Land trusts are often the unsung heroes of the real estate investing world. You can use them to control assets rather than own them yourself.
You’re almost always better off controlling an asset than owning it in your name outright.
And that’s where the land trust really gets to strut its stuff. After all, the land trust is also called a “title holding trust” because that’s it’s main job: hold title to the property in your place. But you still get to stay in control of any property associated with your trust, and of course, any earnings the real estate investment generates. Let’s take a closer look at land trust basics you should know.
The land trust is an asset protection tool that doesn’t get a lot of respect. There is surprisingly little buzz around this real estate tool, though it can save your assets from unnecessary legal risk.
Land trusts can form a critical part of your asset protection strategy well outside the limelight, and in fact, we prefer creating them anonymously for additional benefits. This type of revocable trust takes the critical first step in asset protection: stripping the title out of your name.
When you establish a land trust, you’re using its trustee-beneficiary structure. Your trustee may then provide for you as a beneficiary of the trust. Lawyers make great trustees because of attorney-client privilege, but you get to choose. This is how you maintain control and enjoy the benefits of property ownership while sidestepping its liabilities. It’s a pretty cool thing, in our opinion.
There are many ways land trusts can help out real estate investors. Let’s just consider some of these common uses of the land trust:
As previously mentioned, a land trust is a great tool but can be limited if used alone. It’s not intended to be your entire asset protection strategy, but rather a piece of it. Recall that properties in LLCs are generally ‘pooled’ legally, unless you use a Series LLC of course.
We’ve found that asset protection works best in layers. A land trust is a great first layer of anonymity. If your land-trust-owned property is also owned by an LLC or a Series within a Series LLC, that’s another layer. From there, attorneys and CPAs can pile on even more layers such as enhanced anonymity, the addition of a shell corporation, and plenty of other legal and tax tricks.
Land trust eligibility isn't the same in all states. The only universal pieces of the land trust formation process are these:
Your lawyer will be able to give personalized advice upon agreeing to help you. Thanks for learning about the benefits of land trusts with us today, and please leave any questions you still have in the comments if they aren’t addressed in our Land Trust FAQ.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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