Land Trusts

[Craig Curelop]

Hi,

I recently went to a real estate meetup where a gentleman came in and gave a 90-minute presentation on why we should protect our properties with a land trust. Essentially he advised that each property should have its own land trust and the beneficiary should be the LLC that I (or the investor) own 100% of.

Does anyone have any experience utilizing land trusts when purchasing properties? If so, I'd like to hear some of the drawbacks as the gentleman presenting only responded with its additional paperwork when I asked him about the drawbacks. 

Also, it seems like each trust must have a trustee assigned. By my understanding a trustee acts as the legal owner of the trust's assets and handles all of the assets held in the trust which seems like a lot of work. Is there any scenario where I could ask someone (maybe a friend or family member) to be my trustee and not have to pay them? 

Thanks!

Craig 

[Daria B.]

Originally posted by @Craig Curelop:

Hi,

I recently went to a real estate meetup where a gentleman came in and gave a 90-minute presentation on why we should protect our properties with a land trust. Essentially he advised that each property should have its own land trust and the beneficiary should be the LLC that I (or the investor) own 100% of.

Does anyone have any experience utilizing land trusts when purchasing properties? If so, I'd like to hear some of the drawbacks as the gentleman presenting only responded with its additional paperwork when I asked him about the drawbacks. 

Also, it seems like each trust must have a trustee assigned. By my understanding a trustee acts as the legal owner of the trust's assets and handles all of the assets held in the trust which seems like a lot of work. Is there any scenario where I could ask someone (maybe a friend or family member) to be my trustee and not have to pay them? 

Thanks!

Craig 

 Hi Craig,

I too have been looking into this topic. I have had several conversations and ultimately ended up just getting an umbrella policy and putting wills in place per my discussion with my CPA, which lead to doing the latter 2. 

I did go as far as getting a kit to do it all myself and while having help to do so, it just still boiled down to what I think will work best for me in getting advise from those closest to me (ie CPA, Attorney). I also spoke with people that do the "asset protection" who say this is the way to go (ie land trusts, llc). Well I suppose it's a 50/50 opinion and I've read and seen them all here in BP and elsewhere.

We had an individual speak at our local REI group on this topic and I know he's trying to drum up business so he only dangled the carrot so far. I assume the same as what the person that presented to your group.

With that said, at the time I was looking at putting all the properties into separate land trusts and LLCing them like you mentioned above. You can ask your attorney to be the trustee, which is where I was going or your CPA. In my situation I was going to have them be the trustee for all the properties and do a multi member Nevada series LLC (if I said that correctly). Asking a friend, which was also an option I explored, is just as good - how much do you "trust" that person - was always the question put to me when I asked that question.

They never spoke of "drawbacks" but if you have financed property then the lender may not want to play along with your planning. That's another discussion, "due on sale" clause or calling the note due to your planning structure. If doing all this for lender to just balk then it would reversing everything in order to avoid their actions (if) of calling the note.