Land Trusts basics and why you should be using them now

7 Replies

      Land Trusts are the absolute best way for almost every real estate investor to take title to a property. They provide protection, privacy, and easy of purchase and sale. When you put a property into a Land Trust, no one knows how much you bought the property for, who owns it, how much you sell it for, etc. In the event of any legal action being taken against you, your property, if placed in a land trust, will not show up as an asset since it is not legally in your name. The property is titled in the name of the Land Trust, and you are simply the beneficiary.

      Most people don't know this, but anyone can set-up a Land Trust. You do not have to be an attorney to set one up for yourself. Anyone can set-up their own Land Trust(s) for themselves, but in order to set-up a Land Trust for someone else, you DO need to be an attorney. Below are the benefits of using Land Trusts in your real estate business.

      Benefits of a Land Trust:

      • Liability protection
      • Privacy
      • Keep purchase price secret
      • Keep sale price secret
      • Keep change of ownership private

      • Protection from judgments

      • Protection from liens

      • Avoiding deficiency judgment

      • Avoiding condo and homeowner association judgments

      • Avoiding probate

      • Avoiding lawsuits

      • Ease of control

      • Ease of management

      • Ease of negotiation

      • Improved financial statement

      • Saving on title insurance

      • Ease of transferability of interests

      • Simplification of making gifts

      • Limiting liability

      • Avoiding partition

      • Ease of foreclosure

      • Safer lease/options

      • Avoiding personal problems of beneficiaries

      • Avoiding real estate brokerage laws

      • Avoiding seasoning problems

      • Loaning money

      • Buying foreclosures

      • Buying distressed properties

      • Equity stripping

      • Holding judges property

@Chris Piper That's an interesting list. Seems to me that "liability protection" "protection from judgment" "protection from liens" and "limiting liability" are all the same thing. How the the land trust accomplish those things? What is "holding judges property"? How do they help you loan money? How do they avoid probate/lawsuits/liens/judgments? Why do you care if the purchase/sale price is secret? How do they avoid HOA judgments?

Chris Piper - Trust as an Asset protection device? Are you kidding me? Have you ever tested it? Been tested? Been sued? Actually have a net worth that you'd trust this strategy to protect?

Originally posted by @Chris Piper :
They provide protection,

Not really anything in that trust can be taken.

privacy

true but not absolute by any means

and easy of purchase and sale

How is it any easier for a purchase and sell with a trust?

When you put a property into a Land Trust, no one knows how much you bought the property for

They will see how much you paid before you put it into a trust.

In the event of any legal action being taken against you, your property, if placed in a land trust, will not show up as an asset since it is not legally in your name.

The part not mentioned is that while it doesn't show up, it still needs to be disclosed or you could be defrauding a creditor.

Most of the benefits you list are either bogus or exaggerated. A land trust is a revokable trust so provides no asset protection.

Land trusts are one of the most over promoted, misused, and misunderstood strategies in real estate. While they certainly have their place; land trust gurus spread misinformation from guru to guru to unsuspecting investor.

Sorry to rain on your parade Chris but there is a lot of misinformation here.

Is this a joke?

I'm a pretty big fan of land trusts and use them often, but there's a lot of what's listed above that is simply not true.

Well, I'll take a shot at what's left,

Avoiding probate, no, your Will and/or Trust goes to probate, it is usually approved if proper allowing such to be carried out instead of probate slicing and dicing up your assets for distribution. The validity of a Trust can be attacked at that point and it may not survive. @Adrian Tilley correct me if I'm wrong.

Financing isn't easy, it's a red flag and causes other hoops to be jumped through, might be the borrower doesn't see the pain, but it's there.

Ask a closer about the additional work dealing with trusts.

You get sued, you'll be filling out disclosures, if you lie, hope you like beans and a hot dog for lunch at the County Hotel. There is no hiding of assets if the judge directs you to disclose.

I'd like to hear the one on "Loaning Money" what's that? All lending laws apply to trusts as much as any other entity.

Properties in trust can be partitioned by the court and you're subject to all liens, encumbrances and title actions as if it were in your personal name, a trust doesn't block any title action.

A trust used as or deemed to be a sham transaction or a ploy to avoid responsibility for bad conduct will probably be more of a problem, I don't think judges like to see sneaky stuff.

Equity stripping? How does a scrutinized act that is examined for illegal activities made safer by a trust? Use bogus liens and you have probably complicated the issues as just mentioned above.

I'd sure like to know how it saves you on title insurance! Doubt that one too, the risk to any insurer is not based on the entity holding title, not even related, or are you suggesting not to have title coverage?

Improves you financial statement, that's a load of bull, trust accounting is more difficult, I doubt the gurus even are aware of trust accounting issues, it certainly isn't a improvement under GAAP and for RE you'll need valuations annually, so it costs you more.

Erase foreclosure? Gotta hear this one.

I will say it can make gifting easier, you can add beneficiaries and slice and dice interests without disturbing title, I'll give you that one.

I'll stop on a high note! :)

@Rick Harmon is correct.

The trust does not work when real problems come up. The transaction into the land trust will fall under "fraudulent transaction" in the law; I know from experience :(

Think of the land trust as stage curtain not a brick wall.

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