The Laurex Process: Strategy Development
Land Trust
By Mike Jacka

The Land Trust is the Investors best friend, and the ambulance chasers worst nightmare. They allow you to publicly own nothing, while quietly building an empire, that you control, and benefit from!

What is a Land Trust?

A land trust is a modified form of living trust; it will hide your name from the public records. The land trust (also known as an "Illinois Land Trust”) differs slightly from a regular living trust in that the trustee is a mere nominee. The beneficiaries have the right to direct the trustee as to the acquisition, management and disposition of trust property.

The main purpose for using land trusts is privacy of ownership. No one will know who owns the property but you, and your trustee. If the trustee resides in a different state than the property is located, it will be difficult, if not impossible, for anyone to discover the proverbial "man behind the curtain." If a judgment is entered against you, the lien will not automatically attach to the property, since the title is not in your name.

You wouldn't drive around town with a financial statement printed all over your vehicle, would you? So why would you have your most valuable assets exposed to public scrutiny? Owning real estate in your own name is like walking around with a giant "easy target" sign taped to your back. In every county in the United States, copies of deeds to real estate are recorded in the public records. Anyone can go down to the courthouse or recorder's office and look up the owner of any property in the county.

The land trust keeps your name out of the public records.  The only thing recorded there would be the Trustee, and the name of the Land Trust.  You can be involved with the property in a managerial position.   Every one would deal with you, but as far as they know, you are only the manager, not the owner.

Is a Land Trust Difficult to set up?

No, Land trusts are fairly easy to set up.  There are a few documents needed to prepare a land trust properly, but the only thing that gets recorded is the Warranty Deed to Trustee.  If you have never used a land trust before, you should seek out someone who has, and fully understands the ins and outs of land trusts.  There are individuals and corporations in almost every major city that would be a trustee for a fee.  I have a company set up just for land trusts in Minnesota.  At the bottom of this report will be my contact information if you are interested in more information, or if you have further questions or are looking for a trustee in your state.

Who should use a land trust?

Anyone who has assets…  If you own any rental property, you are a prime candidate for a law suite.  Ask me how I know that.  Let’s say you have 3 rental properties.  You are a small time investors.  You keep a low profile, and you have plenty of insurance on your investment properties.  One day, in the middle of winter, one of your tenants has a few friends over.  They have a couple of drinks, and then leave.  There is ice on the sidewalk and this person falls and cracks his head open.  There is minor injury, but he is all right.  But he goes to a lawyer and say it was negligence on the landlord’s part.  After all, you were not there to walk this person to his car, when there was ice on the side walk, it is not his fault he had to much to drink and fell on YOUR sidewalk.

The attorney does a quick asset search and finds that you own 4 houses. (Your personal residence and 3 rental properties)  There must be some equity there, so the attorney tells his client that he will take the case on a contingency bases, " If we win, I get paid".  Most insurance only covers for this type of case up to a certain level.  They will be suing for much more than that limit.  They will probably be looking for a settlement.  But you don’t have that kind of money, so you go to court.  If the judge agrees with the plaintiff, you will be stuck with a judgment.  A judgment, which will attach to all properties in your name.  You might even be forced to sell these rental properties that you worked so hard for all these years, just to settle this judgment.

What if you had all three rentals in separate land trusts.  The story might go something like this:

The attorney does a quick asset search and finds nothing.  So he checks the title and finds that it is in a land trust.  The attorney would probably then go back to his client, and offer to help.  He would tell his client, that he thinks there is something there to get, but it is going to be a time consuming, and expensive battle, but he will get started right away for a $5,000 retainer.  At this point most of those frivolous cases disappear.  The client usually doesn’t have that kind of money, if they have no guarantee of ever winning.  But lets say this one does. And lets say that they find all three-rental properties, even though they are in land trusts (very unlikely, but possible).  And lets say they even get a huge judgment.  The judgment could not attach to you, if they were properly structured in separate land trusts.   The judgment would only be against the one property, not all three-rental properties.  You could hold onto them forever and never pay off the judgment, if you so chose.  Or you could deal with the judgment when you felt like it, not when you wanted to buy or sell another investment property.  If enough time passes buy, and the attorney and their client realize they are not going to get their money, you might be in a strong position to settle for penny’s on the dollar.

How much does it cost to put a property into a land trust?

Nothing… Except what you would owe your trustee for their services.  There are no extra documents to record.  You have to record the deed, but the deed would be to your land trust instead of you, and that does not cost anything extra.  Your closing costs would be the same as if you took title in your own name.

A trust, unlike a corporation, is not registered with the state. There are no public records of officers, directors and shareholders. There are no minutes of directors' and shareholders' meetings. The trustee keeps control of the trust records and the identity of the beneficiaries in his file cabinet. A trustee will not reveal this information without a court order.

A trust is a flow through entity for tax purposes.  The IRS doesn’t even require you to get an EIN # for the trust, as long as the trust falls within a few exceptions for doing business.  And for the most part, all your land trusts will fall into at least one of their exceptions.  Your Tax accountant will check for you, but for the most part if you have a land trust for investment properties, you will not need an EIN #.  The properties will be included on your personal tax returns.  The fee owner is not important here, just the person, or entity who enjoys the benefits from the trust.

Personal Property Trust

A personal property trust, like a land trust, is a simple, revocable trust used to hold title to assets. Cars, boats, bank accounts, leases, mortgages, mobile homes, corporate stock - you name it - it can all be held in the name of a Trustee. Anything that can be found on public record is a dead giveaway to potential creditors, contingency-fee attorneys and deadbeat litigants looking to steal your hard-earned fortune. Using a Trustee trust to hold title to assets will help keep your financial matters private and discreet in the information age.

Article Provided by:

Mike Jacka
Real Estate Promo.com