LAND TRUSTS - HIDE THE OWNERSHIP OF EACH PROPERTY
There are nearly 100 million lawsuits filed every year in the United States. Landlords are at great risk, and are prime targets for a lawsuit. In a survey conducted recently with visitors to mrlandlord.com, 51% of all landlords responding had been threatened with a tenant lawsuit. That means that the odds are better than 50/50 that YOU will be a target of a lawsuit sooner or later? Are your assets easy to locate? Is your real estate titled in your name?
You wouldn't give a copy of your financial statement to every new tenant would you? So why would you have information about your most valuable real estate assets available for all your tenants (and their attorneys) to see? Anyone can go down to the county courthouse or recorder's office and look up the owner of any rental property. Real estate records are now computerized in most states, so all of your real estate holdings can be located at the touch of a button!
Any mortgages on your property will be recorded as well. Most recorded mortgages will state the amount of the original principal balance and the date the mortgage payments began. All one has to do is figure out the balance of your mortgage and subtract that amount from the market value of your house. Bingo! Now they know how much equity you have and hence whether suing you is worthwhile.
If a tenant or creditor is contemplating suing you, he will make an appointment with a lawyer. Most likely he will likely seek a "contingency-fee" lawyer. A contingency-fee lawyer does not charge by the hour; he charges a percentage of whatever he collects. Most contingency-fee lawyers will not take a case unless there is something upon which to collect. If you have no real estate in your name, then finding out your ownership interest will not be easy for a typical lawyer. It's not that lawyers are lazy. It's simply a matter of allocation of resources; lawyers focus on cases they can win and collect. If they don't find any assets in your name (and there is no other apparent "deep pocket"), they probably won't take the case. As you can see, appearing "broke" is one of the best strategies for lawsuit avoidance that money buy!
There is another problem with owning real estate in your own name. If a judgment is obtained against you and filed in any county in which you own real estate, all real estate in that county will have a lien attached to it. You cannot sell or refinance any property in that county, since no title insurance company will guarantee a clean title. You're stuck until you pay off the lien.
Some people use Corporations to hold title to their real estate. While these entities will protect you, they will not protect your property. If you own all of your properties in one entity, a judgment against that entity will create a lien on all property owned by that entity. Furthermore, the directors and officers of that entity are public record, so it does not hide your ownership. One alternative solution is to use Land Trusts to hide the ownership of each rental property.
What is a Land Trust?
A Land Trust is a simple inexpensive method for hiding the ownership of real property. A land trust can be setup as an irrevocable living trust used to title ownership of real estate. Title to the property is held in the name of a trustee, who is forbidden to reveal the beneficial owner. The beneficial owner or "beneficiary" can be an individual, corporation or other entity for further protection. The Land Trust is an amazing device which offers numerous benefits to rental property owners. The two reasons it is not used by every real estate investor are that few know much about it and those who know about it do not know where to obtain land trust services at a reasonable cost.
Trusts in general go back many hundreds of years and today they offer even more benefits than they did when they were invented. Land trusts were first used in Illinois, hence the nickname, "Illinois Land Trust", which have been used for over a hundred years. In nine states (AL, FL, GA, HI, IL, IN, ND and VA), land trusts are specifically recognized by statute. In most other states the validity of land trusts are supported by common law and general trust principles.
What are the benefits of a Land Trust?
The most important benefits of the land trust are privacy and asset protection. With a land trust, no one needs to know what real estate you own either during your life nor at your death. By using a land trust with an attorney as a trustee, there will be no public record of your ownership of the real estate in the trust. The public records will list the attorney as trustee, and the tax bill will be sent to the trustee (who will forward it to you for payment). The property will be managed by you or by your agent.
Some of the most popular benefits of using a land trust are, keeping the sales price secret, keeping liens and judgments off the property, avoiding a spouse's forced share, and avoiding litigation. A land trust, if properly setup and implemented, will hide your name from the public records. No one will know who owns the property but you, your own attorney perhaps and the trustee. If a judgment is entered against you, a lien will not automatically attach to the property, since title is not in your name.
Land Trust versus LLC?
A land trust can be designed to afford the same type of asset protection with one or two advantages (no state registration or annual maintenance is required). There are possible disadvantages (a higher income tax rate for income earned by the trust). The land trust of this kind is irrevocable, files its own tax returns (in contrast to an LLC which has pass-through tax advantages, pays no taxes, files only an information return with K-1(s) going to the member(s) and is taxed exactly like a general partnership or for single member LLCs, the taxation is exactly like a sole proprietorship). The LLC and the Land Trust can buy, sell, lease, mortgage and gift properties. It should be noted, however that in many states, it's becoming harder to "protect" ownership information about an LLC, because anyone with Internet access can find out anything (public records) they want about your LLC, just by going into the state web site. With Land Trusts, to accomplish the best asset protection strategy, the irrevocable Land Trust should have an independent trustee.
Who can set up a Land Trust?
A Land Trust can be created by anyone who has the legal capacity to enter into a contract. An individual, partnership, corporation or a group of individuals can establish a Land Trust for one or more pieces of property.
How is a Land Trust set up?
Two primary documents are necessary to establish a Land Trust: a Trust Agreement and a Deed In Trust. An Environmental Risk Affidavit is also required. A Land Trust can be created for the property you already own or for the property you intend to purchase. Additional property can be added to an established Land Trust at any time.
How does a Land Trust work?
Under the terms of the Trust Agreement, the beneficiaries retain complete control over all property in the Trust, in the same manner as if they owned the property in their individual capacities. The beneficiaries can modify, amend or terminate the Trust at any time. The beneficiary of your trust can be you individually, a corporation, a partnership or any other legal entity. If you are the beneficiary individually, you can also name any other person or entity to immediately become successor beneficiary upon your death.
A land trust will also allow you to assume an FHA or VA loan without recourse. Anyone can assume an old FHA or VA loan without qualifying, but few investors realize that such an assumption is with recourse. If the investor sells the property and the buyer assumes then defaults on the loan, the investor (and anyone else who previously assumed the loan) may be held liable. If a land trust is established to take title to the property and assume the loan, there is no recourse against the beneficiary. Furthermore, the loan will not appear on the beneficiary's credit report as a liability. To get your property out of your name, and provide privacy and asset protection, take advantage of the Attorney Land Trust Service.
Set Up One or More Land Trusts Today With Our Help!
MrLandlord.com has a special arrangement with one of the top Landlord Trust experts in the country who serves as one the key advisors to our website visitors. He had developed an inexpensive course/service that has helped thousands of landlords nationwide who are interested in utilizing Land Trusts. With this Home Study course/service you will be able to set up your own land trusts for you each one of your rental properties (each property should be placed in its own separate land trust so your properties are insulated from each other). This service specializes in working with the needs and concerns of rental property owners in regard to privacy and asset protection. This is an important service because you definitely do not want to hold title to property in your name. There are NO advantages to owning real estate in your personal name….only disadvantages and liabilities. So, do what the smart real estate investors do and hold title in a trust as part of your asset protection strategy!
Land Trusts Made Simple Home Study course Includes:
* All the forms you will need for the rest of your life to set up and administer your own land trusts!
* Personalized online video and audio training
* Email and phone support 7 days a week!
Call 1-800-950-2250 to find out more about this Land Trust service. You will then receive a follow-up phone call and or email to start the process for setting up your Land Trust. You will also be able to ask any questions you may have about Land Trusts and how they can possibly be utilized as part of your asset protection strategy.