Episode Transcript
[00:00:00] Speaker A: Hey, over the past couple of weeks, I've gotten a whole lot of questions about what happens if you get sued, but your trust has already been dissolved.
So the scenario is this. You owned a property, you owned a house in a land trust, and you sell the property, and the money comes into the trust, and all the money is distributed to the beneficiaries.
And three months later, a year later, the buyer comes back and sues the trust for an undisclosed defect. Or a contractor comes back and says, hey, I wasn't paid for work I did on the property, so now I'm going to sue the trust for what I should have made, what they were supposed to pay me under the contract.
And the question becomes, usually from a potential client, is, well, do I even need to hire a lawyer to defend this, or do I just let him get a judgment?
And it's sort of up in the air? There's no case law in Florida as to what happens when a trust is dissolved or terminated because it has already received everything and distributed everything. My argument would be that there is no real necessity to hire an attorney or to defend the action, because if they get the judgment against the trust, it is a judgment against the trust. The trust has no assets. The trust no longer exists, so there's really nothing for them to get. But then the next step becomes, okay, but what if they try to come after the beneficiaries? They try to go, well, the trust distributed to the beneficiaries all the money, all the assets that it had. So now we're going to pierce the veil of the trust and go after the beneficiaries.
And that's a question that's never been answered in Florida. While it's a. There are standards and there is case law around going after the members of an LLC or going after the shareholders of a corporation, after the corporation or the LLC have been dissolved. There's nothing out there specifically about what happens once the trust terminates. So, again, we're stuck with, can they even do it? We've had people try to do that in the past, and they've not been successful. They have been. They have tried to go after the beneficiaries in the past after the trust has been terminated or the trust has been dissolved, but they have never been successful in going through that trust veil and then going after the beneficiaries, because the beneficiaries never signed anything, the beneficiaries never personally took action that caused the alleged damages to this plaintiff, to this potential judgment creditor. So for that reason, our advice is typically if the trust has been dissolved, if it sold its last piece of property, it no longer owns the property, the trust no longer exists, the money has gone through to the beneficiaries and it's done, it's over with. If someone then comes along after the fact and sues the trustee as trustee of the trust, there's really not a whole lot of reason to mount a defense to that, because if they get the judgment, it's uncollectible for the most part. The only thing you have to worry about is if they, if you have any potential that they could come after you as the beneficiary in some way, you may want to mount somewhat of a defense to fight it off. But once you've stuck your arm in that tar, you're not going to be able to pull your arm back out once you enter into that lawsuit.
So this is another reason that we also recommend, when possible, to use another LLC or corporation to be your beneficiary of your land trust, because that just adds one more layer of protection for asset protection. So let's say they do sue the land trust, and somehow, some way, they get through the land trust and they get to the beneficiary. The beneficiary is now an LLC, and that LLC has now, it may still be in existence, but it has no assets. So now they have a judgment against an LLC. They have a judgment against the land trust if they can do that. But both are empty vessels. So while they may be successful in suing and getting their judgment, their judgment is worthless. So this is why these are good asset protection devices to use, especially when you put a land trust on top of an LLC as the beneficiary when it comes to homestead. Of course, you can't have an LLC or a corporation as your beneficiary because then you can't get the homestead protections or the homestead tax exemptions and caps. But any other kind of property, if it's at all possible, always have an LLC or corporation as your beneficiary. Then you're going to be absolutely clear that if they sue the dissolved trust, go ahead and sit back and let them do it. Let them get their judgment and they'll never be able to collect anything anyway. So that's my two cent on that. If anybody has anything else to ever ask me, please do not hesitate. Send messages, send emails, send us a voice message, however you want to get the question to us, and we're happy to answer it for you.
[00:06:03] Speaker B: Thanks for listening to this edition of Trust. This if you got something out of it, please press like and subscribe and give us a five star review to help us reach others who can benefit from this series. Until next time, keep aspiring to a better life.
