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5 Good Reasons to Hold Real Estate in a Land Trust

Are you a target for tenant lawsuits? Are your assets easy to locate? Do you own rental properties in your own name?

You wouldn’t walk around with a financial statement taped to your forehead would you? So why would you have your most valuable assets exposed to public scrutiny? Anyone can go down to the county courthouse or recorder’s office and look up the owner of any property. Real estate records are now computerized, so all of your real estate holdings can be located at the touch of a button! Lawyers, creditors, IRS agents, newspaper reporters, tenants and other “snoops” can find out what you own and whether you are worth going after.

Don’t give them the ammunition – make your real estate ownership hard to find!

1. Protection from liens. Real estate titled in a trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into trust, the personal judgments or liens of the seller will not attach to the property.

2. Protection from title claims. If you sign a warranty deed in your own name, you are subject to potential title claims against you if there is a problem with title to the property. For example, a lien filed without your knowledge could result in liability against you, even if you purchased title insurance. A land trust in your place as seller will protect you personally against many types of title claims because the claim will be limited to the trust. If the trust already sold the property, it has no assets and thus limits your exposure to title claims.

3. Discouraging Litigation. Let’s face it, people tend to only sue others who appear to have money. Attorneys who work on contingency are only likely to take cases which they can not only win, but collect, since their fee is based on collection. If your properties are hard to find, you will appear “broke” and less worth suing. Even if a potential plaintiff thinks you have assets, the difficult prospect of finding and attaching these assets will discourage litigation against you.

4. Protection from HOA Claims. When you take title to a property in a homeowner’s association (HOA), you become personally liable for all dues and assessments. This means if you buy a condo in your own name and the association assesses an amount due, they can place a lien on the property and/or sue you PERSONALLY for the obligation! Don’t take title in your name in an HOA, but instead take title in a land trust so that the trust itself (and thus the property) will be the sole recourse for the homeowner’s association’s debts.

5. Making contracts assignable. The ownership of a land trust (called the “beneficial interest”) is assignable, similar to the way stock in a corporation is assignable. Once property is title in trust, the beneficiary of the trust can be changed without changing title to the property. This can be very advantageous in the case of a real estate contract that is non-assignable, such as in the case of a bank-owned or HUD property. Instead of making your offer in your own name, make the offer in the name of a land trust, then assign your interest in the land trust to a third party.

  1. Comment by CB
    October 9th at 9:50 am 

    How do I acquire this knowledge without becoming a lawyer?

  2. Comment by Jackson
    October 9th at 11:26 am 

    Is ‘CB’ with us?? I have no idea what this half-question means…ugh!

  3. Comment by Tom
    October 9th at 11:50 am 

    Are Land Trusts legal in Tennessee and Mississippi?

  4. Comment by Marco Santarelli
    October 9th at 11:55 am 

    TOM: Tennessee does not recognize land trusts. (Refer to case “Kelly v. Schwartz”, 740 S.W. 2nd 719 (1987). You should be fine in Mississippi. Check with a local attorney.

  5. Comment by Bruce
    October 9th at 1:48 pm 

    Where can I find a Land Trust template that is recognized in CA and other states?

  6. Comment by sg
    October 10th at 7:09 am 

    is it possible in canada ?

  7. Comment by Tom T.
    October 15th at 10:14 am 

    Very interesting! I live in Illnois where assignments are widely accepted and very helpful for bird-doggin as in many other states. Question: How much does it cost to get a land trust written up? And can it be done with a ‘template’?

  8. Comment by Marco Santarelli
    October 15th at 10:29 am 

    Hi Tom – there are templates out there, but it might be best to spend a couple of hundred dollars with a competent local attorney that understands and does land trusts. I few phone calls should find you one.

  9. Comment by Marco Santarelli
    October 15th at 10:30 am 

    SG – check with a local attorney in Canada. These are essentially the same as a “living trust”, so you should be able to structure something.

  10. Comment by RealBench
    November 17th at 7:45 am 

    Your position on good reasons conforms to that of other authors I encountered, which makes me wonder whether this consensus in public opinion signifies the beginning of a new way of thinking. Thanks for the wonderful article it has really helped me. Nice work William.

  11. Comment by Bill
    August 14th at 11:10 pm 

    Is a land trust the same as an LLC? If not, what are the pro’s and con’s of each?

  12. Comment by Marco Santarelli
    August 15th at 8:27 pm 

    Bill — They are NOT the same. A land trust is similar to a living trust, but it simply holds title to real property. An LLC is a separate legal entity that has one of more members as owners. It can also hold title to property. Trusts and LLCs can also be used together for more protection and anonymity, but as always consult with a competent attorney that understands land trusts (as some do not).

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