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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