Should I Form a Limited Liability Company as Part of My Florida Estate Plan?
When you die, any real property you own is subject to probate in the state of its location. This can make estate administration more complex, especially if you own residences or buildings in more than one state. For example, let’s say you spend most of the year living in your home in New Jersey but you also have a second house here in Florida. If both properties are still in your name at the time of your death, your estate will need to open separate probate estates in New Jersey and Florida.
Now, one way to avoid this scenario is to place both properties into a trust. Trust assets are not considered part of a person’s probate estate. This way, when you die a successor trustee simply assumes control of both properties without the need for probate.
How an LLC Can Protect Against Creditors and Probate
Another option to consider is placing one or both properties into a separate business entity, such as a limited liability company (LLC). This can be especially useful if you use a property to generate income. To continue our hypothetical example, say you spend a month in your Florida home each year, but the rest of the time you rent it out as an Airbnb. You could create a Florida LLC to own and manage the Florida property as a business.
What are the potential advantages to this? The first is creditor protection. Florida already has a generous homestead exemption that protects a person’s principal residence from creditor claims. But if your Florida property is a second or vacation home, the homestead exemption will not protect it. And simply transferring the property to a revocable estate planning trust will also not help, as such trusts typically do not protect against creditor claims.
In contrast, an LLC is a legal entity that is treated as separate from the individual owner or owners. This means that a judgment against the LLC typically cannot be enforced against the personal assets of its individual members (owners). For instance, if a guest is injured while using your rental property and sues your LLC, any judgment could be enforced against your personal assets. Conversely, judgments against you individually cannot be enforced against the LLC’s assets (although a creditor could seek your interest in the LLC itself).
Aside from potential liability protection, putting property into an LLC can also reduce the need for probate down the road. Since the LLC is a separate legal entity, any property owned by it is not considered part of your potential probate estate. Furthermore, if your LLC has an operating agreement in place–and it should–this document can specify what happens to your ownership interest in the company after your death. An LLC can also have multiple members, so you can include other family members in the company.
Want to Learn More? Contact a Lee County, Florida, Estate Planning Lawyer Today
Keep in mind, however, that forming an LLC or trust are not your only estate planning options. An experienced Fort Myers estate and probate administration attorney can sit down with you and review all of your options. Call the Kuhn Law Firm, P.A., at 239-333-4529 today to schedule a free consultation with a member of our estate planning team.