i have a couple courses that have land trusts in them. what do you need to do to put your property into a trust? do you have to have a lawyer? if not, then what is the process in doing this?
I use a lawyer because each trust is indivudual and it is not a cookie cutter arrangment. It costs about $400.
I use a lawyer for the first one because after that it’s cookie cutter as long as the property is in the same state (and the law doesn’t change). The only thing that changes is the property address and legal description.
With due respect to bluemoon06 and mcwagner, I use the cookie-cutter land trust form I got from Ron LeGrand. Since it stays in your possession and is never recorded, all you need is a title company that understands Illinois Land Trusts. If your local title company doesn’t know what you’ve done, tell them to call their Chicago office and let their Chicago office educate them. Better yet, choose a title company that already understands land trusts.
Be sure to complete a separate one for each property. Make sure each one is notarized, too. Otherwise, the trustee you select can say “thanks for the free property” since the land trust would not be valid and the trustee’s name is actually on the title. If you’re using the land trust as an asset protection device, be sure to choose a trustee with a different last name than yours.
With all due respect to Ron LeGrand, I have found the land trust prepared by Bill Gatten’s company at www.landtrust.net to be thorough and complete including accounting and legal review. Their cost is $364.
Land trusts provide no asset protection at all. They offers some privacy until the trustee is subpoenaed and ordered to turn over the trust document, which lists the beneficiaries. Any entity listed as a beneficiary is then subpoenaed to turn over its list of officers and ownership records until a real person is identified.
If we are throwing around names, Lou Brown has a fill-in the blank kit that is very good. No matter which one is used, a local attorney should review it to make sure it complies with local law. All the gurus provide material to a national audience with very little attention paid to local and state rules.
In TX the beneficiary isn’t recorded with the trust document, and so the trustee doesn’t even have to know who it is.
Interesting. How does the trustee make distributions to the beneficiary? I never head of such a thing, but I’m not from Texas.
In a lawsuit, I would go after the settlor and/or the trustee. Some one is paying taxes on that income from the trust and the trust has an some kind of tax id associated with it for its accounts and tax reporting. If it’s an ssn, that’s all I need to do an asset search. If it’s an EIN, I can get those records and find out who set the thing up and track from there. Obviously, this makes no sense for some tiny claim, but it’s different when we are talking about a few hundred K or more.
I would recommend to have an atty (or other indiviudal) very knowlegdeable in land trust help you with the first one and you can mostly likely DIY from there with maybe an occasion phone call. Try to cobble together advices, statements and other info from the Internet is asking for difficulty given the vast amt of incorrect or incomplete info float about in cyberspace.
At the end of the day, a trust is nothing more than a specialize contract. When you know what you are doing, you can creat a trust in about 30 mins.
the trustee knows the beneficiary, but the beneficiary is not recorded in public records. if the trustee is your atty, he/she can claim atty/client priv and not disclose the beneficiary.
I get it now. I suspected you were talking about a certificate of trust or some other type of filing that is submitted to 3rd parties, but wasn’t sure. What you describe is pretty much standard. Institutions need some kind of document that lists the trustee and his powers to make sure he has authority to act on behalf of the trust with regard to the transaction. I’m talking about the actual trust agreement that defines how the trust works, what powers the trustee has, who are the beneficiaries and what are their interests in the trust. This document is private, like corporate books and records, but is not protected by attorney/client privellage during a lawsuit in mos situations.
BLL, you seem to be suggesting that you will get the trust set aside by order of the court. While possible, that’s a real challenge; especially if the trust has been in place for awhile and prior to any of the subject events that lead to such a lawsuit. Unless you accomplish that task, the beneficiaries are not owners of the property; moveover, they are likely to have a lot of other assets out reach as well if they are held in other trust, etc.
While no asset protetction is “bullet-proof” (I hate that phase), various holding strategies will present significant barrier(s) to plantiff lawyers and their clients getting to your assets. Many people threaten to sue, but very, very few have the cash/time and stamina to front on such an adventure couple with the additional hassle of actual collecting the event one is actually able to secure a judgement.
Land trusts provide no asset protection at all. They offers some privacy until the trustee is subpoenaed and ordered to turn over the trust document, which lists the beneficiaries. Any entity listed as a beneficiary is then subpoenaed to turn over its list of officers and ownership records until a real person is identified.
If there are two unrelated co-beneficiaries, there IS definite asset protection. A claim or charging order against a co-beneficiary is impossible without the complete dissolution of the trust. This won’t happen because an unrelated co-beneficiary is not responsible for the actions of the other. I suggest you read Henry Keno on Land Trusts (1989).
In addition, a creditor of a beneficiary of a co-beneficiary land trust may not attach the land or claim an interest. It is much like a limited partnership or multiple-member limited liability company.
I don’t want to collapse the trust. Assuming I have a judgement against the trust, I’m interested in satisfying any excess judgement by seeing if the beneficiary has any involvement in the operation of the trust that I can use as a means to bypass the trust and get to those personal assets. The easiest way around entities is a personal judgement. Individuals forget they are personally liable for their own actions when acting on behalf of an entity. Corporations are especially suspectable to this type of attack because they lack charging order protection. Even partnerships are at risk because most agreements are not written in an executory fashion. Creditors have been able to get partnership interests transferred to them instead of merely relying on the charging order. Creditors can liquidate the company/partnership once they get control.
Fraudulent transfer laws are very useful in getting trusts set aside. Too many people put too many of their assets in them when setting them up and make themselves technically insolvent. They stupidly admit they set up the trust so that their personal creditors can’t touch the assets. People need to keep quiet and have a professional instruct them.
I agree that most people who threaten to sue never do and that most PI attorneys will settle for the insurance limits. Plans should be set up to encourage the attorney to settle on terms favorable to you. Unfortunately, most people don’t set up them properly. They buy a guru’s DIY kit and set it up wrong or don’t bother to set it up at all. They fail to create redundant protection in case one level fails. You would be surprised how many people set up an LLC and never make the annual report. Creditors know these things and no longer walk away when they see an LLC or a trust. Investigators are getting very clever at finding hidden assets and it doesn’t take much effort to determine if the structure will hold or collapse.
Land trusts do not protect the property held in them. The liability will come from the operation of the trust and trust assets will be used to satisfy any judgement. Charging orders only apply to personal liability of the beneficiary to prevent disruption of the business. It is possible that a judge will grant a creditor the trust interest instead of a charging order since the business will not be disrupted if the beneficiary is changed. Case law already exists for partnerships.
[b]Fraudulent transfer laws are very useful in getting trusts set aside. Too many people put too many of their assets in them when setting them up and make themselves technically insolvent.[/b]
You are mistaking trusts with land trusts. Only real estate can be placed into a land trust and usually only one property per trust.
[b]Assuming I have a judgement against the trust, I'm interested in satisfying any excess judgement by seeing if the beneficiary has any involvement in the operation of the trust that I can use as a means to bypass the trust and get to those personal assets.[/b]
Again, can’t happen with a land trust. Legal and equitable title to real property is held by the Trustee, NOT the trust. You may have a judgment against a beneficiary, but not the trust.
[b]The liability will come from the operation of the trust and trust assets will be used to satisfy any judgement. Charging orders only apply to personal liability of the beneficiary to prevent disruption of the business.[/b]
A properly structured land trust is not classified as a “business trust,” in that the holding of title to real property DOES NOT qualify the holder as being engaged in a business. Believe me, all my docs are prepared and reviewed by legal staff.
I challenge you to provide ONE CASE where a properly structured co-beneficiary land trust was ever challenged and defeated. I’ll save you the time and effort – it has never happened because of its legal protections.
Correct. I was referring to trusts in general.
Correct again. I want a personal judgement against the beneficiary so that I can go after his personal assets. I want to find some nexus between his personal action and the liability of property.
We must agree to disagree. The property owner is responsible for whatever happens on the property and the property can be used to satisfy any judgement arising from property liability. The beneficiary of a land trust is not responsible for property liability unless he does something personally to generate liability. The mere fact he is a beneficiary is insufficent in the same way the ownership of stock in a public corporation does not make the shareholder responsible for corporate actions. My point is I will try to find some way to show the beneficiary is responsible so that trust distributions to the debtor beneficiary can go to the creditor via some type of charging order. The key phrase you mention is “properly structured”. That is not the case many times and that is how things fail, not because of some inherent defect of the structure. The key is to find some mistake and exploit it. Theoretically, everything works.
You and I both know this is a loaded comment because anyone with such a structure is just as careful in everything he does and unlikely to get sued because he so meticulous with property management and maintenance as well as has insurance to pay a claim, which is most likely to be accepted by the plaintiff because most just settle for the insurance limits anyway. Very few cases ever go to trial.
A properly structured and run LLC cannot be pierced, but LLCs are pierced because they are not set up or run properly. PI attorneys look for a chink in the armor. Investors who keep excellent records and do things properly are very difficult to squeeze. It is a gamble to push it at trial. It is more efficient to grab the insurance money and run. These guys want disorganzied or cocky defendents.
Offshore asset protection trusts were all the rage until the Anderson’s lost their case and Lawrence spent 6 years in prison for refusing to repatriate assets. Series LLCs are not fully tested in court, but that doesn’t stop anyone from saying they will work. Smart attorneys look for defects in the operation, not the strucutre, because that is where the mistake is made.
I haven’t seen your docs and I can’t say if they are good or bad. What I have seen are land trusts with the beneficiary and trustee as the same person, which do not carry the protections you describe. You seem to have a good grasp on the topic and will guess your stuff is on the good side. The fact that you have two unrelated beneficiaries is encouraging. No offense, but everyone has lawyers review their docs. Most lawyers are idiots or clueless and it’s amazing they even passed bar or graduated from law school. I don’t know the guys reviewing your stuff, but being a lawyer doesn’t impress me.
I agree with you there. There are many scam artists who make themselves both a beneficiary and the Trustee so that they can steal the unsuspecting seller’s property. These scam artists are violating the Doctrine of Mergers which would invalidate the trust if it were challenged. Unfortunately, by the time that would happen they have left a victim. People like that give real estate investors a bad name. I only use a professional trustee non-profit corporation and always protect my seller’s equity. I enjoyed the conversation.
I did as well. You have a very unique system and have me very curious now. Do you have a web site that describes your product/process in more detail?
Important point about charging orders:
You get a charging order against distributions of income. If the LLC, partnership, whatever never makes a distribution, you simply get nothing. Ownership of the LLC can even change (heirs) and you still get nothing.
Meanwhile, back at the ranch, IRS has ruled that the recipient of a charging order is responsible for income taxes on charged income, even if no distributions are made.
So you pay the taxes while the LLC distributes no cash. Sweet.
The LLC can even make investment decisions that are significantly tax negative for you; you can’t prevent it because you don’t have control of the LLC.
Just one more reason that makes LLC’s a little less lucrative targets. Hard to squeeze cash out of 'em.