I usually put my properties in a Land trust only because it is quick and easy and I do not have to register a LLC with the state and new LLC with each property.
With a land trust I just have the cost of recording the warrentee deed.
So which is better for asset protection or are they about the same.
Or are ther reasons to use one over the other?
I am in Utah and Georgia.
I have spent a huge amt of time and effort looking at this issue and come to the conclusion there is no right answer and certainly many things and what-ifs that play into each method of holding.
With that said, a few basics should be pointed out with respect to lawsuits
LLCs are relatively new (10 yrs or so) and thus still evolving to some extent. Land trust have been around for over 100 years. A key different between a trust and an LLC is in a LLC situation you will have control over the property and thus have liability not as an individual but as a member/manager of the LLC. In a land trust situation, you would not own or control the property; only collect on the benefits.
In both cases, these devices help to slow down overzealous plantiffs lawyers and make it more difficult to get to your assets. The lengthof time the entity has existed does help; obviously if one was to try to move property into either entity just prior to a lawsuit, that would be fraud and the entity would be set aside.
Anyways, just a few comments. I have not been indoctorated by any seminar speakers; jsut a well educated dude who has been a lot of time reading on the topic. I have personnally used LLCs for a number of situations and found that the true liability protection is pretty mininal. I have not used a Land trust up to this point.
A few additional points:
Entity law, including that of LLC’s, is much more standardized than trust law. The former is a product of model statutes tweaked by the states. The latter is a product of hundreds of years of common law that has evolved differently in each state. Statutory law, the source of most entity law, lends itself to generalization much more readily than does an amalgam of cases. In short, entity law is more standardized and easier to understand than trust law.
Also, in a land trust, you do far more than just collect the benefits. In many respects, you ARE the owner and certainly control the property. I would agree that in the case of certain IRREVOCABLE trusts, you are just the beneficiary - but land trusts are REVOCABLE, meaning you can pull the assets or replace the trustee. Very different rules tend to apply to revocable trusts, as opposed to irrevocable trusts.
John Hyre
So John what I am hearing is that a irrevocable trust is the best?
I wouldn’t say that they are necessarily “better”. Like most tools, irrevocable trusts have pluses & minuses. On the plus side, they provide true asset protection. On the down side, you do not own or control the assets that it owns AND someone else has to be the beneficiary in all but four states. Because you no longer control or own the assets, the trust agreement is generally quite detailed, customized and therefore expensive. Such trusts tend to be feasible where large sums of money are involved.
John Hyre
OK, so for long term holds irrevocable trust might be worth the money and the protection,and what about short term holds such as investment properties that I want to rent out for 1m to 5 years is it worth an LLC or land trust? I use a property management company because I invest out of my state a good amount of time and I do not ever take title personally (if the lender alows it) I usually take title in a land trust immediately and I guess that is one reason why I use a land trust over a LLC because my Attorney understands that and the lenders are more acceptable in talking title that way verse taking title then putting it in an LLC? Am I making any sence?