Do you use a Land Trust and why?

Question

Matthew Kreitzer · Answer

This post is on the right track. A land trust doesn't protect you from valid discovery. If I were involved in trust litigation, I could probably get the information of the Settlors pretty easily if it is related to the case. There are some methods that provide better name protection, but a land trust won't protect you completely.

Generally speaking, I advise talking to an attorney when you are contemplating different business entities. Only they will be able to give you a complete and comprehensive list of pros and cons. Relying on a non-lawyer may result in an incomplete, but not entirely wrong, list of pros and cons which could leave you in a bad position.

Much of the information you have been provided thus far is accurate. Land trusts provide for some degree of anonymity in normal dealings, they provide a decent amount of asset protection, and are a good holding structure. However, along with the pros come the cons. There are pretty strict requirements in setting up a trust. Trusts are even less of a DIY project than normal business entities, since you have to listen to the Uniform Trust Code. Failure to do so could cause your trust to be invalided under the UFTA or UFCA.

For more information on trusts, seek out local counsel.

Account Closed · Answer

Simply re-frame the question.

Why not ?

Jeremiah H. · Answer

So when I tenant specifically ask you if you own the property or know who the owners are you don't tell them that it's you? I'm not willing to do that. Maybe that exposes me to lawsuits but I couldn't live with myself lying to people I'm doing business with.

Also, do you believe that during a lawsuit that the other attorney won't be able to determine your assets through mortgage docs, tax records, taxes filed, etc? I haven't gone through this process, but I was told by the biggest law firm in Florida that it's just a small hurdle for them that takes slightly more paperwork. Not sure if that's true though, but they don't own their own property in a trust which makes me feel more secure in their answer.

Crystal Smith · Answer

We live in a litigious society & if you own enough assets a suit involving one asset could potentially affect other assets.  So we use multiple methods to protect our ASSets.  Land Trusts is one of the methods.

Even for simple stuff like our tenants not knowing who we are.  Example:  We did a spot check on one of our properties after an incident.  We told the management company to let the tenants know that a property manager was coming over.  The tenant's don't know we are the owners & we don't want them to know.  During the visit one of the tenants asked if we knew who CTLT# was.  CTLT # owned the property.  If that tenant had any ill or litigious intentions towards us the Trust would make it difficult.

We treat the Trust like insurance.  Hopefully we never need it, but it's there to protect us if we do.

Crystal Smith · Answer

We use land trusts for the following reasons:

1.  Asset Protection - our name and/or our company name is not on public record

2.  Minimize/avoid transfer tax.  On some of our desks the trust continued to own the property when the beneficiaries changed.  Some jurisdictions still charge a Cree tax); others do not

3.  Get around deed restrictions/. Fannir mär Use to have restrictions that preiender resale of a property in less than 90 days.  We remained compliant w/ this restriction using trusts

Those are the big 3 for us

Delia Lopez · Answer

I would love more details Matthew.  Our properties were put into irrevocable trusts years ago and I often see an LLC suggested as the beneficiary while ours has a property Management LLC as the trustee of the trusts which each series of trusts has a separate checking account. So it is different than what people discuss here. I am very curious as to why the differences?  The settlor retains only an interest in the income so the assets are supposed to be safe and the income goes into the LLC so it should have charging order protection. I think.

But if the property is owned by a trust there is no need to lie to anyone about owning the house, you would not own it.  I do not own ANYTHING, nada, zip. I am destitute.  I am only the manager of the properties.

John Thedford · Answer

I am not sure a land trust would shield you from a judgement. There are a couple attorneys that provide information on land trusts and they would be the ones to get valid correct information from. If you have property in a land trust, you would be required to disclose that if ordered to provide a list of all assets. Simply having property in a different name does not make it legal to fail to disclose. Same thing with property held in an LLC, S corp, or even personal assets stuck in your safe such as gold bullion, etc. If I was wanting asset protection, I would form a multi-member LLC. A single member LLC can be a disregarded entity in the event of litigation. Get competent legal advice from a Florida attorney that specializes in real estate. I can refer you to a couple attorneys that you can inquire with. If interested, send a PM.

Edward B. · Answer

@Matthew Kreitzer, um...no I'm good.

This is why I ultimately use attorneys for this stuff. It is good to have a base understanding though so you know what questions to ask.

Matthew Kreitzer · Answer

Good questions, and I am speaking in the most general of terms here and no one should act on this necessarily:

Depends what kind of trust we are talking about. Some trusts offer more judgment creditor protections than others. There are two kinds of trusts and two types of assets a trust has;

Trust Types:

A) Revocable Trust, you can modify it or revoke it prior to death

B) Irrevocable Trust; you're stuck with it.

Assets:

A) The "corpus" (AKA the secured property)

B) The rents and interests from the corpus

There are a few parties to a trust;

A) The settlor, the dude who sets it up.

B) The trustees, the dudes who are supposed to manage it.

C) The beneficiaries, the dudelings who gets the benefit of the trust.

Trust litigation can go a few different ways;

A) The trust could be declared fraudulent and the court could pretend as if the trust never existed. In which case, both the corpus and the rents and interests are completely up for grabs.

B) The Trustees, the fiduciaries, may breach their duties to the trust itself.  This could happen if the trustees hide trust assets from the beneficiaries. A judgment creditor can step into the shoes of the beneficiaries and attach to the rents and interests, but cannot get the corpus.

C) A judgment creditor may sue and have a judgment against the beneficiaries of the trust or the settlor of the trust. A judgment creditor typically cannot get to the corpus of the trust if they have judgment over the beneficiaries, but *MAYBE* they can if they get judgment against the settlor. A judgment creditor can typically get access to the interests from the trust.

However, the same thing applies in corporations. A judgment creditor can get at distributions to LLC members when they are made, so that is kind of a red herring.

The real issue is the unique scenario in which the corpus can be obtained. What is relevant here is whether you have yourself a revocable or an irrevocable trust.

Do you want me to go on or is that a good starter?

DISCLAIMER: Huge disclaimer here. Basic educational information. State rules definitely impact this analysis. Do not do anything based on this information alone. I am not your attorney.

Do you use a Land Trust and why?

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