Mr. Land Trust® expands on some of the many reasons to use a Trust to hold title to your real estate:
Reason #1: There are hundreds of thousands of lawsuits filed every year in America.
Many of these lawsuits are filed against the owners of real estate because they are easy prey for contingency fee lawyers and their deadbeat clients looking to make a quick buck off honest hard-working real estate investors. (I read about one investor who bought a vacant lot and signed personally for the financing. The buyer discovered after the purchase that the site had been a gas station with underground gas storage tanks that polluted the ground. The EPA was a constant threat. The buyer stopped making payments on his bank loan and now the bank is foreclosing).
Reason #2: You are buying a Pure Option or entering a Lease-Option.
You could enter an Installment Contract where fee title will remain in the seller’s name until full payment is made to satisfy the terms of the contract purchase.
Your concern is that by the time you have created enough value added to the property to sell for a profit, the owner (the title-holder) may have done something stupid to cloud the title such as filed bankruptcy, had a lien recorded against him/her, made repairs that resulted in a mechanics lien, gotten divorced, borrowed against the property, signed a long-term lease for under market rents, etc.
You can’t prevent problems like these from cropping up. What you can do is insulate your investment from these risks by using a Land Trust. When a Land Trust is used, liens and such that would attach to an individual do not attach to the property in the Trust . . . in most states.
Whenever you are a Co-Beneficiary of a Land Trust, you want to avoid being left out of the process when the Director might direct the Trustee to do something. You want to be included in decisions like borrowing against the property or signing a long-term lease.
You could exercise control over who or what is the Director. Another strategy is to be sure that the Director cannot act without unanimous consent from the Beneficiaries (this depends on how much power you yield to the Director temporarily or permanently).
Reason #3: You are an out-of-state investor/corporation/LLC, but you are not licensed to do business in the state where your opportunity lies.
Registering in the state where you want to invest would cause you to pay large fees and possibly result in state tax issues and multiple tax returns. You need to find a way to do business that preserves your low profile and protects your profits.
Voilà! A Land Trust is a contract between consenting parties. It is not a business. Therefore, holding real property in a Land Trust does not constitute doing business in the state where your opportunity lies.
Reason #4: You were a successful real estate investor before 2008 when the world came crashing down on you.
You now have liens and judgments filed against you in the county where you do business. Your ex-spouse has his/her attorney trying to collect unpaid child support/alimony and the IRS has sent their agents looking for you. In short, your life is a total mess. Putting the title to real estate in your personal name would be lethal to your financial well-being. The only way you know how to make money is to buy/sell/rent/rehab real estate.
Reason #5: You are a big-time wheeler-dealer in real estate (or plan to be).
You own/control properties in multiple states. When you die, your estate will have to go through ancillary probate in all states where you “own” (read here: “control”) property. Distribution of assets to your heirs will be delayed for months and legal expenses will diminish the value of your estate to your heirs. You think, “There must be a better way to own real estate.”
“I am so thankful for the day my path crossed with Randy Hughes. I had a fast-approaching closing of a property I wanted to put in a trust but the only somewhat local attorney with such expertise was unavailable. As an attorney myself, I interviewed several attorney candidates but not were as knowledgeable as Randy. He’s like a great law professor but with clear concise directions and as patient as the day is long. One of the great things about purchasing his trust material is the follow-up support he provides. I heartily recommend him and his services.” ~ R. Brown
About the Author
Mr. Land Trust® is a full-time real estate investor who purchased his first rental house in 1969. During his 50-year career, he has purchased hundreds of houses. He also teaches investors how to put their properties into Land Trusts for privacy and asset protection.
Mr. Land Trust® is a national teacher, author, and mentor. He has been an expert witness in the California and Illinois court systems on Land Trust issues. He is the founder of the Land Trust University (an online institution that teaches real estate investors how to set up and administer their own Land Trusts).
Residing in Illinois (the granddaddy state of Land Trust Law), Mr. Land Trust® knows more about Land Trusts and how to link them to other entities than anyone else in America today. You can reach him at www.landtrustsmadesimple.com, or e-mail him at randy@mrlandtrust.net. or by calling him at 217-355-1281. (He answers his own phone!) Be sure to mention the name of the real estate association or group to which you belong!
(Disclaimer: This article is for educational purposes only. No one is giving legal or accounting advice in this or any communication.)