How You Can Protect Your Real Estate in Florida

Before getting started, I want to make clear, your first line of defense in the event of a claim or lawsuit against you in connection with your real estate or real estate business should be insurance. However, that’s just the first step. That doesn't mean you shouldn’t take other precautions to protect yourself in case insurance cannot cover you.

So, what am I referring to? As a real estate investor, I’m sure you already know the big one: getting sued by a tenant or a creditor coming after your personal assets over business debts. While the subject of asset protection is a complex one, here are three easily digestible examples of ways to protect your real estate in Florida.

The Homestead Exemption

The Homestead Exemption is a collection of legal rights given to you over your primary residence and only your primary residence, with significant legal consequences, reaching into taxes, family law, estate planning, and, of course, real estate.

In the case of real estate, the Homestead Exemption grants almost unlimited protection from all creditors with the notable exception of taxes, mortgages, and construction companies. Should someone obtain a judgment against you, they should not be able to force the sale of your Homestead to satisfy the judgment. There are acreage limitations to the size of the homestead, and one must be a residence of Florida to avail themselves of this.

Thus, Florida’s homestead exemption can protect your primary residence, and only your primary residence from judgments and creditors.

Limited Liability Companies (“LLCs”)

An LLC is a business entity that is considered a separate legal person from its owners. It can conduct business, enter into contracts, buy and sell property, including real estate, in its own name, and can sue and be sued. If the owners stick to certain formalities and do not combine their money with the company’s money, the most the owner of an LLC, called a member, can lose is their investment in the LLC. Their personal assets should not be within the reach of the LLC’s debtors to satisfy the LLC’s debts.

The LLC is an effective way to prevent your personal assets from being used to satisfy business debts, but the reverse is not necessarily true. If someone manages to get a judgment against you in your personal capacity, a judge can grant them the ability to reach the distributions from your business to you.

Another way to protect your real estate assets is by keeping your name off the public records. It’s hard to sue you over your real estate if no one knows you own it. An LLC and should take title to any real estate you own for business purposes. However, given Florida’s broad public disclosure laws, most people don’t do this correctly and don’t avail themselves of the anonymity an LLC can provide.

Trusts

A trust is another type of legal entity that is considered a separate legal person from its owners, but its purpose is not business oriented. In a trust, there are three roles: Grantor, Trustee, and Beneficiary. The Grantor creates the trust and contributes the property the trust is in charge of. The Trustee agrees to manage the property in the trust according to the Grantor’s instructions and for the benefit of the Beneficiary. The Beneficiary receives the benefit of the Trustee’s management of the Grantor’s property.

Trusts, like real estate, are governed by state laws. And state laws are different state-to-state. I mention this because a very common misconception is that someone can create a trust and receive asset protection from that trust. That may be possible in states that allow for Domestic Asset Protection Trusts, but Florida is not one of those states. In fact, the laws of Florida explicitly allow a creditor of the Grantor to reach trust property to be made whole. This is true even if the trust is irrevocable.

So how does a trust help you protect your real estate assets in Florida? By keeping your name off the public record. It does this better than an LLC for two reasons: First, you can name your trust whatever you want, unlike an LLC which has naming requirements. Second, unlike an LLC, there is no requirement to list someone in connection with the trust on SunBiz, Florida's online business directory. So, as long as you can resist naming your trust after yourself, you should be able to use a trust to anonymously own real estate.

A trust also has the added benefit of avoiding probate, which is a different threat to your real estate that will be covered another time.

Protect Your Assets with TealAcre

You read this far because you’re care about your interested in protecting your assets. And you’re interested in protecting your assets because you've earned them and you use them to provide for your family, maintain your business, and take care of your employees. Instead of going at it alone, let TealAcre help you get the clarity and peace of mind you’re looking for. To contact us you can:

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