Business Structuring: Real Estate Privacy Trust..Do I need this?

[Christopher G.]

I have an LLC with 4 properties in it. The company that formed my LLC in Nevada is trying to sell me on forming a Land Trust / Real Estate Privacy Trust.

Can anyone tell me if this is necessary and what the point of the REPT is? As I understand it, somehow the title of the company passes through the LLC then stays in the REPT and no one is supposed to know what assets I own??? Kind of feel like this company is trying to sell me something that I don't need, imagine that. Thanks

[Josane Cumandala]

Necessary? I suppose it depends on your specific investor identity and situation but probably not. 

Rather than be pressured by a sales pitch perhaps consult an actual attorney who specializes in asset protection regarding real estate in the state you are invested in. 

I have heard arguments for and against land trusts. I'm not an attorney or legal expert but my understanding of it is that land trusts are a way to keep your name out of public record. It is not the same thing as an LLC and probably isn't a panacea as far as asset protection goes. It's simply a way to frustrate people who like to slip and fall on a property and sue the owner as quickly as possible. If it is too hard to find the owner's name the thinking goes, it's a lot harder to sue them.

For a run down of what I consider to be a reputable advocate of land trusts I suggest downloading episode #74, "Dispelling Myths About the Land Trust" of The Real Deal Real Estate Show podcast by Larry Harbolt. You can find it pretty much anywhere you can download podcasts. Keep in mind Larry Harbolt is not an attorney. He can explain land trusts pretty well and has first-hand experience using them, but he is not a legal professional. 

One of the most notable detractors of land trusts that I know of is Garret Sutton. He warns that land trusts can "cloud title" if not handled properly. He also points out that anonymity is not the same thing as true asset protection, and someone determined to sue you do so will do so if you don't have the proper entities in place. You have an entity set up already and Nevada has very strong asset protection laws in place. The only state I hear compared to Nevada in terms of asset protection favorability is Wyoming. In Wyoming, LLC members are not a matter of public record anyway and if your name is kept out of public record then the land trust seems unnecessary. I would dive in to whether or not Nevada law withholds the identity of LLC members from public record. For analysis of Garret Sutton's positions check out his book Loopholes of Real Estate or his company, Corporate Direct.

Trusts in general are a powerful tool for many different things. Land trusts are somewhat more obscure than living trusts but I'm sure they can be part of a sound wealth strategy if used correctly. That said, your strategy should be devised by you and your team of trusted attorneys and CPAs, and you should do your own research. Someone pushing a land trust on you to make a sale just doesn't seem legit. Especially if that person cannot explain the concept to you sufficiently on their own.