Tuesday, June 22, 2010

Land Trusts, What To Use Them For....

First of all, I am not a lawyer and not giving you legal advice. Just telling you a little information I have learned about land trusts. Consult your attorney before using one.

There are a number of reasons to use a land trust in your real estate holdings. One primary purpose of a land trust is to help your loved ones avoid the headaches and costs of probate court and excessive taxation when you die.

Land trusts are also used to keep the owner of the property anonymous on public records. You may not be interested in tenants, lawyers or others knowing your every day business. Knowledge of how much property you own can help a lawyer determine if it's worth while to take a long shot sue you with a weak case.

Land trusts don't give you liability protection like an LLC does but they do give you a little protection from title claims. If you for some reason end up getting a judgment against you, it won't automatically attach to the property, since the title is not in your name. The same goes if your trust gets a lien against it. The lien will not be against you personally but rather the trust.

Land trusts are also used for ease of changing owners and working with the seasoning requirements of most banks. Land trusts are assignable so once the property is in a land trust, it is easy to change the beneficiary (owner) of the trust to the new owner. The trust agreement is a private agreement that is kept by you in your file cabinet so no one really knows who the beneficiary of the trust is besides you. The only other part of a land trust besides the trust agreement is the deed that has to be changed and recorded at the courthouse into the name of the trust.

Trusts are also used to buy property subject to the existing mortgage. This can help avoid the due on sale clause that all mortgage loans have these days. But presently, for the most part, banks are not calling the loans due at this time because interest rates are far too low to make it beneficial to do so. Presently they are happy to get the money they are owed.

Another benefit of a land trust is if you are having your property managed by a property management company, a trust is beneficial in preventing code enforcement from taking you personally to court rather than the property management company because the beneficiary of the trust is anonymous.

The trustee of a land trust is usually an entity (llc) or person other than the beneficiary (owner). A trustee holds the legal title to all trust property. The trustee signs, notarizes and records documents in their name, not the name of the investor. In a land trust, the named beneficiaries retain the use of the property and the income it generates. The trustee can act only when it receives written instructions from the beneficiaries, who maintain control at all times. If the trustee lives in a different state or country, it will be difficult and expensive for creditors, lawyers, code enforcement, etc to determine who the beneficiary is.


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