Using Land Trust "Just another strategy for investors

7 Replies

Using Land Trust "Just another strategy for investors"

Its uses are:
To control or purchase real estate
To protect confidentiality
To limit liability
To help with "DOS" clauses in some cases
Land trusts have been used since the late 1800's in one form or another and became recognized by statute or case law in many states.

A land trust is a vehicle that holds real estate nothing more nothing less.

The trustee has the power to convey or deal with the property at the direction of the trust beneficiary. The beneficiary, on the other hand, retains the power to use, convey, or manage the land and holds any other number of rights as directed by the beneficiary and the trust agreement.

The process in it self is simple:

The owner of the subject real estate transfers title to the property over to the trust by way of deed and enters into a trust agreement with the trustee and a beneficiary agreement with all beneficiaries.

A trust is just an agreement to hold or manage assets by a trustee for the benefit of another. Different types of trusts are used based upon needs and goals. They will vary in use, flexibility, control and asset distribution so I have taken the liberty to share some information about other forms of trust below.

Personal Residence Trust - A personal residence trust involves the transfer of a personal residence to a trust with the grantor retaining the right to live in the residence for a fixed term of years. Upon the shorter of the grantor's death or the expiration of the term of years, title to the residence passes to beneficiaries of the trust. This is an irrevocable trust with gift tax implications.

Qualified Personal Residence Trust - A qualified personal residence trust (QPRT) involves the transfer of a personal residence to a trust with the grantor retaining a qualified term interest. If the grantor dies before the end of the qualified term interest, the value of the residence is included in the grantor's estate. If the grantor survives to the end of the qualified term interest, the residence passes to beneficiaries of the trust. A QPRT is a grantor trust, with special valuation rules for estate and gift tax purposes, governed under IRC 2702.

Living trusts - Are created during the lifetime of the trustor. Property held in a living trust is not normally subject to probate (the court-supervised process to validate a will and transfer property on the death of the trustor). In Washington, because such property is not subject to probate, it need not be disclosed in the court record and confidentiality may be maintained. Such trusts are widely used because they allow the trustor to designate a trustee to provide professional management.

Testamentary trusts - Are created as part of a will and must conform to the statutory requirements that govern wills. This type of trust becomes effective upon the death of the person making the will (the "decedent") and is commonly used to conserve or transfer wealth. The will provides that part or all of the decedent's estate will go to a trustee who is charged with administering the trust property and making distributions to designated beneficiaries according to the provisions of the trust.

To create a legal trust you will need a trustor, trustee, beneficiary, trust property and trust agreement.

You can be appointed as Trustee and run all the day to day business affairs of the Structure or you can appoint another.

The trustee has no personal liability in their capacity so long as they operate within the bylaws of the contract on behalf of the trust.

A trustee normally will act in accord with the express terms of the trust instrument; act impartially, administering the trust for the benefit of all trust beneficiaries; administer the trust property with reasonable care and skill, considering both its safety and the amount of income it produces; maintain complete accounts and records; and perform taxpayer duties, such as filing tax returns for the trust and paying required taxes.

When using a land trust it is best not to name yourself as trustee because A trustee in general must administer the trust property only for the designated beneficiaries and may not use trust principal or income for his or her own benefit. In other words, a trustee is usually prohibited from borrowing or buying from the trust, from selling his or her own property to it, and from using the trust assets as collateral for a personal debt.

While trusts can offer a number of tax advantages, tax avoidance, and provide confidentiality this should never be your sole motivation for using this strategy.
Basic Documentation Process of a trust is:
The Land Trust Agreement
The Assignment
The Beneficiary Agreement
The trust is normally created under the name of the current property owner or the property address.

Trust will also help with:
Protecting Assets From Lawsuits
Protecting Assets From Business Failure
Protecting Assets From Governmental Seizures
Protecting Assets From Tax Troubles
Protecting Assets From Divorce
Trust will simply make your assets private and if set up properly should convince any litigant that, it will be impossible to collect.

Support of Land Trust

Wellenkamp vs. Bank of America (8/25/78) (50 USLW 4916) 73 L.Ed.2d 664, 10 S.Ct. 3014 (1982)

Fidelity FSB vs. de la Cuesta (6/28/82) Regulations Act of 1982 - (FDIRA) (10/15/82) 12 USCA sec. 1701-j-3

GARN-ST. GERMAIN EXCEPTIONS Governing Land Trusts www4.law.cornell.edu/uscode/12/1701j-3.html

This form of investing is another tool to help you as an investor and help your customers as well.

As an investor, you need more than just a few tools in your investors toolbox.

I have uploaded a zip file of land trust forms for your use at http://trice84.tripod.com/reforms/land_trust.zip

Enjoy my fellow investors - to your success!

JohnMichael, I gave you my vote on this one, pretty good info. This post is nearly 5 years old, but I wanted to bring it back to life.

Please ellaborate on using a trust with and LLC as beneficiary, is that a worthwile added layer of protection? Does it cause any further complication?

Also, if i plan on putting a large commercial incomeproducing asset into a Land Trust, whom should a select for beneficiary? A law firm? But doesn;t the trustee have to manage, collect rents, pay taxes etc? no law firm wats to do that and if they do they'll certainly be charging a hefty fee (ie not worth it). how does this part of the Trustee relationship work?

Also, if I am trying to comletely mask ownership I wouldn't want to transfer title into a trust from my name but rather purchase through a trust and take title directly in the trust name. What problems might be incurred here, financing issues to a Land Trust,etc.

Also, this quote "While trusts can offer a number of tax advantages, tax avoidance, and provide confidentiality this should never be your sole motivation for using this strategy." leaves me wondering - why then should you use a Land trust if not for these reasons alone.

Finally, you detailed a bit about other trusts after opening with Land Trust. for purposes of holding large income producing assets for the LT, is a Land trust best or another form of trust?

Jimmy,

johnmichael doesn't have a "last active" field in his profile, so it's been a while since he came to BP.

Steve - thanks for the heads up, I knew the post was old but thought it was worth a shot.

I'd hope to be able to get a decent response from someone in the know. It is definately a subject that could be further detailed in the BP threads.

How would you insure a property with a land trust??

Originally posted by Stephanie Anson:
How would you insure a property with a land trust??

Not sure, but we're going to learn soon after we place our personal residence into a living trust. I imagine the trustee simply takes out an insurance policy with the trust as the named insured. Perhaps the beneficiaries as well.

My BS Meter is going off!

Inusrance will depend on the property type, the insured is the trust name / beneficiary as insured.

Think a trust off some program is compliant in all states? Really?

If you a running from an Ex-wife (husband) maybe it's worth the hassel.

This strategy is over hipped and totally unnecessary.

Why is it that so many "investors" spend so much time investigating bazar programs and entities instead of working on what could make them money? What the heck is someone going to gain by setting up trusts and LLCs without several properties to put in them?

I always lookat the number of posts when this stuff pops up, I also look at who voted them up and the number of posts made by those who endorse the ideas posed. Seems it's a team effort.

You really think you need a trust, talk to your attorney! Most certainly don't, they need money for the next down payment!

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