I’ve heard that holding rental properties in a land trustis an effective form of protection. This would be in addition to ethical & legal business practice and ample insurance. However, I have a few questions.
Thanx for any help you can offer :biggrin
Unless you willing to give up control of the property or give the property interest to someone else, the land trust will be a big disappointment to you. That Bill Gatten stuff floating around doesn’t work.
Oh snap - BLL laying down the law!
I think it’s very area specific. I’m sure it’s effective for the right person. I personally think it’s WAY over the beginners head and is a subject that only confuses and adds increased fear of moving forward.
phlemboy,
I’m curious. What did you hear and where did you hear it? I was too quick to assume it was a Bill Gatten PAC trust.
A land trust is traditionally used as an estate planning tool. The grantor, the person who set up the trust, still runs it, gets the benefit of it, and pays taxes related to it, but the property held in it is not part of the probate estate. There is no asset protection because the grantor has full benefit and control of the trust assets. How is what you have heard different?
I heard it from a local landlord, but I never got the chance to ask him for details. I think I also read an article on this site about it. He just said “Its good to have to protect your assets.” That’s why I asked it here. The way I understand it, a Land Trust is more of a privacy protection than an asset protection. But if someone can’t find out what you own, they may just settle for what the insurance will pay in the event of a lawsuit. So there is some small form of asset protection from privacy protection. I don’t know much about Land Trusts or what their main purpose is. But what I’d like to do is keep my assets private and be able leave the properties to my family if I die.
Land trusts are basically an estate planning tool. They have a privacy element and can be used with other entities as part of a comprehensive plan. Additionally, I use them for bookkeeping purposes. Each property gets its own trust, making it easier to segregate expenses and bring on partners/investors without disrupting my other interests.
There is a privacy element, but that goes away once a suit is filed and it’s game over if the beneficiary has influence over the trust. Assume everything will come out in discovery. Hiding is not a good strategy for protection. There can be a limited liability aspect if the beneficiary and trustee are unrelated and the beneficiary has no influence over the trustee. That is an advanced topic that will require many thousands to implement properly.
Unfortunately, too much of the information on the Internet is wishful thinking or untested. It may work in theory, but the practical application in court is what matters. Information without case law is not a solid foundation. Judges and juries have too much discretion when facing new situations. However, you will win if they like and you will lose if they don’t. That’s why trial is such a crap shoot.
Thanx BLL. What is the typical cost to set up a Land Trust? Is it done by a lawyer?
Good lawyers charge a few thousand to set up the first one. After that, you could use it as a template for anymore you set up. I would only suggest this route if you are using land trusts in the traditional way. Setting them up as limited liability vehicles is much more complex and much more expensive and not worth the effort unless you have several million in equity and other assets as part of your estate.
A few thousand! Wow, well I’m definitely not at the asset level to warrant that kind of money. But it’s nice to know for the future. Thanx again BLL.