As many of my students know by now, I really like the Florida Land Trust Statute enacted in 1963. Florida cites it as Florida Statutes Annotated, Sections 660.41, 689.071, 196.031 (Supp. 1963). Why do I like it? It’s a real estate investor’s best friend! This statute provides incredible advantages for privacy, asset protection, and flexibility.
Let me count the ways:
Florida Does Not Require an In-State Trustee
What It Means: When setting up a Land Trust under the statute, you are not legally required to choose a Trustee who resides in Florida.
Why This is Important: This flexibility allows investors across the country to use the Florida Land Trust Act as the Governing Law in their Trust Agreements. (See clause 9.5 in the Trust Agreement 6.0 that I provide to all my students.) A Trust Grantor, someone who creates a Land Trust, may use a trusted friend, family member, or out-of-state corporate entity as their Trustee. It saves the hassle and expense of hunting down a local institutional trustee just to manage your paperwork. Please note: I prefer individuals as Trustees instead of entities. I explain the reasons for my preference in this post.
Consider This: In my view, it is best when the Trustee resides in the same state as the governing law used in the Trust Agreement. This congruence between the governing law and Trustee could be critical in court. It may increase the odds a judge will recognize the jurisdiction of the governing law in a lawsuit.
Protection From Personal Creditors
What it Means: An outside creditor cannot easily attach a lien directly to your Beneficial Interest if you run into personal financial trouble. And they cannot attach a lien against you to the property held inside the Trust. This gives you a negotiating advantage when working out a resolution to your problem.
Why This Is Important: The Trustee holds the legal title, and not you personally. Therefore, there is a robust wall separating your personal liabilities and your investments.
A Creditor of a Land Trust Cannot Attach a Lien to the Owner of the Beneficial Interest in the Trust
What it Means: The reverse of the above is also true. A creditor of a Land Trust cannot go after the assets of the owner of the Beneficial Interest (unless the B.I. owner signs personally for the loan as a guarantor).
Why This is Important: The statute isolates risk, which is what we always want. If an issue arises with a Trust property for which you hold the Beneficial Interest, creditors cannot automatically pierce through the Trust to latch onto your personal assets.
The Beneficiaries of a Land Trust Are Not Liable For Premises Liability
What It Means: Only the Land Trust itself is exposed to premises liability. This is liability that occurs on the real property held within the trust. Beneficiaries are generally shielded from premises liability.
Why This Is Important: Slip-and-falls can lead to devastating lawsuits. This statute insulates Beneficiaries and their other assets from liability for what happens on the site of a trust property.
The Land Trust itself is not subject to liability for actions of the Beneficiary(ies)
What It Means: Just as the Beneficiary is shielded from risks related to the property held in the Land Trust, the Land Trust is protected from liability associated with the Beneficiary.
Why This Is Important: The example I turn to is this: If Bob the Beneficiary hits his neighbor’s dog with his car, and his neighbor sues Bob, his neighbor cannot attach a judgment lien to the trust in which Bob is a Beneficiary. The property inside the trust is untarnished and unaffected by external personal judgments.
WARNING:
- Be sure that any deed you are using for a Florida Land Trust complies with Florida Statutes, Section 689.071 and NOT Section 689.07 (Florida trust code has numerous rules and requirements that apply to Trusts, but these rules DO NOT apply to Land Trusts).
- Florida law requires the Trustee of a Florida Land Trust to check the Beneficiary for any Racketeer Influenced and Corrupt Organization Act (RICO) liens before a transfer or direct distribution of money out of the trust estate. The Trustee has PERSONAL LIABILITY for making distributions that bypass RICO liens. RICO liens run for six years and can be renewed for six more years. NOTE: You can obtain a “search” from any local title company.
- Conditions apply to a Florida Land Trust that has ten percent of the Beneficial Interest owned by a non-US citizen or foreign entity. It must have a registered agent and be registered with the Secretary of State as an Alien Business Organization
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