touch my life insurance.” That’s true to a point. They can’t touch your life insurance so long as the owner of the policy and the insured life is the same person.

So, a lot of people will transfer the ownership of their policy to their spouse because they don’t want it in their estate. They’ll say, “Okay, well, this belongs to my spouse.” Which is perfectly fine because if they get sued now, they’re definitely sure. Well, they can’t touch this life insurance. I’m just the insured life and my spouse owns it. But we urge people, it’s like, don’t don’t do that. just keep the policy in your name and uh uh you’re the insured life.

Now, that’s Florida. Not every state has that. So, if you move and you still have this life insurance policy and you think, “Oh, well, my nobody can touch it and I’m I’ve been sued in this other state.” Not necessarily is that life insurance policy if it has if it’s a whole life policy with um cash value. There’s no guarantee that that is protected, that cash value is protected. So instead, if there’s a chance you’re going to be in another state when you get sued and they’re going to try to take your and we’ve got people with whole life policies that have hundreds of thousands of dollars of value. Uh instead, what we would do is we would set up an uh irrevocable life insurance trust. And now the uh irrevocable life insurance trust owns the policy. And again, it’s just like the ostrich on the last page that um it uh it’s the ostrich over here, just like that. And it never sticks its head up. It never does anything. It never drives a car. It never signs a contract or anything like that.

So, life insurance is a good one. Uh IRA and retirement accounts, uh and annuities, life insurance, uh and annuities sort of go together. they work the same way. Uh they’re also covered. So if you’ve got a lot of cash somewhere and you want to make sure it’s protected, annuities is a great way to do that. Uh IRA, 401ks, and uh 403bs, those uh HSA accounts. Um trying to remember all the others, the the 529 accounts, the education uh accounts. We don’t know about I mean it’s not been said specifically about the Trump accounts at least not from what I’ve heard. But I would I would argue that the Trump accounts are also covered at least for children under 18 who have one of those accounts because it’s just basically a kitty IRA um which will fall over here. But if you’re sued the creditors can’t touch these in Florida either. And again this is Florida. In other states you never know uh what they’re going to do. In most states, these plans are protected against creditors claims so that if you get sued, you can go bankrupt and keep it.

But the big one in Florida, of course, is the homestead. So, I’m always talking about the homestead. Always keep that in mind because in Florida, pretty much your homestead is sacrosan. as long as you’ve lived in Florida at least uh 3 years, four months, uh is how it goes. Now, if you just move to Florida and then you buy a $20 million estate to hide all your money and uh the lawsuit has already ripened into a judgment in another state and then you go, “Well, then I’m going to just go bankrupt in Florida.” Bankruptcy courts are not going to protect it. Uh but maybe in state court, you may have some arguments.

But two things about the homestead you have to keep in mind. It’s only a half acre is protected uh inside inside city limits or 160 acres outside city limits out in the county unincorporated parts of of the county. So I always tell people keep in mind that the homestead is not absolute because if you go bankrupt bankruptcy has some special rules around that around the homestead protections three years four months and some other things also equity that was added in the past so many months. Uh so in bankruptcy court they can get at the homestead pretty good. But one of the things they’re also going to look at is how big is the lot. So, if you ever come to us for your asset uh protection planning, we’re always going to ask you, are you inside the county or outside the county? And how big is your lot for your homestead?

So, those are just some things off the top of my head, some big questions that we often get and the reason why we do over here what we do to protect you from your properties, your properties from you, and your other assets.

Vehicle ownership and liability exposure.

Another thing that we often recommend uh when it comes to cars, let me make a new uh page. Uh cars is a big one. I will always because for most people, cars are going to be one of the ways that you get sued. You’re going to have a wreck. Um so we always ask people how many miles a year estimated do they drive? Things like that.
But this goes back to the um the TBE, the the tendency by the entirety I was telling you about because a lot of people we we know have all their cars are titled in the married couple’s name. And I don’t like that. I instead say, “Okay, you have a car, you have a car, and try not to drive each other’s cars if you can help it. Uh, but don’t put both your names on the car because if you put both your names on the car whenever someone sues, they’re going to sue both of you because one is the owner and one is the um the driver. And that is going to anything that you own as TBE is going to be dragged into it. So everything that we did to try to get your property into a married couple’s name is now dragged in because one of you wrecked a car.

Um, so that’s why we tell everybody it’s like try to drive your own car. Now, there are some limits if you just lend your car out. Maybe your kids are driving one of your cars or something like that. There are limits on how much a judgment creditor can or or an injured party can get in a judgment against you under the statutes. Um, but that’s only inside Florida. If you are if your child is outside of Florida driving, not every state has that kind of limitation. So, for that reason, we just we love for kids, of course, the cars to be in their names. Uh, and we love for uh the spouses to have their own cars and try to drive only their cars. Try not to drive your your spouse’s cars and try not to let your kids drive mom and daddy’s car either. That’s a big one.

Why Wyoming LLCs should not directly own Florida rentals.

Uh, another question we had here was, uh, my fellow real estate investors are setting up LLC’s in Wyoming. How do I know if I should do that? Okay, that’s a good question. So, let me go back here. to the first page where we did a Wyoming LLC. Uh the only time we ever like Wyoming LLC’s is if it is not going to own real estate directly. Period. And this is from my this is sort of my doctrine from when uh I was in title uh the title industry for years.

And the thing is is Wyoming LLC’s are extremely confidential. Nobody knows who really owns them. So if these if this Wyoming LLC owned 123 Baker Street, this 123LT property and it was not in land trust. So let’s say the Wyoming LLC owned it directly or let’s say you did the Wyoming protected series LLC and each protected series owns the properties directly. There’s a couple of problems there.

Number one, if they’re renting out property, the Wyoming LLC is still going to have to register in Florida as a foreign business if it ever has to evict one of these tenants because it is doing business in the state of Florida. And before it has the right to walk into a courtroom and file an action against a tenant to evict them, it has to register as a foreign company in Florida anyway. So, at that point, everything becomes public. So, what good did it do?

Number two, let’s assume it never has to walk into a courtroom. So, you just own it in protected series LLC’s. At that point, anyone can go to a title company company in Florida and say, “Hey, I own uh this Wyoming LLC protected series, and we’re selling this uh or we’re we’re mortgaging this property uh 1011 uh Baker Street. We’re going to we’re going to go ahead and do that.” The title company has no way of looking up who the true owners of this are. They have no way whatsoever. And the only thing that this person has to do, this this fraudster has to do is produce, well, here’s a here’s a an operating agreement, and here’s certified copies of the articles, and I’ll sign an affidavit saying, “Yes, it’s my company. Now, go ahead and wire the money to a company account in Jamaica that I just opened,” or something like that. And then you show up and they go, “Well, wait. You just put a mortgage on this property. I didn’t sign that. This is my company.” The title company and whoever was involved in this closing has really no obligation to you because you set this up this way. You were too confidential.

This is why we like the land trusts to be the owners of to be the face of the property. Especially if it’s a company like ours. Every title almost every title company in Florida knows us because we’ve been around since the late 80s. So, if they see, oh, this is this this propertyy’s selling, this property’s mortgaging, and this person who’s walked in the door bringing me this title order doesn’t own the property. It’s this trust. I got to call the trustee. So, they get in touch with us. We get in touch with you as the beneficiary because we know, yeah, you’re Wyoming Protected Series owns it, but we know who you are because we set all this up. We call you, we we email you, we contact you through our secure portal and we say, “Hey, why didn’t you tell us you’re refinancing this property?

Why didn’t you tell us you were selling this property? We would have been working with you to get this done with the title company all along so it wouldn’t be this mad rush at the end.” And you’re going to go, “What? What are you talking about? I have no idea who what you’re talking about. I’m not selling the property. I’m not refinancing the property.” We then contact the title company and say, “It’s fraud. We are not we are not signing anything for this. We are not going to finance or sell this property whatever is being done. So we stop fraud that way because they can find us. They can’t find this, the owners of this, the the Wyoming LLC, but they can find the trustee of the trust, especially if it’s a professional trustee company like ours are here in Florida where everybody knows us and everybody knows my landrustee.com now, so they can all find us.

Um, if I have a spouse, can I make a multimember Wyoming LLC with her and use that to make a child Florida LLC and have the same protections as a multimemember Florida LLC? Uh, yes and no. You’re sort of going around your elbow to get your butt to do that. Uh, you wouldn’t really need to because the Wyoming LLC, well, number Okay, a couple reasons. A lot of people want to set up Wy back to Wyoming LLC’s. A lot of people want to set up Wyoming LLC’s because Wyoming LLC’s, remember where I talked about uh charging orders, Wyoming LLC, Wyoming courts and Wyoming statutes allow you to get a charging order protection for one member LLC’s. So if you’re the sole member of the LLC, they still can they still cannot take your membership interest in the LLC. However, Florida courts, there’s a case, I think it’s called Mstead, has made it clear that that’s nice in Wyoming under Wyoming law. And I know it might be a Wyoming LLC, but if it’s done anything in our state, it better have two members for whatever it’s doing here. So, for that reason, uh we we would just do the Wyoming LLC and it’ be the beneficiary of the trust.

With that said, yes, I mean we have lots of people who will create I mean they have companies in Ohio and Texas and California and Virginia, North Carolina, South Carolina and Florida. And of course all those com for some of those families, all of those companies are owned by um by the Wyoming LLC. Uh we often use the Wyoming LLC like the old um family limited partnership in Colorado. uh may not get the same, you know, benefits out of it for tax uh purposes, but um we’ll just have the Wyoming LLC be sort of the the this is the this is the family office. This is the family business and it can own uh not only land trusts, but it can own other LLC’s anywhere in the country. and it would be the member and then you might be the manager, you might have manager trusts, whatever you do. Uh but it can also own corporations, certain corporations, uh usually Ccorporations, S corporations. It’s iffy.

Uh it can invest uh in other places. We have a lot of people who invest down in Central America. Uh Costa Rica used to be very popular, Panama. And whenever they did that, the Panameanian or or or Costa Rican attorneys would say, “Hey, you have to have a Costa Rican LLC, a corporation down here to own this.” And they’re like, “Yeah, well, I don’t want to own it in my own name down there.” So they would just do a a Wyoming LLC and then it would own the the other uh LLC’s and companies in other in other countries even. So that’s very common.

It could also I I I presume uh a Nevice LLC is is a big one, but Nevice St. kits. A lot of people will hear these uh because they’re very favorable to um for offshore accounts. Uh so a lot of people will set up Nevice LLC’s uh or St. Kits LLC’s and those then are the beneficiary of offshore trusts. And I don’t see why that LLC couldn’t be owned by a Wyoming LLC. Uh so it could do that too. So it just gets you that even farther away from the ownership, the human beings farther and farther away from the ownership.

And then this Wyoming LLC, you know, typically it may be owned by the RLT of the the joint RLT of mom and daddy. They may set up a a kid one uh irrevocable trust and kid two uh and then they may even set up a uh charitable uh trust. And all of these are the members of this Wyoming LLC. So you have multi multimember LLC protection even in states that require multi-members like Florida even though Wyoming doesn’t require multiple members to have charging order protections. So we do that.

Florida protected series LLCs and investor document kits.

Florida series LLC’s. Uh what are your thoughts on the new series LLC’s in Florida? What about just having series LLC’s from other states that are recognized in Florida? I am actually uh this is a good point to mention this. I’m actually teaching a twohour CLLE, continuing legal education class on this tomorrow uh here in uh I’ll be in the office, but it’s nationwide. We’re teaching nationwide, but I’m sure it’s mostly going to be Florida people who are going to be interested in it. It’s of course directed attorneys, but anyone is allowed, you know, to sign up and come to it. Um, but it will be tomorrow and uh it’s about nothing but the new Florida Protected Series LLC.

Now, your question is, well, why would you use a Florida protected series LLC rather than a Wyoming LLC? I go back to the uh two too private too private uh if it’s going to hold real estate. Now, we we will often do Wyoming LLC’s for privacy for clients to own uh crypto accounts, crypto wallets. Uh they will use them to hold investment accounts, bank accounts, and things like that. And again, it’s just a wrapper for their estate plan underneath it. That’s that’s that’s all the members of it. Um but it gives them that charging order protection. It gives them that privacy, but they still have the the foundation again, the foundation of the um the the the plan there of everything and how that’s going to work.

So,if you really want to hear my thoughts on the Florida Protected Series LLC, Rick is putting the I know he’s putting the link in the description of this video. Uh so if you want to and and there’s also a free pass. You don’t have to pay for it. Um so you can sign up for free and go to it and learn what lawyers will be learning about protected series LLC’s tomorrow that I’m going to be teaching for for two hours from 12 I think it’s from 12:00 to 2:10 p.m. Eastern time tomorrow.

Now got down here lease options and documentation and somebody wrote in they said that they purchased our landlord dokit and we’ll talk about that and noticed it has a memorandum of lease rather than a memorandum of option. Does that make it less likely for the underlying lender to notice the house has been sold with a lease option? Okay, first let me talk about you heard them ask about the dock kit. Uh if you go to our website aspireleal.com uh there is a place there where you can look through our dockit. We have a landlord.kit, a wholesaler.kit which is really the investor.kit. Um land trust.kit. So we have uh and private lender.kit I believe. Um and you can what was that? And he’ll put that in the comments section. A link for that too in the comment section.

But we um it years ago I I kept getting people writing me and asking me, “Hey, can you review this?” I went to a guru’s boot camp and or a mentor or a coach’s boot camp and they had contracts, but they said that we should have these reviewed by an attorney in our state where we’re going to be doing business. And I got tired of reviewing those because they sucked. So I said, “How about this? I’m just going to design forms.” And it’s forms that we use. Uh it’s forms that we use as well as um uh uh other, you know, people use. But so I just designed forms that fit more of what real estate investors would use and landlords would use and private investors would use. Uh and we’ve we’ve put those in packets and you can just pay a onetime fee and you you own them. You have access to them forever and ever. Uh so uh we have a link for that.

Lease-option memoranda and combining documents.

So apparently uh this uh audience member did purchase the landlord.kit and and and in the landlord. We have a sandwich lease. We have a lease option agreement. We have a memorandum of lease. Um I thought there was a memorandum of option in there, but I may just be mistaken. I may be thinking wrong, but there there could be a memorandum of option.

But first of all, what is a memorandum of lease? What is a memorandum of option? And that is a document that gets recorded in the official records to give notice that hey there’s a lease on this property for more than a year. So it gives the whole world notice I’ve got a lease. We did that uh we did a memorandum of lease because yes it doesn’t give this blaring siren you know red light flashing that uh we put an option on the property because under uh the do on sale clause a lease well actually you’re sort of screwed both ways a lease for more than one year or an option to sell the properties they are both considered uh violations of the deal and sell clause under under your mortgage. So, uh, but we do the memorandum of lease because it is a little less obnoxious than a memorandum of option.

Uh, but you, like I said, I’m almost 100% sure that there is a memorandum of option in that that packet. And you can also record a memorandum of option. But these protect really the buyer on the lease option to let the world know that, oh well, if the seller decides to just go ahead and sell this property out from under me, they’re going to have a title search done and this is going to pop up in the title search. And they’re going to go, wait a minute, you’ve already agreed to sell this property to somebody else. We can’t do this closing because you’re selling this right now to somebody. Um, you you’ve already agreed you’re selling it to these people.

Um, so that’s why we do it. Uh, when I did a lot of lease options back in the day, we don’t do many anymore at all. Uh, but when we did a lot of them back in the day, uh, it was usually for the investor buyer. So, it was really a protection mechanism for our client, the investor, buyer who was buying that property that they could record that and then that prevents the seller from going, “You know what? I sold this property for too little to you. The rent’s too low or whatever. I’m going to go sell to somebody else now. I’m going to rent somebody else.” But they have a they have a title search done that buyer does and they go, “Wait, they’re already selling to this guy, this investor, so I can’t I can’t buy it.” And so they’re going to have to come back to you and try to work something out to get rid of that.
The next question sort of dovetailes into that. It says, “So, I’ve been told from some Florida investors that we need to have a separate option agreement from the lease agreement to prevent it from being described as a disguised mortgage. Can you comment on why I combine them both into one document?”

And the reason I combine them into one document is because it just flows. They flow better and you’ve got one document to sign instead of two separate ones where something could be screwed up. Also, they’re already tied together. So, a default of one is a default of the other. Uh there have been cases where they defaulted on the lease, but then the court said, “But your option is still good because it didn’t have the cross default language in both documents.” So, just to avoid that kind of thing from happening by mistake, we don’t we we put them both in one document.

Number two, that old, you know, argument of, well, you know, you don’t want the judge to see that you’ve got a lease because you’re going into a victim under the lease. You don’t think that if they’ve paid a lot of money for the option and they paid a lot of money for the lease and they’ve been performing, you don’t think that they’re going to file defense to the eviction and say, “Wait a minute, there’s an option agreement. They didn’t tell you everything. Here’s an option.” At that point, the judge is going to be like, “Well, wait a minute. What are you doing trying to pull the wool over my eyes? You weren’t giving me the whole story.”

So, and that’s from an old lawyer. He’s gone now. He’s he’s no longer alive, but uh an old lawyer told me that years ago. He said, “Yeah, these these and he also represented a lot of real estate investors through the years.” And he said, “Yeah, a lot of investors always want me to put them in two separate documents, but every single time I’ve gone to evict on uh uh the lease, the tenant buyer always shows up with the option and says,”But wait, your honor, I’ve got an option. I paid them $20,000 to buy this house.” At that point, most judges just go, “Oh, okay. This is I’m going to re re and” and and also if they go to legal aid, legal aid lawyers are really smart and they’re going to figure this out and they’re going to they’re going to say, “No, this is truly a seller finance sale of the property. So, you’re going to have to go foreclose. We’re not going to let or you’re going to have to do summary rejectment at the lease. We’re not or quiet title. we are not going to let you simply evict them and it’s over.

Um, so and also the eviction doesn’t necessarily, you know, unless you got the true cross default in there and you plead it, the simple eviction doesn’t get rid of the option that’s still out there. So, that’s why we just do it all in one document. Uh, hope that explains that um why we do that.
Uh, do we have any other questions out there? Uh, looking to see where do I go? Oh, I go here. No. No. Where do I go? To to the notes or No, it’s not. Just read it to me. What is it?

Mortgaged rentals, land trusts, documentary tax, and insurance.

Ah, good question. So, I have a revocable living trust and I have three houses that all have mortgages on them. Do I need to move them into land trust? And if I do, doesn’t that trigger the do on sale clause? That is a mouthful right there. That is a mouthful. Um, and good questions. Very good questions because we we see this all the time.

I really don’t like holding uh real estate directly in your your revocable living trust uh unless maybe your homestead. And uh here’s why. Because like I said, your your revocable living trust does not provide you with any um asset protection. So it they they go right through it to you. So if someone gets hurt on property one, two, or three, and they’re all three owned in your revocable living trust, all it’s it’s just as if you owned it directly. So you’re getting no asset protection there.

I would hope that you have really good um insurance, uh liability insurance, and maybe an umbrella policy. But one of the things that we’ve learned over the years is that most umbrella policies do not cover um rental of properties. So if you’re renting the property out, your your most umbrella policies don’t cover if if a tenant or a guest gets hurt. And like I said, we hold usually around 2,000 properties at any time in trust. And we get sued regularly for slip and fall. Uh broken railings, uh uh drownings, uh all kinds of injuries that happen on the properties, broken ankles, you know, stepping in holes, things like that.

So the next question is, you got Okay, so you got three properties um and they’re all in your RLT right now. So, would I recommend pulling them apart even though you have a mortgage on it? Yes. Uh because then you’re going to separate them from each other and you’re going to separate away from the uh revocable living trust. Now, since they have mortgages on them, that is probably as far as I would go. I would make your your RLT the beneficiary of the same three trust because they have mortgages on them.

And there’s two reasons I do that. one doc tax. If you just move it into an LLC and you have mortgages on these properties, if you put it into an LLC, we have to pay documentary tax at 0.007 multiplied by the outstanding balance of your mortgages on each one of these. So, it gets expensive. So that’s why we leave the RLT as a beneficiary because that’s a specific exemption under the Florida administrative code for documentary tax. That’s section 12B of the uh the the administrative code. So uh now your your revocable living trust is a beneficiary. We don’t want to. Now, my next thing is is I don’t want to move from the RLT to an LLC because it’s the same exact thing happens. The same the documentary tax is then due. It’s just due on the unrecorded assignment of beneficial interest. So, for that reason, I would still leave it in your RLT, but your insurance is going to change on each property. So, this one’s going to be insured with one trust, this will be insured with the other land trust, and this will be insured with the other land trust. So they’re separated from each other. They have their own insurance. One of the things I always do or recommend is you still name your revocable living trust as an additional interest or an additional insured.

And if you go in and you do work on the property yourself, if you go in and fix leaking pipes, if you go in and change out circuit breakers and outlets, if you go in and clean the pool, you should also personally be named on that policy. If you’re swinging a hammer or paintbrush in that property, you should be listed as an additional sure insured on your liability insurance for each of for each of the properties because we’ve actually had cases where it was the trust named as the insured. Someone slipped and fell. We’ve had uh stair banisters give way and they fall off the stairs and break a hip or break a leg and they sue. Of course, they sue the trust, which you know, if if the trust loses, the trust is going to have to pay its insurance. But it’s it’s policy limits at most. But if it exceeds policy limits, they they can take that house. But they’re not going to take two and three from you.

But if you were the one who installed that banister and you didn’t do it to code and it’s all your fault, they’re going to name you in that lawsuit, too. And and they’re going to find out because they’re going to have investigations and they’re going to have depositions. They’re going to have requests for admissions, uh, document production. They’re going to find it out that you were the one who went in there by yourself and put up that stair railing because you wanted to save a hundred bucks on a handyman and you did it yourself and it gave way and grandma was going up the steps at the Airbnb and she fell and she broke her ankle in three places, her her femur in two places and ended up having to get a new hip too. and she was in in in bed for six months and ended up dying from pneumonia because of it because she couldn’t move. And it’s all your fault because you put up you put up the steps rather than hiring a contractor to do it for her for you. So that’s a big thing. Insurance, liability insurance has to be right, but get it down here.

Now you’re worried about, well, doesn’t that trigger do on sale? Technically, yes, because these are not your homestead. These are rentals. If it’s your primary residence, you can move it into a land trust as long as you are the beneficiary of the trust and you are still living in the property. The Garn St. Germaine Act says that’s totally exempt. That’s exempt from the the uh deal on sale clause. They can’t the bank cannot enforce that against you.

So, there is a possibility that your bank would say, “Oh, we we just saw the insurance or we just saw the tax bill and it’s no longer in the name of our borrower. It’s now in the name of a trust or a land trustee, an LLC that’s the trustee of a land trust or something like that, they’re going to say,”Hey, you got 30 days to put this back into your name or pay the mortgage off.” Typically when when in the very very very rare occurrences that has happened, we we or you can send a letter to them saying no no no the your borrower your original borrower is still the the beneficiary of the trust. So it nothing’s really changed. It’s just we just put it in a different in a different trust and then we’re we’re now the beneficiary of that trust.

So, uh, so the possibility that they can do it, yes, there’s a possibility they can do it. Probability they’ll do it, very low. Uh, we’ve been doing that for 30 years and I’ve had I’ve personally had maybe four or five out of hundreds that we’ve done, four maybe four or five have come back and the lender has said, “Whoa, you can’t you can’t do this. So, put it back or fix it.” And then we use a go to them and go, “No, no, no. The you’ll see here’s the trust. They’re still the beneficiary of it. We know it’s not exempt under Garn St. Germaine, but hey, you know, it’s still the same people in charge of the property, and they’re paying your mortgage. They’re paying the taxes. They’re keeping it insured. and the interest rate’s pretty good. So, why don’t you just take it and be happy?” And uh in those cases, uh I’ve I’ve knock on wood, I’ve only had one case in 30 years where the lenders just put their foot down and said, “Nope, nope, nope. Get it back in our borrower’s name.” And in those cases, in that one case, we did our our client was like, “Just put it back in our name. We’re done. I’m tired of dealing with them. Let’s just do it. They’re wrong, but we’ll just do it.” So, we did that.

So, that’s that’s my answer to that. As I definitely put them into three separate land trusts, drop your RLT down as the beneficiary of it uh of of each land trust. So, you have that argument. Number one, there’s no documentary tax. Number two, if the bank does come calling if if if very unlikely probable that it would happen, but if they do, you can make the argument, yeah, but or else he’s still here.

Another thing is is uh when you go or if you become incapacitated or whatever, your trustee then just has it and they can sell each of these properties and if a code enforcement lean has hit one of the properties in the meantime while you were incapacitated uh or whatever the trustee go that’s fine I can still sell two and three and I’ll deal with the code enforcement lean right now with all three of them being in the same if they’re in the same county if code enforcement lean hits number one you can’t the sell or refinance two or three until you deal with the code enforcement lean on one. Um, so that’s that’s I re my recommendation how I would handle that. Uh, nine times out of 10 for a client if they came to me with that same question.

Do we have any other questions, Rick?

Choosing a Florida series LLC versus Wyoming.

Correct. Correct. And this is one of the places too where now we’re having more clients say, “Oh, instead of doing Wyoming, just do a Florida protected series LLC as the beneficiary of each land trust.” Um, and we’ve had that come up quite a bit uh because they just don’t want the Wyoming for whatever reason. But for me, Wyoming is um you get privacy out there and it’s also cheaper. It’s it’s a lower filing fee and a lower annual fee than Florida.

Uh so my thing is though, again, this is the ostrich that keeps its head in the sand. Uh it does not poke its head up. It doesn’t do any work on the properties. It doesn’t have a car. It doesn’t uh own anything else that would be a dangerous instrumentality. Uh it’s not going to do a fireworks show, you know, out by the lake for anybody. it doesn’t do anything other than hold the beneficial interest for these trusts. Um, and uh, so yeah, that’s the way we do it.

We don’t actually have the Wyoming LLC own the properties because again, too confidential and uh, you you’re still going to have to register in Florida as a foreign company anyway. So why why bother? You’re still going to lose your anonymity ultimately. Um, but again it goes for me the biggest reason is it’s too anonymous. I like having a third-party trustee that anybody can find. Any title company can find them and call them and say, “Hey,” and it’s not just us. I mean, there’s other land trust companies in uh Florida, but the title companies in Florida know how to get hold of them and they’ll call them and email them and go to their websites and and get everything fixed um right and make sure that it’s not fraud because that’s really what title companies are for. They’re there to prevent fraud. That’s a big big big function that they serve on that. So, okay. Anything else?

The Delaware bank-account garnishment discussion.

Okay. Uh, thank you guys. One more thing. Since you stuck around, anybody who stuck around, um, I’m going to give you one more little tidbit of information for asset protection in Delaware.

Okay. So in in in every state in the union, if you are sued and you have cash in a bank, so let’s say you bank at Chase Bank, whatever, Bank of America, whatever. If you’re sued in North Carolina and you live in Florida, but you have a Bank of America account, that judgment creditor can go to any Bank of America branch in America and say, “Hey, I have a judgment against this person and here’s their social security number, their date of birth, and here’s the judgment. Give me everything in any bank account that you hold for them.” And the bank, you know, they’ll give you a notice of garnishment, and and if you don’t fight it in time, they just go, “Okay, fine. here’s all the money that’s in that account and they can just suck your account dry.

Delaware does not allow that for for um individuals. So if you are an individual and you have a bank account with a bank that only has branches inside Delaware, if a sheriff shows up at a at that bank in Delaware and says, “Hey, Joe’s got a judgment against him. give me all this money in his account. They’re going to say,”Get out of here.” Because Delaware’s uh legislature has said, “We don’t have time for our banks to be bothered by sheriffs walking in and saying,”Give us all the money in the account.” That’s we’re not going to do that. We’re not going to put up with that.

So, one of the things we tell clients too, another thing that we tell clients is if you got money sitting around, just some, you know, not doing anything, go open a bank account in Delaware and put some money in a checking or savings account in that bank account in Delaware and they the judgment creditors can’t just go and take it unilaterally. But applied bank.

Applied Bank has two branches and those two branches are only in Delaware. Uh so one’s in Wilmington, one’s in Rahobitth Beach. So that I know off the top of my head, Applied Bank is one of those banks that you can open an account, put some money in it. You can do it all online. You don’t have to go to Delaware to open the account. You can do everything online. but put you, you know, 100, $250, 300, $500,000 in a bank account up there and you know, if you do get sued that and and they go, “Okay, we’re going to come take your bank accounts from you.” They can’t take that bank account.

Now, a judge in Florida, judge wherever could say, “Hey, you, Mr. Judgement DTOR, bring that money back. Get it back down here and give it to them. Uh, or I’m going to hold you in contempt.” So, that could happen, but at least they can’t just walk in without you knowing about it because that’s how they do garnishments. You don’t even know what’s happening and they just suck the money out of your account like that. Um, so that’s one of those things uh we tell people about too. It’s a little trick. And since you all stuck around this long, remember that Delaware accounts for individuals does not work for businesses, but for individuals, uh, Apply Bank up in Delaware can take care of you on that.

So, with that, uh, we’re going to end tonight. Thank you all for attending. Thank you for the great questions. I hope you learned something.

Hope you picked up a little tidbit of something here while I was talking. And uh if you ever need anything, please uh let us know. Until then, trust this.

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