A Land Trust Vs. a Living Trust

End-of-life matters are not always easy to think or talk about. However, making plans now, while you are healthy enough to do so, can save your loved ones time, money, and heartache.

The last thing anyone wants to do is lose a loved one and then be immediately buried in legal matters regarding their possession, estate, and finances. If you have been considering end-of-life plans, you may have heard the terms “living trust” or “land trust”. These trusts help ensure your loved ones get the assets or properties you want, while bypassing the complex, often expensive, legal process known as probate. To learn more about these trusts, keep reading.

Understanding The Living Trust

A living trust is one that is created during your lifetime. (As the living trust owner, you are known as the trust settlor or grantor.) A designated trustee manages these living trusts. This trustee holds legal possession of any assets or property that are included in the trust. A trustee has the duty to manage the trust in accordance with the best interests of the beneficiary (or beneficiaries). The trust settlor, or grantor, designates the trustee. Upon the grantor's death, the assets and properties will flow to the beneficiary without having to go through the court system. (This is different from a will, which will need to go through court before it can be distributed to your loved ones.) A living trust can be “irrevocable” or “revocable”.

What Is A Revocable Trust?

With a revocable trust, the granter can appoint himself or herself as the trustee. This allows them to take control of the assets contained in the trust. By doing this, the assets within the trust remain a part of the grantor's estate. This means that, if the value of the estate taxes exceeds that of the estate tax exemption at the time of death, taxes may be owed. In a revocable trust, the granter, acting as the trustee, can amend the trust and the rules at any time. They can freely change beneficiaries at any time. They can also undo the trust at any point as well.

What Is An Irrevocable Trust?

By comparison, in an irrevocable trust, the grantor is not the trustee. Because of this, they end up relinquishing some of the control over their living trust. When a trustee is designated for an irrevocable trust, they become the legal owner of the assets or property within the trust. (This reduces the taxable estate for the granter.) With an irrevocable trust, the named beneficiaries are hard to change.

Understanding The Land Trust

A land trust is a type of living trust. However, unlike a living trust, which holds any type of asset, a land trust can only hold real estate or related assets. This means a land trust can hold physical properties, notes, mortgages, air rights, and other real estate related assets. With a land trust, the property owner is the beneficiary. Because of this, they are able to direct the management of the property. (The trust agreement or deed would dictate the level of control a beneficiary has.) The property owner is also able to retain all rights in regards to the property. This includes the right to freely develop, rent or sell the property contained in the land trust. Land trusts are typically considered to be revocable trusts. As such, they can be amended or terminated at any time.

Benefits of a Land Trust

There are plenty of benefits when you create a land trust.  Perhaps the biggest benefit, however, is the ability to hold property anonymously.

How is this possible? The property contained within a land trust is listed as the name of the trust in public records. This helps to hide your full net worth from the public eye. As a result, it can decrease the potential for lawsuits and help with property negotiations.

Whether you personally own it, or your Series Limited Liability Company (LLC) does, a land trust inherently protects your property investments. In addition to this, as a type of living will, a land trust avoids probate court. This means you do not have to go through court in order to manage, rent or sell the property contained within the land trust. (This is because the property contained in the land trust are considered personal property. This is similar to the idea of owning corporation stock.)

Get the Most Out of Your Living Or Land Trust Agreement

It is important that your trust agreement should give you the rights you expect, without hidden clauses. When you designate a reputable “nominee trustee”, such as Royal Legal Solutions, you can rest assured that your trust agreement contains everything you need it to. In fact, when Royal Legal Solutions is designated as your “nominee trustee”, the filing process is not only easier. But it also ends with our firm resigning as the trustee and transferring the land trust back to you as the sole trustee. What does this do for you? In doing this, Royal Legal Solutions will be the trustee of record, protecting your anonymity. You will retain all rights related to the property, including the ability to sell it. (You will need the trust agreement to successfully sell a land trust property.)

Royal Legal Solutions, Your Ideal Living Or Land Trustee

At Royal Legal Solutions, we aim to protect your assets. As your nominee trustee, we ensure your trust agreement reads exactly as you need it to. We do not include hidden clauses that will bar you from your rights to the property. We understand the importance of asset protection and anonymity. If you would like to schedule a consultation with Royal Legal Solutions, please contact us today. After all, you invested in the property and deserve the full benefits a land trust can provide.

What Is The Liability of a Land Trust Trustee?

A land trust is a type of revocable living trust. Unlike a living trust, which can contain any types of assets, a land trust is for real estate or real estate-related items only.

With a land trust, you are able to obscure your overall net worth. This is because the property contained within a land trust is not listed under your name in public records. In fact, the property is listed in the name of the trust on all public records.

Below, we discuss what (if any) liability a land trust trustee has.

Land Trust: The Basics

As stated above, a land trust is a type of living trust. As with other types of trusts, a land trust must have a designated trustee. 

In a land trust, a trust agreement will act as the vehicle through which you dictate the trust arrangement. For most land trusts, the trustee holds the legal title to a property. However, all rights remain with the beneficiary. (In a land trust, you are typically the beneficiary.) This means the beneficiary retains all rights to the ownership, possession and management of the property. In other words, the beneficiary retains the right to manage, rent or sell any property contained within a land trust.

Finding a trustee for a land trust can be hard. While companies like Royal Legal Solutions offer “nominee trustee” services, finding an individual interested in taking on this task is often difficult.

Benefits of a Land Trust

Before we talk about the role and liability of a trustee, let us review the benefits of a land trust. While there are many benefits to having a land trust, the primary reasons are related to anonymity and control.

Anonymity

In a land trust, the property is listed under the name of the trust. This means your personal identification, including name and address, are not listed in public records. In today’s world, anonymity is a rare and precious protection measure. Why? When your property is not linked to you, it helps to obscure your overall worth. In doing so, it can help reduce potential lawsuits. (After all, if your net worth is unknown, lawyers cannot seek exuberant restitutions.)

Obscuring your net worth can also help with property negotiations. Why? Because when your personal wealth is unknown, the party you negotiate does not realize your full worth. This can reduce the likelihood that they press for ridiculous amounts of money simply because they know you can afford it. (Celebrities tend to purchase properties through land trusts for this reason!)

Control

A land trust gives you full control over the management, rental or sale decisions of your property. You also do not have to go through a probate court before distributing or selling properties under a land trust. Because they are considered personal property, assets in a land trust are exempt from court proceedings that regulate their distribution. This level of control is greatly appreciated by many parties. (In an irrevocable living trust, for example, you can not freely amend the trust or change beneficiaries.)

Liability of the Land Trust Trustee

In a land trust, the trustee is only to act in accordance with directions given from the beneficiary. While the beneficiary has a keen interest in the trust agreement, a trustee should as well. Why? To avoid liability, a trustee will want the trust agreement to specifically exempt them.

In fact, a trustee should be exempt from personal liabilities related to the land trust’s debts and obligations. (Some trust agreements divide incidents of ownership between the trustee and beneficiary.

Make sure you read any trust agreement before signing it to ensure it includes the points each party find relevant.) In addition to this, the trustee may find themselves personally liable, regardless of the trust agreement exemptions, if they have acted negligently. They may also be liable if they acted without the direction of the beneficiary.

Certain states have additional statutes that apply to land trusts. Your trustee should research these laws to ensure their liability is well known prior to signing any agreements.

Royal Legal Solutions

At Royal Legal Solutions, we understand the nuances of the role of a land trust trustee. We work with you to carefully construct a trust agreement that benefits everyone. As your “nominee trustee,” Royal Legal Solutions files the right paperwork on behalf of your land trust. Our name appears on all public records related to your property to protect your anonymity. After filing the right paperwork, we transfer the trustee title back to you.

With your net worth remaining anonymous, you assume all rights and responsibilities associated with both the trustee and beneficiary role. Think this offer applies only to individuals in a certain state? Not true. Royal Legal Solutions are able to assist with land trusts throughout the United States and Canada. If you would like to schedule a consultation with us, please contact the professionals at Royal Legal Solutions today.

Land Trusts and Limited Liability Companies

If you want to protect your privacy and real estate assets, a land trust is a great way to do so. Why? A land trust inherently provides anonymity on public records related to the ownership of a property. For those investors looking for increased protections, however, a limited liability company (LLC) can help.

Understanding the Benefits of an LLC

As the name implies, a LLC limits your personal liability. Legally, your LLC is responsible for its own debt and obligations. As such, your personal finances and assets are not subjected to any court judgments or legal proceedings against your LLC. If you fail to pay mortgage on a home purchased through your LLC, only the LLC itself is responsible for repaying this debt. LLCs are also exempt from having to hold annual meetings or filing extensive records or reports. The Internal Revenue Service (IRS) classifies LLCs as proprietorships or partnerships. As such, an LLC is able to take advantage of tax breaks associated with them. For example, an LLC does not pay taxes on any gains. Instead, it is used as a pass through vehicle and taxes are paid through the owner’s personal tax returns instead.

How Land Trusts And Limited Liability Benefit You

A land trust provides property owners with complete anonymity. This is a crucial feature that can obscure your net worth and limit potential lawsuits. This is because, with a land trust, the property’s owner is listed as the name of the trust itself. Your personal information is not associated with any public records related to ownership of your property. As the beneficiary, you also retain full control of your property. You can manage it as you wish, rent it to others, or even sell it whenever you want. This is a great way to protect your asset and you from potential money sharks looking to make a quick buck off someone they believe has a high net worth.

The Best of Both Worlds

When you combine land trusts with LLCs, you get the best of both worlds. How? Let us take a look at some of the most frequently asked questions regarding land trusts and LLCs.

A Note on Series LLCs and Land Trusts

When you establish a LLC, you should consider forming a series LLC. Why? A series LLC segregates assets. Each asset under the various “series” are protected from lawsuits or judgements that may be made against one and other. In other words, if you establish a series LLC, each with its own land trust, the properties under Series LLC A, B and C are exempt from judgments against Series LLC D. This protective barrier between LLCs and assets is a great way to further protect your investments, while maintaining your anonymity.

Royal Legal Solutions: A Knowledgeable Trustee

In a land trust, you designate a trustee. This is true even if you establish a land trust in support of an investment made through your LLC. At Royal Legal Solutions, our professionals have experience with both land trusts and LLCs. Our experts are fully aware of the best ways to protect your assets and can advise you based on experience, a thorough understanding of state and federal laws, as well as our professional insights into the benefits of the land trust. In fact, Royal Legal Solutions is able to assist you with establishing your land trust and your LLC. We also have experience with assisting clients all over the United States, as well in Canada. If you are interested in scheduling a consultation with Royal Legal Solutions, please contact us today.

Land Trust Beneficiary: What Does IRS IRC Section 121 Advise?

A land trust is a great way to own property while maintaining your anonymity. With a land trust, the ownership of the property is publicly listed under the name of the trust itself. A land trust has a designated trustee as well as at least one beneficiary.

With most land trusts, the property owner is the beneficiary. This allows them to maintain full control over the property. However, limited liability companies (LLCs), corporations, the trustee, and other trusts can also be listed as the beneficiary. In listing one of these other types of parties as the beneficiary, you increase your anonymity.

To determine whom you should have listed as the beneficiary, you might want to consider the tax implications.

IRC Section 121

The Internal Revenue Service (IRS) establishes regulations regarding taxes. These regulations, known as the Internal Revenue Code (IRC), apply to almost every financial situation in America. A review of IRC Section 121 makes it ideal for the property owner to list himself or herself as the beneficiary of a land trust. Why? Let us examine the code for a better understanding.

The Issue with Entities

A grantor trust, as defined by IRC 671-679, is considered a qualifying trust that can act as a beneficiary of a land trust. A revocable living trust is a qualifying trust as well. If you make an entity your beneficiary instead, you will likely have an issue qualifying under the IRC Section 121. (However, recent court rulings have begun to show promise relating to LLCs and asset protections.)

Let Royal Legal Solutions Help

At Royal Legal Solutions, we understand the intricacies of tax regulations. Our professionals have experience with all aspects of asset protection. This includes the establishment of trusts, LLCs, and other entities. Our experts are licensed to work throughout the United States as well as in Canada.

If you still have questions about IRC Section 121, feel free to ask in the comments section below. If you need specific advice, set up a consultation with Royal Legal Solutions today. Asset protection is not a do-it-yourself gig.

My name is Scott Smith. In addition to being an attorney, I’m a real estate investor myself. If you’re considering a land trust, let us help you protect your valuable investments with a foolproof asset protection strategy from people who’ve been around and seen it all. Take our financial freedom quiz and schedule a free consultation. We’ll help you make your investments bulletproof.

Transfer Of Beneficial Interest In Trust

A land trust provides owners with anonymity. This is one of the biggest benefits of establishing a land trust. However, this level of anonymity extends to the transfer of beneficial interest in trust as well.

What is Beneficial Interest?

Beneficial interest allows individuals or entities to receive benefits associated with assets held by another party. Under a land trust, the properties contained within it are considered personal property. Referred to as interests, the transfer of these assets can be done with relative ease. There is no need for a notary, witness, public record, or other such documentation. With a land trust, this provides several important protective measures. For example:

Transfer Of Beneficial Interest In Trust

The Role of a Trustee

When you establish a land trust, you must designate a land trust trustee. This individual or service (as provided by Royal Legal Solutions) can only act per directions you provide. When it comes to the beneficial interest of a trust, your trustee will need to accept the transfer.

If you have an entity that is named as the land trust beneficiary, the beneficial interests can be transferred without needing a change in the beneficiary designation. (Entities can include, but are not restricted to, limited liability companies (LLCs), corporations, and personal property trusts.) When an entity acts as the beneficiary, the trustee is exempt from the process. This means they do not have to acknowledge the transfer in any way. If you are seeking full anonymity, this may prove to be your best course of action.

Hiring a Reputable Trustee Service

The professionals at Royal Legal Solutions understand how important your anonymity is. After all, keeping your net worth from public records can help limit and reduce the likelihood of a lawsuit and aid in future negotiations.

Royal Legal Solutions can provide you with the best support possible. If you would like to speak with a professional about beneficial interest, trusts, corporate structures, or any other aspect of asset protection, please schedule a consultation with Scott and his team today.

The Benefit of Using Power of Attorney With a Land Trust

When it comes to having a land trust with someone you are close to, using a power of attorney with a land trust is a good idea. A Power of Attorney, or a POA, is someone who acts on behalf of you. This is a good thing to have in case you are out of town or you are unable to do anything for yourself at the moment. Some people who need a Power of Attorney may be your elderly family member who cannot think for themselves or do anything for themselves. However, a POA is also good for those who are running a business and are out of town a lot.
If you have a land trust with someone close to you, you may need a Power of Attorney in case you are out of town and need someone to sign documents for you or act on your behalf for something to do with your business.

Do You Have Questions About Land Trusts?

Are Land Trusts Still Effective?

If your attorney tells you that land trusts are not as effective as they once were, they are not educated enough on land trusts. Most attorney's don't know enough about land trusts for them to give you advice on using one. They most likely didn't get this education in law school. Land trusts are just as effective as they once were, if not more effective these days.

What States Are Land Trusts Used in?

Land trusts are only used in six states as of now. These states include Illinois, Florida, Virginia, Indiana, Hawaii, and North Dakota. These are the only states that have statutes for land trusts right now. This may be why many attorneys don't know enough or, if anything, about them currently.

Who is the Best Person to Use as My Trustee for the Land Trust?

The best person to use as your land trust is someone you trust very much. This could be your closest friend or family member. However, if you don't want to use an individual for your land trust, you also have the option to use an institution. Although you do have this option, the institution may charge you a fee for using them whereas, the individual you are closest to, may now charge you anything because, after all, they are your best friend or close family member.
So, in short, it is a great idea to use a Power of Attorney for your land trust in case you need documents signed and you are either unable to do this because you are in the hospital or maybe even out of town on a business trip.
Hopefully, these questions and answers helped you learn a little more about land trusts and you are more educated on this effective tool for real estate investors.
 

Land Trust Mortgages: How To Borrow Money Using a Land Trust

I’ve been harping on for years about the importance of setting up a land trust for your real estate investments. Today I want to touch on one of the issues many real estate investors struggle with – how to borrow money using a land trust.

There are times when you may want to borrow money to make improvements or preserve assets held in a land trust. There may also be a need to refinance the property at some point. You need to make sure that the trust has the power to borrow money. It may not always be the case and this is normally covered in the trust deed.

Let me get right into the mechanics of it all.

What Do I Need to Get a Mortgage Loan Using a Land Trust?

The first step you’ll need to take is to have the trustee sign the mortgage or note. However, you will need to apply for the loan and sign the guarantee or the note since the trustee won’t be signing personally.

Alternatively, if you have your property in a land trust already and want to borrow money against the beneficial interest, then the lender will need to serve a Notice of Collateral Assignment on the trustee. The trustee will then write an acknowledgment of the assignment.

When this happens, the trustee is no longer able to transfer title of any property held in the trust or encumber or mortgage the property without the lender’s written consent.

Here are the five things the lender will be looking for when granting the loan:

  1. The lender will need to review the trust instrument.
  2. The lender will need to confirm the grantor and trustee identities.
  3. The lender will need to establish whether the trust grants the trustees power to borrow money and pledge or encumber trust assets.
  4. The trustees may be required to sign a trustee certificate reciting some key terms of the trust and confirming the authority of the trustees to take out a loan.
  5. The bank will need evidence that the property is actually owned by the trust. For this, you will be required to provide the deed on record for review.

If you’re seeking to obtain a loan against trust assets, you need to consult with an expert trust administration attorney. You do not want to take any action that might potentially harm the assets of the trust. 

Land Trust Asset Protection: What If The Trust Gets Sued?

Forming a land trust is a no-brainer for the savvy real estate investor. It helps keep the ownership of the property private and consequently insulates you from litigation. With a land trust asset protection strategy in place, the land title office is not able to disclose who owns the property. This comes in handy when you’re threatened with a lawsuit (as you’ll see below). When used in conjunction with an LLC, a land trust provides invaluable asset protection advantages.

How a Land Trust Helps Stop a Lawsuit in its Tracks

A litigant can sue you for all sorts of reasons, frivolous or legitimate. If they are willing to pay filing fees and serve a complaint, there’s no way to stop them.

However, getting a favorable judgment and getting paid are two different things.

They’ll spend a fortune on attorney fees only to hit a brick wall in recovering the damage award—if they get one at all.

A lawsuit, like a stool, stands on three legs:

  1. Injury
  2. Legal liability
  3. Recovery

If one of them is broken, then it becomes increasingly hard to sue. This is where the land trust comes in. It gives you personal anonymity and makes recovery a nightmare for would-be litigants. On its own, a land trust is not a fool-proof asset protection strategy, but it does help erect one more hurdle on the litigant’s path. The more hurdles you have, the harder it is for them to access your hard-earned property.

No attorney worth his salt is going to go into the wild goose chase involved in suing someone they do not know. After all, they need to determine whether you are indeed worth pursuing in court. 

Can a Land Trust Get Sued?

A trust, like any other legal entity, can be sued. But your property cannot be touched until they win and get a judgment in their favor. Rarely will the assets held in the trust be exposed to prejudgment attachments. You’ll probably have a few years to maneuver. However, there are cases where the assets held by the trust can be attached before the litigant gets a judgment against you.

This is why we recommend holding a single property in a trust. This will definitely not whet the appetite of any attorney looking to make a killing. After all, there’s not much to recover.

Protect Rental Property Assets With Separate Land Trusts

One thing I tell all my clients is that they need to put their investment properties into a land trust—rental property assets included. A land trust is a very simple and inexpensive instrument for purchasing and retaining title to a property. The privacy a land trust affords you is one of the key elements of the asset protection strategy we recommend.

Protect Rental Property Investments With a Land Trust

To keep your assets away from the prying eyes of predators, you need to set up a separate land trust for each of your rental properties. Doing this keeps your properties insulated from each other such that any liens or judgments against any of the properties don’t affect all your investments. Some of the benefits of using a land trust include:

  1. Privacy
  2. Protection from liens
  3. Protection from title claims
  4. Discourage litigation

Any judgments or liens against the beneficiary of the land trust (you) cannot attach to the property. Unlike an LLC, the owners of the land trust (beneficiaries) are not publicly available. If you held the property in your own name then you’d be in for a rough ride. If someone tried to sue the trustee, then they would first need to find them.

I can assure you this is not a job that any attorney with a good head on their shoulders would be looking to take on. This is because all of our trustees are located out of state and their last names are different from those of the beneficiaries. Furthermore, the addresses listed on the deed to trustee are P.O. boxes. This scenario makes you an undesirable target to any would-be litigant. No one wants to fight a ghost.

If the litigant was hell-bent on getting one over you, they would have no option but to sue the trust through a publication in the newspaper in the county in which the property is domiciled. I can assure you that this will only add to the expense and trouble of the plaintiff. It’s a dead end.

Making An LLC The Beneficiary of the Trust

The takeaway message from all this is that you should hold all your investment property in separate land trusts. You can make an LLC the beneficiary of the trust without putting your property at risk. If the LLC (beneficiary) is sued, then a judgment against it would not affect the title to each property since the LLC doesn’t hold title to the property.

Let Us Help You Structure Your Land Trust

Asset protection is not a do-it-yourself gig. My name is Scott Smith. In addition to being an attorney, I’m a real estate investor myself. Before I began specializing in land trust rental properties, I would play for the other side.

If you’re considering a land trust, let us help you protect your valuable investments with a foolproof asset protection strategy from people who’ve been around and seen it all. Contact us at [GLOBAL VAR=phone-number] for a free consultation. We’ll help you make your investments bulletproof.

Find Out if a Land Trust is Legal in Your State

For years now, I’ve been telling people to use land trusts for their real estate investments. Not only does it provide protection from creditors but it also prevents them from using the Uniform Fraudulent Conveyance Act to access your assets. It’s also a great way to discourage would-be litigators from suing you since your name never appears on record that you own anything.

I’ve been talking about the importance of using land trusts for years now. One of the questions I keep getting is: Which "land trust states" will recognize this legal entity?

Are Land Trusts Legal in Your State?

Only six states have a land trust statute on the books. These states include:

This doesn’t mean that you can’t form a land trust if you don’t live in these states. Most states without the legal structures in place defer to the Illinois Land Trust statutes to determine validity and case law. Apart from Louisiana, you can hold land in trust in any of the other 49 states and the District of Columbia. This has to be done in accordance with the law of any of the foregoing states given that the beneficiary, trustee, or the property is based there. The states of California, Colorado, Missouri, and Nevada have trust laws that allow trustees to hold title to property for a NAMED TRUST (note that it’s just a trust, not a land trust).

With the guidance of a knowledgeable lawyer, you can actually form a land trust in most states, even in Louisiana. The state still has the old French Civil Laws that will need an expert to navigate. One of the hurdles you might have is getting a good attorney in your state who’s well versed in land trust matters.

How to Go About Setting Up the Land Trust

To start setting up your land trust, deed the piece of property you’re buying to a friendly nominee. Should you run into problems down the road where the title company rejects your land trust, they will be able to recognize the last person in the title – the nominee. Thereafter, direct your nominee to sign a deed directly to your new purchaser. But there’s a catch to this approach – you need to be certain that your nominee will be around for the long haul. This is why you might want to consider a appointing close friend of family member as the nominee.

To avoid problems in future, you might want to have the grantor execute two deeds – one for the land trust (using trust deed language) and the other directly to the grantee. The deed to the grantee is a failsafe to be used if the land trust is found to be defective by your state law.

 

Interested in learning more? Check out our article The Benefit of Using a Power of Attorney With a Land Trust.

Can A Lien Be Placed On Property Held in a Land Trust?

One of the key elements of asset protection is financial privacy. The only way a savvy real estate investor 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 setup protects your prized assets from lawsuits and liens.

But there’s a catch…

Can Property Held in the Trust be Liened?

Can a lien be placed on a trust? 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:

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.

Fraudulent Conveyance: How a Land Trust Protects You

A fraudulent conveyance happens when someone illegally transfers assets or property into someone else's name, such as spouse, friend or family member, or even a business partner, in an attempt to avoid creditors. If they are selling your property or other assets to someone they know for an insignificant amount of money, they are either trying to evade creditors or trying to keep the property or assets out of the reach of a creditor.

Let's look at how to make sense of fraudulent conveyance and the land trust.

Are You Going to be Sued?

If you are going to be taken to court soon, there are ways to protect yourself and your property and assets legally:

Proving You Are Not Doing a Fraudulent Conveyance

There are certain things the courts will look at when deciding whether or not you are potentially commiting the illegal act of a fraudulent conveyance:

The solution to the problem of fraudulent conveyance is to act before one of these "warning signs" happens. A land trust with an LLC as beneficiary can help you protect yourself before you are taken to court. You want to ensure everything is done legally, however, because if they can prove a fraudulent transfer was made, you will be in some major trouble, legally speaking.

How a Land Trust With LLC As Beneficiary Benefits Property Owners and Investors

Having a land trust is a good idea for property owners and real estate investors. Land trusts are especially a good idea in case you own more than one property and don't want everyone to know you own so many properties.

You can choose whoever you want for your land trust.  However, it should be someone you know and trust since your property title will be going to them to keep it safe and private for you. While your property is in a land trust's name, no one can see that you own it. For example, the title company cannot announce in the local newspaper that you own property (like they do with everyone else).

How to Start a Land Trust

First, you have to choose someone or a certain business to be your land trust. You don't have to choose an individual if you can't find one to do it for you. You also have the option to choose a business if the business owner agrees to do it.

Whichever one you choose, you need two legal documents for the land trust. The first legal document is a trust agreement between the owner of the property and the person or business who will be the land trust. The second legal document is the deed of the property from the owner to the trust.

Although the land trust will be holding on to the deed of the property, they will not be the owner of the property and will not receive any benefits from holding the deed and having their name on it. The owner still has all rights. The land trust is just for privacy. The trust agreement is also private and only you and the land trust know about the agreement.

Land Trust With LLC As Beneficiary for Privacy and Asset Protection

Although a land trust is for privacy and asset protection, a land trust does not receive the benefits that an LLC or a business does. However, if someone falls on your property and gets hurt, the beneficiary will be held responsible. This is the main reason to use an LLC or a regular business to stand in as the beneficiary of the property. The reason for this is that LLCs and other businesses are protected from something like this happening.

That was just the first reason for obtaining an LLC or other businesses as a land trust. The second reason to do so is because they receive tax benefits. This means that the transfer of the property can be done tax-free.

A third reason to use an LLC is that many attorneys and accountants don't even know what a land trust is in many states. Because of this, you won't have to worry about litigators looking at your property and thinking you have deep pockets. This way, they won't be trying to file a lawsuit against you.

The Benefit of Using a Power of Attorney With a Land Trust

When it comes to having a land trust with someone you are close to, using a power of attorney with a land trust is a good idea.

A power of attorney, or a POA, is someone who acts on behalf of you. This is a good thing to have in case you are out of town or you are unable to do anything for yourself at the moment. Some people who need a power of attorney may be your elderly family member who cannot think for themselves or do anything for themselves. However, a POA is also good for those who are running a business and are out of town a lot.

If you have a land trust with someone close to you, you may need a power of attorney in case you are out of town and need someone to sign documents for you or act on your behalf for something to do with your business.

Are Land Trusts Still Effective?

If your attorney tells you that land trusts are not as effective as they once were, they are not educated enough on land trusts. Most attorneys don't know enough about land trusts for them to give you advice on using one. They most likely didn't get this education in law school. Land trusts are just as effective as they once were, if not more effective these days.

What States Are Land Trusts Used In?

Land trusts are only used in six states as of now. These states include Illinois, Florida, Virginia, Indiana, Hawaii, and North Dakota. These are the only states that have statutes for land trusts right now. This may be why many attorneys don't know enough or, if anything, about them currently.

Who Should Have Power of Attorney for the Land Trust?

When choosing the best person to use as your power of attorney, trust is what matters. This could be your closest friend or family member. However, if you don't want to use an individual for your land trust, you also have the option to use an institution (which will usually charge you a fee for using them).

So, in short, it is a great idea to use a power of attorney for your land trust in case you need documents signed and you are either unable to do this because you are in the hospital or maybe even out of town on a business trip.

Hopefully, these questions and answers helped you learn a little more about land trusts and you are more educated on this effective tool for real estate investors.

The Definitive Language of the Irrevocable Land Trust

An irrevocable land trust is different from a revocable trust. The difference between the two is that once the grantor or the trust owner signs his assets and property over to the beneficiary, he or she has no say in the trust without the beneficiary's permission.

This means that the grantor cannot modify or get rid of the land trust without the permission of the beneficiary once he or she signs the paperwork into the beneficiary's name. This is unlike a revocable trust that the grantor still owns all rights to even after he or she signs everything over to the beneficiary.

What is the Reason for an Irrevocable Land Trust?

The main reason for setting up this type of land trust is to remove all ownership of the assets and property from the original owner. It is mainly for estate and tax purposes. This means that the grantor will no longer be liable for tax payments on his or her assets and property. However, the downside of this is that he or she will not receive tax benefits from the assets and property once the ownership of them are signed over to the beneficiary.

The Benefits of an Irrevocable Land Trust

There are a few benefits to having an irrevocable land trust signed over to the beneficiary of your choice. They include:

Types of Irrevocable Trusts

Irrevocable trusts come in two different types:

To learn more, check out our article, Does A Revocable Trust File A Tax Return?

 

Big Considerations to Take When Naming Your Land Trust

Today I’ll shed some light on an aspect of land trust that may seem so simple, it’s often overlooked. The naming of a land trust shouldn’t take much time, but it should be done with some care.

The main thing to consider when naming your trust should be maintaining privacy. Below are some naming tips for anyone considering a land trust. Start with our guide (What Is A Land Trust?), then follow these do’s and don’ts to keep the anonymity of your land trust intact.

Think Like the Opposition

It’s human nature to dislike thinking about potential fraudsters or angry ex-business partners or even worse, ex-spouses. After all, if you go about your business and personal life with integrity, nobody should ever be out to get you right?

Unfortunately, simply looking like you have wealth or something of value to go after my be reason enough for someone to target you. This is why you don’t want your name or any other personal information revealed in the naming of your land trust.

One of the main attractions of a land trust is that it’s a vehicle for anonymous property ownership and purchases. Listing your name as your land trust name can jeopardize that privacy. You risk having your name show up online or in records connected to your property. You make yourself an easier and a desirable target since you’re now linked to something of value, which is your property.

Creative Trust Names Are Best

There’s no need to form some crazy system of code names. However, being lazy and simply naming your land trust as your full legal name can backfire. Don’t be afraid to be creative with naming your land trust. For instance, you can name your land trust to sound like a vague fictional company, unrelated to anything in your personal or professional life.

Don’t Rely on a Lazy Advisor

Sadly, some advisors by default will recommend that you name your land trust as your full legal name or address. A busy advisor may not have the time or creativity to invest in this seemingly small detail.

Take control of this component of setting up your land trust. First, brainstorm a handful of names. Then, look through your list and ask yourself if any of those name reveal anything that could jeopardize your privacy or make you stand out as an attractive target. Your land trust name should pass this test, before it’s listed on your trust documents.

Set up Your Land Trust

The do’s and don’ts of naming your land trust boil down to maintaining privacy and thinking ahead. Our legal team can assist you with the nitty gritty details of naming your trust, land trust basics, and your larger estate planning and asset protection goals. Contact us today for a consultation.

Florida Land Trusts Using Foreign Beneficiaries

Florida is one of six states (along with Illinois, Indiana, Virginia, North Dakota and Hawaii) that have specific statutes allowing a land trust to hold title to real estate. These statutes go back to 1963. Today, Florida land trusts are covered under the state’s 2006 Land Trust Act. Although the laws regarding land trusts in Florida have evolved over time, they remain a popular way to avoid Florida’s complicated probate process as well as purchase and hold property anonymously.

However, enjoying the benefits of a land trust can be a bit trickier when dealing with foreign beneficiaries. Today, we’ll go over the steps to setting up a Florida land trust with foreign beneficiaries. We’ll also highlight two important actions you need to take to avoid costly fines.

Steps to Setting up a Florida Land Trust with Foreign Beneficiaries

Step 1: Decide if a Florida Land Trust is Right for You

Once you understand the basics of land trusts and how they can work for you as a real estate investor, you'll probably want to learn more about how they work. In general, the land trust as a vehicle for holding real estate is an ideal estate planning and asset protection method. However, there are some scenarios where a land trust is not the right option. This article covers some scenarios in which a land trust may not be a good option.

Step 2: Establish Required Florida Land Trust Documents

A valid land trust in The Sunshine State requires two main documents:

  1. Deed to Trustee - This document moves property into the land trust.
  2. Trust Agreement - This document names trust beneficiaries, outlines the purpose of the trust, details the obligation of the trustee in respect to the property and covers several other details regarding control of the trust. While trust agreement templates can be found online, the wrong wording can lead to headaches down the line. We can advice you on structuring your land trust compliant to the Florida Land Trust Act.

Step 3: Fulfill Foreign Beneficiary Requirements

The federal Racketeer Influenced and Corrupt Organizations (RICO) Act requires that a land trust which is ten percent or more owned by a foreign person or entity be registered as an Alien Business Organization. As an Alien Business Organization, the trust must also have a registered agent. Failure to comply with these steps could result in a fine of up to $1,000 a day. Assigning foreign beneficiaries will require these extra steps, but beneficiary names will remain private and you will enjoy the same benefits as a trusts with domestic beneficiaries.

Setting Up A Land Trust in Florida

As you can see, the basic steps to setting up a land trust in Florida aren’t complex. However, when you consider multiple beneficiaries, Federal RICO ACT requirements and potential differences in Florida law compared to other states, things can get tricky. Our legal team can make sure you cover all your bases when forming an anonymous land trust. Plus, we offer our services at half the price of other companies. Contact us today at 512.757.399 for a consultation.

What Happens if a Land Trust Beneficiary Claims Bankruptcy?

The history of land trust goes back to medieval England. The prevalence of lengthy wars, such as the Crusades, led landowners to construct a way to delegate management of their land while they were away and in the likely case of death.

Through a trust, landowners could delegate management rights to a trustee. The trustee would serve as the land manager, but would not benefit from the land himself. He’d simply be in charge of management until the beneficiary (usually the son of the landower) was old enough to manage the land himself.

land trust bankruptcy

Land Trust Benefits

Today we no longer have to plan for years-long crusades, unless you’re knee-deep into one of those medieval role playing games. However, land trusts do have several uses in our modern world of taxes and lawsuits. Land trusts can simplify the tax filing process, since they’re treated as pass through entities.

Land trusts do not file tax returns. You simply report taxes on your personal tax return. Land trusts also provide privacy. This can come in handy in the case of a lawsuit. Property is held under the trust’s name, not your own. Thus anyone threatening a lawsuit won’t be able to connect you to a certain property.

What Happens if the Beneficiary Files Bankruptcy?

As you can see, land trusts do provide protection and convenience. However, in the case of bankruptcy things can get thorny. Protection of land trust property in the case of bankruptcy is a complicated legal issue. We recommend consulting with a legal professional who is experienced in setting up land trusts. What is certain is that in the case of trusts with multiple beneficiaries, co-beneficiaries can suffer.

Land Trusts and Multiple Beneficiaries

Let’s consider the case of John. John is the settler beneficiary and also one of the loan signers on the property. A bankruptcy judge will try to satisfy creditors by selling trust interest from John. While this action is possible, it’s not quite easy. There isn’t a large market for partial interest in a land trust. It’s not an attractive purchase. But if it does go through, co-beneficiaries lose freedoms. They are now tied to whoever bought the partial interest.

Get Professional Land Trust Advice

Even in less complex scenarios, land trust beneficiaries should consult with a legal professional to avoid the unpredictable actions of a bankruptcy judge. Whether a trust is revocable or irrevocable can make a difference in who has control over the trust. Most land trust are revocable. This means they are still under the control of the grantor, until his/hear death not the beneficiary. This can help a beneficiary who is going through bankruptcy because any property in that trust can be protected from creditors.

Also, the type of bankruptcy being filed can impact the protection of trust assets. Again, land trust do come with important benefits. However, in the case of bankruptcy and especially with multiple beneficiaries, we can’t stress how important it is to seek professional legal consultation.

Our team specializes in asset protection and estate planning. Call us today a 512.757.399 for a consultation.
 

Land Trust Disadvantages? Here Are Three Reasons NOT to Use Them

The land trust is an ideal vehicle for anonymous property ownership. However, like all asset protection structures, there are advantages and land trust disadvantages. Keep reading to hear more about some of the positives and negatives of this unique entity.

ANONYMITY

Stop lawsuits before they start is not just the tagline here at Royal Legal Solutions.  Anonymity removes the target from your back and deters most lawsuits before they are initiated. This is possible, in no small part, due to the anonymity provided by land trusts. By carefully creating the land trust and utilizing a nominee Trustee, you are able to remove your name as the current record title holder. The land trust is a privately held document that is not recorded, filed, or publicly searchable.

ASSET PROTECTION

When land trusts are combined with a limited liability entity, you get the best of both worlds. The land trust provides anonymity to a degree not generally available with limited liability companies, and the limited liability entity provides strength and compartmentalization that would not be offered with a typical revocable trust. This is done by creating a land trust that is founded and owned by a limited liability company or a statutory trust.

EASE OF FORMATION

Setting up a land trust is a fairly straightforward process. It requires only two main documents: a deed to the trustee and the land trust agreement. Land trusts are valid in all states, although the specific laws governing each differ (especially when dealing with California and Florida land trusts).

AVOID DUE ON SALE CLAUSE VIOLATIONS

Transferring a residential property with conventional financing into an entity like an LLC directly can place the mortgage at risk for a due on sale clause violation. This is not the case with a land trust. Federal law provides several exceptions to due on sale clause violations. Among these exceptions, a transfer to a revocable trust is set out specifically. This allows you to make a transfer to a land trust with confidence, knowing that your mortgage lender will not be calling the note due.

At this point, you are probably thinking, “What are the land trust disadvantages?” We believe in providing a balanced view of different asset protection and estate planning strategies. To that end, here are several possible drawbacks to using a land trust.

LAND TRUST DISADVANTAGES

#1 LOSS OF REDEMPTION RIGHTS

Redemption rights allow homeowners to reclaim their property before and sometimes even after foreclosure. Homeowners would have to pay off an agreed-upon amount, which usually consists of the total debt plus additional costs. This payment must be made within a limited amount of time, in some states homeowners are given 12 months. This valuable right is lost if the property is purchased under a land trust and you are the beneficiary.

#2 POTENTIAL LOSS OF HOMESTEAD EXEMPTIONS

We already discussed the benefits of homestead exemptions. These exemptions go way back to colonial laws, so while they may differ from state to state their ancient benefits of tax and creditor protection aren’t going anywhere. However, with a land trust homestead exemptions can be forfeited. When it comes to assessing property value for taxes, a hefty reduction may be lost with the disqualification of homestead exemptions. For instance in Florida, homestead exemptions can reduce home property assessment values by $50,000.

#3 LOSS OF SECONDARY MARKET LOANS

Another detail you should consider when dealing with land trust is financing options. With a land trust, you are disqualified from secondary market loans. The secondary mortgage market is where loans are grouped together and resold to investors. This allows the primary lender to gain back the initial loan amount.

LAND TRUST DISADVANTAGES RECAP

You may already be considering a land trust and all that you have to gain in terms of privacy and protection. However, we hope this article has been helpful in pointing out land trust disadvantages, including the loss of rights and exemptions.

Redemption rights can be jeopardized in case of foreclosure. Homestead bankruptcy protection and tax benefits are lost. Lastly, you lose secondary market loan options.

CREATE A CUSTOMIZED ASSET PROTECTION PLAN

Land trusts are one of our preferred strategies to create anonymity but they may not be the right vehicle for everyone. To get a customized asset protection plan designed for your situation, Take Our Quiz. We’ll gather your information to have a productive conversation the first time we speak. After completing the quiz, you will have an opportunity to book your consultation.

Should My Land Trust Have A Private Trustee or Institutional Trustee?

Although choosing a trustee for your land trust is an important thing you have to do for your property or assets, it is also a hard decision to make. Should you choose a private trustee or a banker or other institution?

Although it may seem like an easy task, it isn't. Let's look at how you can choose to search for a private trustee or an institutional one.

Pros and Cons of Choosing a Private Trustee

There are many advantages and disadvantages of choosing a private or individual trustee for your land trust. Keep reading to learn more.

Pros Of Choosing a Private Trustee:

 

Cons Of Choosing a Private Trustee:

 

Pros and Cons Of Choosing an Institutional Trustee

Pros Of Choosing an Institutional Trustee:

 

Cons Of Choosing an Institutional Trustee:

 

 

Thinking about each pro and con for private trustee and institutional trustee and weighing them will help you make a final decision for your preferred trustee. Take your time and really weigh them together. Although it seems that an institutional trustee may be the best decision, it is important to consider each advantage and disadvantage of both types.

Choosing the right one for your trust is the first and most important step in forming the trust for your property or assets. After choosing the right one, you can then move on to the next steps in forming the trust for your most important assets and property.

Choosing to Search for a Private Trustee or Institutional Trustee

Although choosing a trustee for your land trust is an important thing you have to do for your property or assets, it is also a hard decision to make. Should you choose a private trustee or a banker or other institution? Although it may seem like an easy task, it isn't. Here is some more information how how you can choose to search for a private trustee or an institutional one.

Pros and Cons of Choosing a Private Trustee

There are many advantages and disadvantages of choosing a private or individual trustee for your land trust. Keep reading to learn more.

Pros for Choosing a Private Trustee

Cons for Choosing a Private Trustee

Pros and Cons for Choosing an Institutional Trustee

Pros for Choosing an Institutional Trustee

 

Cons for Choosing an Institutional Trustee

 

Thinking about each pro and con for private trustee and institutional trustee and weighing them will help you make a final decision for your preferred trustee. Take your time and really weigh them together. Although it seems that an institutional trustee may be the best decision, it is very important to really think about each advantage and disadvantage of both types. Choosing the right one for your trust is the first and most important step in forming the trust for your property or assets. After choosing the right one, you can then move on to the next steps in forming the trust for your most important assets and property.
 

How Honest is it to Use a Land Trust for Asset Protection?

If you're thinking about establishing a land trust for asset protection, you may already know that one common misconception is that land trusts should be used for dishonest purposes.

I'd like to look at some ethical concerns around the use of land trusts, and thoroughly bust the myth that land trusts are dishonest by nature. We'll also explore some of the honest uses of the land trust.

Land Trusts Are Asset Protection Tools

There is nothing inherently dishonest about a land trust. As with any tool, its power lies in the person who is using it and his/her motivations.

Think about a computer for a moment.

There are lots of things you can do with a computer. You can use it for good things, like writing the next great American novel, donating to charity, or reading educational articles to become a kick-ass real estate investor.

And of course, if you wanted to, you could use your computer for bad things. You could make arrangements with a hitman on Craigslist, or order a package full of methamphetamine and shoulder-fire missiles from a foreign country. Not that we think you'd do such a thing, nor do we encourage it.

The point is, if you did any of those terrible things, that would be on you - not the computer. The land trust is similar, because it's just a tool. Most investors will use one for the right reasons, such as protecting their anonymity, preventing frivolous lawsuits, or as a way to effectively manage certain pieces of real estate. Somebody could, theoretically, use a land trust towards fraudulent or dishonest ends, but that speaks more about the integrity of that individual than it does about the land trust.

As a legal tool, the land trust has been subjected to a lot of time in court. Courts exist to enforce justice for everyone. You can rest assured that a fraudulent tool wouldn't last in our court system for as long as the land trust has. The land trust has held up under more than its fair share of legal scrutiny.

Anonymity and Honesty: Why the Land Trust Gets a Bad Rap

Sometimes, people who don't understand asset protection leap to the conclusion that asset protection as a whole isn't entirely honest or ethical. We believe land trusts have fallen victim to the same misinformation, and that the inaccurate characterization is based on ignorance.

The false notions about the integrity of land trusts may have some root in their anonymous nature. Anonymity can also be used for good or for ill, just like the other tools we mentioned above. Some people want anonymity to commit shady dealings. We don't encourage anonymity for real estate investors because we want our clients to be shady. We encourage it because anonymity has proven to be extremely effective in preventing lawsuits. Lawsuits which, of course, are often initiated by ethically questionable individuals in the first place.

Reality Check: Land Trusts Protect You From Dishonest People

Using a land trust doesn't make you dishonest. It makes you smart and resourceful. It's one of the tools available for investors who want to avoid pointless, expensive hours in court and victimization by identity thieves. If you still have questions about the ethical or practical concerns of using a land trust, feel free to ask them in the comments below.

Setting Up A Land Trust: What Property Owners Need To Know

When it comes to setting up a land trust, the best time to set one up is as soon as you purchase your property. The reason for doing this is to keep your name off the property records. Not only will this protect your property from creditors, but it will also keep them from using the Uniform Fraudulent Conveyance Act to gain your assets.

When you are buying a property, form a land trust with either a private trustee or an institutional trustee immediately before you close on the property. This is the best way to set the land trust up to keep your ownership private.

You will need to let the trustee's attorney know about you setting up the land trust before doing so. Although the property will be in your name for a little while, there won't be a record of it for long. Still, you will still be able to benefit from having a land trust for your property and assets.

If you don't know much about land trusts and want to learn more, keep reading to learn how they work for privacy of ownership.

How Does a Land Trust Work?

When it comes to setting up a land trust, the first thing you need to do is to choose the one who will be your land trust trustee. Choosing one can be a little bit difficult, however, it is the most important step. The trustee needs to be someone you can trust.

Who do you choose, a friend or family member, or a bank or other institution? This can be hard at first but once you weigh the pros and cons of each choice you have, you will have a much better way to choose the right one for your property and most important assets.

Once you choose who will be your trustee, you will then need to have your attorney draw up the documents for you. You can also do this yourself by downloading them from the Internet, printing them out, and having the individual or institution fill out and sign the documents. The documents you need include the agreement between you and your trustee, and then a copy of the title of the property or assets.

Once you have these documents, you and your land trust will have to fill them out and sign them. Now you have your land trust, which protects you and provides you with the privacy you need and want.