“Trusted lawyer” is an oxymoron. Most lawyers know nothing about a land trust, but it’s hard to find one to admit it. You said the Trustee will “resign after recording the trust”. That is because you are going on title. My trustee is a corporation that remains throughout the trust and does all the work for me. He collects the lease payments from my tenant, pays the mortgage, taxes, insurance, etc., and sends me a check each month for my profit. I am never on title or on any loans, have NO property management, no collections, no maintenance and repairs, etc. If my tenant is late with payment, the Trustee sends out the default notice. There is NO WAY I would want to be my own trustee and have to assume all those responsibilities. This may be a land trust, but it is NOT a NARS land trust which has been successfully used since 1984. There is a big difference.
What happens when your trutee resigns? Are you appointed the successor trustee? If that is the case, this is a flaw. Everything else seems to be ok.
But whenever there is any inquiry, the trustee is the one who needs to respond. If you are want full privacy, you should not be the trustee.
Just my 2 cents.
There are many ways to this, being that you are ultimately the beneficiary and owner of the property, you should not be the trustee.
Great posts on this forum topic and if the trustee resigns you just appoint a successor trustee.
Using an attorney as your trustee for short term holds is ok but I would certainly prefer a non-profit out of state corporation who maintains an arms length transaction and shows the fidicuary responsibility as a trustee and the experience as a trustee.
I wholeheartedly agree with Mr Floridainvestor you would not want to be the trustee since that comprises your privacy, security and in some cases your integrity. For real short term holds on real estate in a trust you probably be ok but for longer term holds not advisable.
As to the trustee resigns after being designated your trustee I would think if he was your attorney he can also use the attorney/client privilege to stop a charging order yet if he resigned you’d be back to designating another trustee so it could be a good stalling tactic againest those lawsuits or whatever.
The nice thing if a trustee needs to respond to an inquiry regarding anything about your trust the trustee under laws is protected that so it would stop there, and you would want a experienced trustee to respond in your behalf and of the designated beneficiaries.
Just my 2 cents worth
Are Land Trusts legal in the State of Michigan? If so, does anyone know of a company that provides the service of properly setting up Land Trusts in MI for investors.
Any recommendations for an attorney in MO (St. Louis) that is familiar with setting up land trusts for investors?
Thanks!
First of all, Land Trusts are a type inter-vivos revocable trust, and as such they are legal in every state. But there are 2 states that do not recognize them and I don’t know the details, since in those states I am sure other type of trusts are recognized.
So the answer to your question in Michigan is YES, they are legal. Now MI doesn’t have any specific statutes dealing with Land Trusts, so if you ever go to court they will have to rely on other general statutes referring land trusts and perhaps a court would admit cases from Illinois or Florida (2nd state to recognize them by statute, I think)
Below is a quote from Bronchick’s article on Land Trusts.
“Land trusts were first used in Illinois, hence the nickname, “Illinois Land Trust.” In nine states (AL, FL, GA, HI, IL, IN, ND and VA), land trusts are specifically recognized by statute. In most other states the validity of land trusts are supported by common law and general trust principles (land trusts are not recognized in TN & LA).”
The link to the article is this,
We require always having a third-party corporate Trustee hold title to shield the property from judgment creditors and hold one’s beneficiary interest in a separately owned LLC. The trustees we use are each bona fide non-profit charitable organizations acting on behalf of their members.
TRUSTEE DUTIES
The following is a list of the duties of a Trustee. Upon Acceptance of a Trusteeship
* Administer in accordance with its terms and purposes.
* Administer the trust in good faith.
* Administer in the interests of the beneficiaries.
Duty of Loyalty
* Administer the trust solely in the interest of the beneficiaries.
Impartiality
* Trustee shall act impartially while investing or managing or distributing the trust property giving regard to beneficiaries respective interests.
Prudent Administration
* Administer the trust as a prudent person would consider the purposes, terms, distributional requirements, and other circumstances of the trust.
* Exercise reasonable care, skill and caution.
Costs of Administration
* Incur only costs that are reasonable to the trust property.
* The purposes of the trust and skills of the trustee.
Trustee’s Skills
* A trustee who has special skills or expertise is named trustee in reliance upon the trustee’s representation, that the trustee has special skills or expertise and shall use those special skills or expertise.
Powers to Direct
* While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.
Control and Protection of Trust Property
* A trustee shall take reasonable steps to take control to protect the trust property.
* Record Keeping and Identification of Trust Property
* A trustee shall keep adequate records of the administration of the trust.
Enforcement and Defense of Claims
* A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.
Collecting Trust Property
* A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee and to redress a breach of trust known to the trustee to have been committed by a former trustee.
Duty to Inform and Report
* Keep the qualified beneficiaries of the trust reasonably informed.
* Concerning administration of the trust and material facts necessary to protect their interests.
Discretionary Powers—Tax Savings
* Trustee shall exercise discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.
General Powers of Trustee
* A trustee, without authorization by the court, may exercise: powers conferred by the trust except as limited by terms of the trust other powers to achieve proper investment, management & distribution of trust property.
Distribution upon Termination
* Upon termination of a trust, the trustee sends to the beneficiaries a proposal for distribution.
* The right of any beneficiary to object to the distribution terminates if the beneficiary does not notify within 30 days after the proposal was sent.
Delegation by Trustee
* Trustee may properly delegate under certain circumstances, duties & powers to a prudent trustee of comparable skills.
Don’t leave home without one . . . and DON’T become your own trustee!