Asset Protection Planning
is proactive legal action that protects your assets from threats such as creditors, divorce, lawsuits and judgments. Call now to let our attorneys help you.
Land trusts can provide asset protection benefits by providing you with privacy of ownership for real property. Each piece of real estate can be placed into a separate land trust. If a lawsuit is associated with one piece of real estate, other properties titled to different trusts are not automatically encumbered.
The public records show that a land trust owns the property. But the trust, itself, is not publicly recorded. Thus, a simple search does not show who owns the land trust. Privacy of ownership provides lawsuit deterrence, which is a form of asset protection. By privately owning property an individual who is being sued would appear to have no assets to satisfy a judgment, if no assets can be located by a legal opponent it drastically reduces the odds that a suit will be filed.
To say it a different way, land Trusts are private documents that hold title to real property. Although public records can be searched to identify property ownership, only the trust name is public information in this case. They are not asset protection trusts but they can help keep prying eyes from knowing what you own.
In addition, an LLC can be formed that records a second mortgage against a property that strips any equity from the real estate. These privacy techniques implement legal instruments that can deter a lawsuit.
We can establish land Trusts very quickly. They are useful tools for at separating real estate from one’s personal name. As such, they prized legal tools of homeowners and real estate investors.
To put a property into a land trust, there are two legal documents involved.
Another document often used is an “Assignment of Beneficial Interest.” This document transfers one’s interest in the trust to another party. For example, let’s suppose a house is owned by John Smith. John Smith conveys title to the trust. The trustee of the trust is ABC Trustees, LLC, a company owned by John. John might also want Fred Jones, his brother-in-law, to be the trustee.
John wants an asset protection instrument to own the trust. So, if John is sued, there are legal provisions to protect John from losing the trust in a lawsuit. Plus, if there is a lawsuit on the property, John does not want to have personal exposure. So, John signs an Assignment of Beneficial Interest in the land trust. This document transfers his position as beneficiary over to Blue Sky Holdings, LLC, another company owned by John.
When you order a land trust, first our legal department emails you a questionnaire to complete. The questionnaire will ask you what you would like to name the trust. This is usually the same as the street address of the property with the word “Trust” added to it. If the address of the property is 123 Main Street, you would simply name the trust the “123 Main Street Trust,” for example. The address of the property is public record, anyway. So, there is no loss of privacy in naming it in that manner. Plus, you may have multiple properties and trusts. Thus, this nomenclature makes it easy for you to figure out which trust is associated with which property.
Next, we ask you your name and address. This way, we know who to send the documents to once they are completed. We ask you the name and address of the trustee. You can choose a trusted friend or relative to serve as trustee. Alternatively, you can have us establish a private LLC in Wyoming, for example, to serve as trustee. You can opt for nominee managers. This way, you own and control the company serving as trustee. But no one in the general public knows this. This is because you have one of our associates listed in the public records as company manager. Your nominee manager, in turn is contractually obligated to only act at you request. With a company plus nominee service, you maintain your privacy from prying eyes.
We next ask you who is the settlor of your trust. This is the person who is having the trust created. This is typically the one who owns the property now. This must be exactly as listed on the current title document. We utilize this information to draft the deed that transfers the property from your name to the trust name.
Do you want extra protection? We touched on this above. For the home that is not your primary residence, most experts advise that you make the beneficiary of your trust a limited liability company. That is, an LLC.
A land trust is not an asset protection device. It is a privacy device. It keeps your name out of the public records. The beneficiaries of the trust are exposed to liability. So, when you put an LLC in that place, the LLC is exposed rather than you personally. Plus, when you are sued personally, the LLC can offer true asset protection. That is, there are provisions that allow you to protect your ownership in an LLC and anything that the LLC owns.
As such, the next thing we ask is where you want to assign your beneficial interest in the trust. That is, in addition to your trust and the transfer deed, we include an Assignment of Beneficial Interest document. So, you can transfer the “ownership” of the trust, called your beneficial interest, in the trust, to a company.
Most tax advisors recommend against assigning beneficial ownership of your personal residence to a company. That is because a personal residence is a different tax category than investment property. There are certain benefits in maintaining beneficial interest in the land trust that owns your home. Some examples are writing off the interest on our home mortgage. Another is selling the property and not paying taxes on significant portions of the gain if you have lived in the home two years or longer. So, the most common recommendation is to assign your beneficial interest to LLCs for investment property. Keep your personal beneficial interest in the trust on your personal residence.
Naturally, we ask for the property address. We ask for the county in which the property is located. Next, we need to know where you want the county to mail your property tax bill. In addition, we need the tax parcel number. The legal description is helpful, but not necessary. This is because you can typically attach the legal description to the deed for filing.
We usually email the land trust to you. Once you receive it by email, you will open the attachment, print it and follow the enclosed instructions. You scan through the document to make sure that your name the addresses are correct. You write the date on your trust. Then you and your trustee sign the land trust in front of a notary public.
Some states use Quitclaim Deeds. Some use Grant Deeds. So, we include each. The current owners then sign the appropriate deed in front of a notary.
You next take the deed down to record it in the public records. You usually do this in the county recorder’s office in the county where the property is located. You put the trust itself, however, in a filing cabinet in your home or office or in a safe deposit box. Once you have recorded the deed, the property is now titled to the trust. A public records search will not show you as the current owner of the property.
To put your real estate in land trust, you can call the number above or complete the inquiry form on this page.