Land Trust Blog
Let's Talk Beneficial Shares
by Randy Hughes on August 15, 2010
Let's Talk Beneficial Shares
Land Trusts are unique animals in the legal world. Most legal professionals have little experience with the ins and outs of exactly how a Land Trust works and why it is a GREAT tool for the everyday real estate investor. Unless you deal at the "ground level" of real estate investing you probably do not know (nor would you understand) the benefits derived from the use of the simple Land Trust.
The beneficiary of a Land Trust holds a personal property interest in the trust itself. The beneficial interst IS subject to a creditor's process in collection procedures and liquidation in bankruptcy. In one case, the court ordered the trustee to transfer the debtor's beneficial share to the court appointed trustee for distribution to the creditors.
Interestingly enough, where legal action is being brought against the beneficial share of a Land Trust, it must be brought in the situs of domicile of the owner of that share. Now you can realize the benefit of having an out-of-state entity as the beneficiary of your Land Trust. And furthermore, since beneficial interests are easily transferred, prosecution of a law suit can become very expensive and time consuming for an adversary (and perhaps involve multiple states). An additional benefit to making an out-of-state entity the beneficiary is that a "favorable legal jurisdiction" can be chosen to form the entity.
Another unique attribute to Land Trust beneficial shares is they can represent LESS than a fee simple title interest. Shares can be issued for "estate for years," "remainder interests," "lease-holds" or for "use" of the premises.
These attributes of the beneficial interest in a Land Trust should give rise to many creative asset protection techniques. The deep thinkers among us will have a "hay day."
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Are You Attracting Identity Thieves?
by Randy Hughes on August 15, 2010
Are You Attracting Identity Thieves?
When you buy a house (to live in or to rent out) and finance it with a mortgage that gets recorded at the court house, you are asking identity thieves to become a part of your life! The average person does not think about it, but when you finance a property that is secured by a mortgage there is an incredible amount of personal information about you that is published in your local county tax records office. Tax and mortgage records are a breeding ground for identity thieves. Here is a list of some of the information an ID thief can get from the county records website (they do not even have to drive over to the court house!):
1. Your full legal name
2. Any maiden name, nickname or aliases
3. Your home address (assuming you do not use a p.o. box address)
4. Your maining address (if it is different from your home address)
5. Your phone number and your personal contact information (work info)
6. The type of mortgage you have on your home, how much you borrowed, what the terms of the loan are, how much you paid for your home, etc.
Besides Identity Thieves, you are also prey to nosey neighbors, unhappy ex-spouses, disgruntaled employees, jilted lovers, co-workers and anyone else with a computer and a desire to cause you trouble.
If you use a Land Trust to hold title to all your real estate holdings, none of the above will matter to you.
It is your move.
1. Your full legal name
2. Any maiden name, nickname or aliases
3. Your home address (assuming you do not use a p.o. box address)
4. Your maining address (if it is different from your home address)
5. Your phone number and your personal contact information (work info)
6. The type of mortgage you have on your home, how much you borrowed, what the terms of the loan are, how much you paid for your home, etc.
Besides Identity Thieves, you are also prey to nosey neighbors, unhappy ex-spouses, disgruntaled employees, jilted lovers, co-workers and anyone else with a computer and a desire to cause you trouble.
If you use a Land Trust to hold title to all your real estate holdings, none of the above will matter to you.
It is your move.
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Selling a Trust Asset
by Randy Hughes on August 02, 2010
What Happens When the Trustee is Directed to Sell the Trust's Assets?
Exactly what happens when the Beneficiary directs the Trustee to sell off all the assets held in the Land Trust? First of all, the law pretty well protects the Trustee to insure that he has been paid his compensation, if any is due. In many states the Trustee has first claim on any assets that are foreclosed or sold at public sale by the courts. Here is how that might work in some states.
The instant that the property is sold, the land trust is converted into a Personal Property Trust in which cash is being held for the beneficiary. This cash is not real estate, but personal property, so, depending upon the situation, it might be viewed to be non-attachable except by the Trustee whose Trustee aggreement--or employment agreement--might state that he is to receive first priority on liquid trust assets in the event his trustee fees are not paid when due. In that event, he would be allowed to pay himself out of that cash. If his fees were considerable, they might consume ALL the cash--leaving none for other creditors, the IRS and anyone else staking a claim. Kinda makes your mind wander, doen't it?
The instant that the property is sold, the land trust is converted into a Personal Property Trust in which cash is being held for the beneficiary. This cash is not real estate, but personal property, so, depending upon the situation, it might be viewed to be non-attachable except by the Trustee whose Trustee aggreement--or employment agreement--might state that he is to receive first priority on liquid trust assets in the event his trustee fees are not paid when due. In that event, he would be allowed to pay himself out of that cash. If his fees were considerable, they might consume ALL the cash--leaving none for other creditors, the IRS and anyone else staking a claim. Kinda makes your mind wander, doen't it?
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How to Pay for College
by Randy Hughes on July 18, 2010
How to Pay for College
(when you really do not want to)
(when you really do not want to)
When our two daughters were very young (four and eight) my wife and I realized that one day they would be going to college and would need a lot of money to do so. We began brainstorming as to how we would come up with the funds to put our children through four years of college. One option was to begin saving money in a separate account marked "college savings fund" and skimming off as much cash from our spendable income as life would allow. Since this did not sound like much fun we considered other alternatives but, none of the other savings/investment plans sounded good (primarily because it lowered our life-style capabilities NOW).
We finally decided to let two of our investment properties fund the kid's college education via future appreciation. Each of the two target properties were in their own separate land trusts (this is one of the many benefits to placing each property into it's own separate land trust....as we expouse constantly). We had each property appraised at current market value and then sold an option on each respective property for each kid (actually, for each kid's land trust).
So, when the dust settled we had the Trustees of our kid's land trusts hold options on land trusts that held title to investment real estate. Consequently, the trusts that held the options (for the benefit of the kids....who were each beneficiary of their own trust) on the trusts that owned the real estate captured the appreciation from that day forward until the kids turned college age. Once the girls turn college age and needed money for tuition we had the option of allowing the options to be exercized (and the kids selling of each property for cash) or buying the options back from the kids (at a profit to the kids).
What do you think we did?
We finally decided to let two of our investment properties fund the kid's college education via future appreciation. Each of the two target properties were in their own separate land trusts (this is one of the many benefits to placing each property into it's own separate land trust....as we expouse constantly). We had each property appraised at current market value and then sold an option on each respective property for each kid (actually, for each kid's land trust).
So, when the dust settled we had the Trustees of our kid's land trusts hold options on land trusts that held title to investment real estate. Consequently, the trusts that held the options (for the benefit of the kids....who were each beneficiary of their own trust) on the trusts that owned the real estate captured the appreciation from that day forward until the kids turned college age. Once the girls turn college age and needed money for tuition we had the option of allowing the options to be exercized (and the kids selling of each property for cash) or buying the options back from the kids (at a profit to the kids).
What do you think we did?
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Revocable vs. Irrevocable Land Trusts
by Randy Hughes on June 26, 2010
The way in which different types and classification of trusts keep intertwining is almost incestuous. By virtue of the power of the settlor (the creator of the trust) to modifiy any of its terms any time he/she wants, any trust that is revocable can be:
1. A grantor trust
2. A simple trust
3. A complex trust
4. A living trust
5. A family trust
6. A common law trust
7. A land trust
8. A business trust
9. A medicaid trust
10A secular trust
And, in fact, every kind of trust EXCEPT an irrevocable trust.
A Revocable trust could contain provisions which would seem ironclad on the surface, but when the trust itself can be modified, amended, or revoked, these conditions are illusory at best. Still, they may make persuasive reading when one is not knowledgeable about trusts. Remember, Revocable trusts are not effective as asset protection devices, since, under court order, they can be revoked and all assets can be exposed to the claims of creditors.
What a person trades off between revocable and irrevocable trusts are flexibility in return for protection. In either case, a trust is effective in providing privacy, but a revocable trust is merely a curtain while an irrevocable trust acts more like a wall for tax and asset protection purposes.
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