Does the Land Trust method work?

[Herm M.]

Can someone explain the land trust method?
Can someone confirm if it works, or if it doesn't work?

Some of the BP members who are reps for transactional lenders are saying that the method works, and others are saying that it doesn't work.

[Cary Donham]

There is way too much to a landtrust for you to get in one post but I'll hit some key points. It works only as well as you set it up. There are different ways to set up a landtrust. All you are doing is holding title to the property in a landtrust until you find a buyer/renter.

Benefits:

Title doesn't show up in your name in case you have a lawsuit filed against you. Why? Because the landtrust nor the assignment of beneficial interest is filed at the courthouse..... only the deed is filed.

It's better than just transferring the deed to you for the purpose of the DOS clause in the note the lender holds - this doesn't mean they won't call it but IMO there is less of a chance because you can show the lender the family just put the home in a trust for the protection of the heirs

Let me explain about setting up a simple landtrust.... you find a seller who doesn't have enough equity to make it work for you buy the house outright. So you have them deed the property to a landtrust with a 3rd party trustee (preferrably someone you know and TRUST or an LLC owned by someone you TRUST). The beneficial interest go to the owners. You then have the owners assign the beneficial interest to you or your company. The only item that is filed at the court house is the new deed. You get a power of attorney (make sure it's a durable power of attorney - that means it continues to be in affect should the person die) so you can act on behalf of the sellers to change insurance etc.... You do want to change the insurance so you are on the policy.

Does it work? Oh yeah..... I have done many of them and been paid at closing with the paperwork I submitted to the title company showing my beneficial interest in the landtrust.