Discretion And The Land Trust

There is a reason why some of the wealthiest people in America own tremendous amounts of real estate without their names showing up on public records. The Land Trust is one of the best kept secrets of wealthy property investors and is a fundamental tool which can be utilised to protect your property, your privacy and your legacy, declares Cheryl Jones.

Established in Massachusetts in 1891, land trusts have actively been used in Illinois for more than a century, and have become more common in other states in recent decades. The use of land trusts gained prominence in England during the reign of King Henry VIII, when people used them to hide their ownership of land so that they would not have to handle certain obligations of land ownership, or serve in the military. Popularised by American legal counsellor and attorney Robert Pless in the 1990s, this special type of legal arrangement emphasised structuring via a ‘’deed to trustee’’ to separate legal ownership from beneficial privacy, and underlined the fact that keeping the trust recorded as a private document preserved liability shields, while filing publicly compromised protection.
 

Land trusts were not established for the sole benefit of millionaires and billionaires. Providing the power of ownership without the exposure, they are for anyone who understands the benefits of utilising a property management strategy that is cost-effective, legal, and incredibly powerful. One of the reasons why real estate investors like to create land trusts, is for the anonymity this structure provides. A land trust is a unique kind of legal framework dedicated specifically to holding and managing real estate. They may be utilised to manage something as complex as a multi-state real estate investment trust, or as ordinary as a single family home. Similar to a revocable living trust, it enables you to control your property while you are still living and bequeath to your heirs, while completely bypassing the formal probate process for real estate. You simply update the beneficiary designation to pass it down without a court, delays, or scrutiny.
 

The main advantages offered by the land trust are centred around litigation deterrence, privacy of ownership and estate efficiency. It consists of three main parties who are; The Trustor/Grantor (Settlor), who is responsible for creating the land trust and transferring the property title into it, The Trustee, who is a third-party individual or corporate entity who manages and holds the legal title of the property, signs documents to lease, sell, or mortgage a property as per the instructions of The Beneficiary, and who officially appears on public records as the ‘owner’ of the property, and The Beneficiary, who is the individual (or corporate entity) that holds the real power, maintaining full control and ownership rights over real estate placed in the land trust, including the right to direct The Trustee, use the land, receive all income, and sell the property.
 

PERFECT WHEN USED WITH THE LLC

With it being a private document, the land trust is not recorded anywhere- and the only people who know the terms of the trust are those who drafted and signed the document. The Corpus of a land trust (also called the trust principal) is the physical property, property title or parcel of land placed transferred to the trust, and is distinctly separated from the income produced by the property though strict trust accounting, separate ledger categories and rules defined in the trust deed. Unlike other kinds of trusts, the ability to transfer the ownership interest to a third-party, is what makes this arrangement so unique. All you have to do is create a trust agreement that includes the grantor, trustee and beneficiary, with an asset placed into the land trust, in order to have a valid trust agreement that is formally recognised by the courts in the United States.
 

Anonymity of the land trust can be combined with the liability protection of Limited Liability Companies, in order to strategically maximise the advantages of both entities. A land trust that has title to a portfolio of properties may be used in conjunction with an anonymous Wyoming LLC that is not connected to you, acting as Trustee, while an LLC that is nominated as beneficiary can provide asset protection. The reason to assign beneficial interest to the LLC is because if a liability occurrence happens, it remains ‘trapped within the LLC’- however this LLC is not on the title. You may own the LLC, or own a land trust that owns the LLC, or own a land trust that owns an LLC, which in turn owns another LLC. It is a strategy that is silent, efficient and completely legal in all fifty of the United States. There is no limit to the number of land trusts you can create, own, and you do not go through the same process as you would when creating a limited liability company. Moreover, the land trust is the ideal entity when it comes to taxes because when transferring property into the trust, there are no transfer taxes or reassessments triggered- which may not be the case with an LLC.
 

UNDENIABLE BENEFITS OF PRIVACY

The benefits of discretion in this manner are absolutely undeniable. For instance, if an individual owns their house or investment property in their own name and unfortunately gets into an accident, the lawyers suing that individual can easily find their properties in the public record, but contingency-fee based attorneys looking for searchable assets will quickly be discouraged if property is held in a land trust. If someone cannot find out what you own, they are less likely to sue. If a tenant, neighbour or opportunistic person cannot trace ownership back to you, it is much harder to build a case, or even know who to sue. Because there will be no list of vacation homes, rental properties or addresses showing up under the Beneficiary’s name in public county or municipal property records, this arrangement is of great benefit to professional athletes, celebrities, or political figures who want to keep a low profile. The strategy of owning property in a land trust and establishing an LLC as the beneficiary, instead of owning it in your own name can be an exceptionally advantageous tool for long-term wealth and estate planning. It provides a formidable barrier between you and those who do not have the best interests of you and your family in mind.
 

The land trust offers advantages through anonymity that do not exist with Limited Liability Companies. For instance, if an investor attempted to transfer their mortgaged investment property into an LLC, and the lender discovers that the borrower has done this (especially if the loan is not held with Fannie Mae or Freddie Mac) they may call the mortgage note due, forcing the investor to either immediately pay up the entire loan in full, or refinance at a significantly higher interest rate. In addition, through a land trust, liability on financing is limited to the assets of the trust, the sales price of property may be kept off the public records, property taxes are lower if the purchase price remains private, judgements and liens (including from the IRS) against an individual do not result in a lien being placed against properties held in the land trust. When it comes to refinancing properties, some community banks and portfolio lenders that do not use Fannie Mae or Freddie Mac underwriting guidelines, enable the option to borrow equity out of the property held in the land trust without losing anonymity.   EG