One of the key elements of asset protection is financial privacy. The only way a savvy real estate investor, such as yourself, can keep their financial matters private is by not making the extent of their holdings public. This is why we recommend holding property in a land trust. Trusts take the ownership of assets out of your name and bequeath them to a trustee to act on your behalf. This set up protects your prized assets from lawsuits and liens as it’s impossible to levy against the property held in trust. But there’s a catch…
Can Property Held in the Trust be Liened?
Confusing, right? I’ll explain.
A lien filed against the beneficiary of the trust (you) cannot be attached to the property. After all, the title is not held in your name. However, the property itself can be liened. Some of the reasons your property could be liened directly include:
- Mechanic’s lien
- Lawsuits filed against the property, e.g., when a tenant slips and falls
- Unpaid taxes
- Mortgage lien
- HOA fees
How Do You Protect Your Property from Liens?
I’ve been saying the same thing for years – put each property into a separate land trust and set up an LLC to be the sole beneficiary of the trust. This way, the properties are insulated against each other and you reduce your exposure to only one property should it be liened.
You only need two legal documents to create land trusts for multiple properties. However, you will first need to come up with a name for your properties. Find someone you can trust, either family member or friend, and then contact a land trust attorney. The attorney will help you draw up the contract by capturing the rights of both parties and how the relationship will work going forward.
Both you and the trustee should go over the document and sign it once you’re satisfied with the contents. Follow this up by recording the trustee deed. After you’re done, the ownership details of your property will not be available to the public in a perfectly legal manner. Your name won’t appear anywhere even when you must use a mortgage. The name that appears when a search is conducted is that of your trustee. If you choose to have your attorney as the trustee, then you’ll have an extra layer of protection since all communication between a lawyer and their client is considered confidential.