Hello,
I'm a new real estate investor and I’m trying to educate myself on Land Trust. I ordered a few books that explained Land Trusts & Land Trust Agreements but I can find any information on the Warranty Deed to Trustee. To my understanding that’s the document that needs to be recorded (correct). Most of the books really didn’t explain what to do if you already own the property that you would like to place in a Land Trust.
Here is my plan, I currently have a rental property already in my name that I would like to place into a Land Trust and have my LLC as the beneficiaries for asset protection. I will probably use a Lawyer being that this is my first dealing with Land Trust but I would still like to educate myself on the process.
Can someone help with the Warranty Deed to Trustee, and show me how to fill it out. Does any one have a completed example that I can see.
Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
18y
In my opinion... land trusts are not as useful for “protection” as they are for “privacy”.
If you want protection, an entity like a Corporation or LLC will probably do a better job than a land trust.
As far as filling out the deed... you can ask any title company to help you, or... go pull a copy of a deed that is already recorded from your local county and use it as a sample.
The party giving away ownership is the grantor (they are granting title)
The party receiving ownership is the beneficiary (they are benefiting)
I know others have different views on the protection (or lack there of) a land trust may or may not provide.
This is my opinion on them… and this is just my 2 cents...
Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
18y
Originally posted by "antwonperson1":
I plan to use the Land Trust for privacy and make the beneficiary my LLC for asset protection.
I have also looked online at different county Register of Deed offices and can’t find a completed Warranty Deed to Trustee.
I would say call a title company... they won’t fill it out for you but they should answer questions for you… i.e. what goes in what blank….
Also you can ask the title company to pull a filled out one for you and email it to you.
I hesitate to answer any specific questions for you as things are different from state to state. It is very easy though... Once you have done it the first time you will then be a pro!
The attorney thing is a real good idea too. It’s worth it to get all the questions answered and make sure the first time around things are being done correctly.
Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
18y
Originally posted by "antwonperson1":
I'm really just trying to find out how to fill the Warranty Deed to Trustee out. That is the document that is record right.
I my area we can also use a warranty deed. In the beneficiary blank... the title company here likes to see... "John Smith as Trustee for the XYZ Trust" as beneficiary...
Is this what you are asking?
If you want to email me the document... I will fill it is as a sample for you... But again... I know my area only...
Real Estate Attorney · Charlotte, NC · Member since 2008 · 54 posts · 3 votes
18y
In my ten years of practicing law in NC everytime I have had to deal with a land trust, it was either the victim of a fraud, or it just felt slimy... I have one in my closing rotation right now, and it just feels wierd... I understand the use of a "fictious name trust" it makes sense... but the "John Smith Land Trust December 25, 2007" where the land is deeded to an irrevocable trust fbo John Smith, and the trustee is some third party.
As an attorney, I cannot not seem to get a level of comfort.
The way I see them is
John Smith conveys to Jon Doe as trustee of the John Smith Land Trust
John Smith is the beneficiary, but has no power to remove the trustee or convey the property... so if Jon Doe wants to he can convey the property away, or encumber it.... further.. when the land is put into the trust I am of the opinion it triggers the due on sale clause.... if it is Foreclosed on, then the bank in not secured, and the owners are gonna get nailed for loan fraud....
Real Estate Attorney · Charlotte, NC · Member since 2008 · 54 posts · 3 votes
18y
Hey Antwon---
If you have a loan on the property you are putting in the trust, you should look at the security instrument and talk to the title company like EricFoster suggested... The mortgage environment is in turmoil. The states attorneys general are really cracking down on attempts to "over protect" property. Essentially you can protect the property from everyone except the IRS and the Bank. One thing I counsel clients on daily is the risks of that language in the mortgage which says, if the property is conveyed to another entity or person, they can call the note and foreclose... There are some exceptions to this general theory... its a local thing... be careful.. talk to your attorney, let him put his butt on the line and protect you!!
If you are in NC... I would think twice before doing it... The Depart of Justice and Attorney General is really cracking down!
--- Sorry about the soapbox speech--- its a hot button in the carolinas
Real Estate Investor · Portland, OR · Member since 2008 · 1k+ posts · 23 votes
18y
Originally posted by "NCREOATTORNEY":
John Smith conveys to Jon Doe as trustee of the John Smith Land Trust John Smith is the beneficiary, but has no power to remove the trustee or convey the property... so if Jon Doe wants to he can convey the property away, or encumber it.... further.. when the land is put into the trust I am of the opinion it triggers the due on sale clause.... if it is Foreclosed on, then the bank in not secured, and the owners are gonna get nailed for loan fraud.... Any thoughts...
I had to read it twice... but I do have a couple of comments. First... let me clarify that I am not an attorney... However, let’s just say I have done a deal or two. And also to clarify, not in the carolinas.
" John Smith is the beneficiary, but has no power to remove the trustee"...
The ones I have seen do have a provision in the land trust agreement to allow the beneficiary to terminate and replace the trustee...
"so if Jon Doe wants to he can convey the property away, or encumber it"
He could, True, there could be criminal activities in doing so... Much like an attorney having possession of client funds, say in a trust account... You can go take all the money from the account tomorrow and run, but there could and would be some trouble ahead for doing so.
"when the land is put into land trust I am of the opinion it triggers the due on sale clause"
That is very well possible, and that point is open for discussion for sure, however the due on sale clause gives the “option” to the lender to call the loan due... it does not mean they will… especially in today’s mortgage mess. If you have ever read a standard note and trust deed used by mortgage lenders, I would bet a good attorney could find 20 things many home owners are breaching in their agreement on a regular basis… i.e. parking commercial vehicles, or operating a business from the premises... Can you imagine how many foreclosures there would be if every lender foreclosed on every house with a construction vehicle in the driveway, and running a small business from home? With all that said... yes it can be a risk... but so is driving to go out to dinner, there are some nuts out on the road!
"...if it is Foreclosed on, then the bank in not secured, and the owners are gonna get nailed for loan fraud..."
You lost me on this one... How is the bank not secured? Where did the deed of trust go? The bank still has security in the form of a lien on the property... the lien is still there until it is released from the property by the bank. If you could make liens go away by transferring titled... that would be very helpful and a great scam!
Thanks for your thoughts... And in general I agree... there are risks to using land trusts... Someone should clearly how something works and evaluate the pros and cons of doing so… land trusts or anything else.
Real Estate Attorney · Charlotte, NC · Member since 2008 · 54 posts · 3 votes
18y
A trust much like a corporation is a "jural person" it can sue, be sued, it has a separate tax id number and is for all legal purposes a separate and distinct entity from the person who is a party to the security instrument.
In almost every consumer security instrument I have seen there are two clauses which are always in them:
1. a "due on sale clause" the language reads that in the event the parties who sign the security instrument sell or convey their interest to another person (a jural person) or entity it will allow the lender to hold the parties in default, and trigger its remedies... acceleration, lawsuit, and possibly an action at equity to rescind the conveyance... nasty stuff in general...
Its hard to put to paper... easy to verbally explain...
2. The banks can also contend that this constitutes an attempt to evade foreclosure. If the party to the security instrument is not the owner... then there is a problem with the banks right to foreclose under the power of sale or deed under power provision.... they are technically for foreclosure provisions (esp in a title theory state) un secured. They still have an action on the note, but they cannot take back the property...
Its hard to put to paper... easy to verbally explain...
Sorry for the confusion... sometimes thinking like a lawyer causes problems......