Land Trusts! What You Need to Know to Get Started
Land Trusts are one of the most confusing and often misunderstood aspects of real estate investing.
In this article, we’re going to discuss a few basic, essential things you should know about Land Trusts if you’re buying & selling houses, are concerned with privacy, and/or want to enhance your estate planning.
I'm often asked about these wonderful 'things' called Land Trusts, and the techniques & benefits that are associated with them. As a land trust expert, it's an AMAZING feeling to have the knowledge & confidence to be able to use them correctly. Would you like to have that awesome feeling? Great! Keep reading...
There are SO many benefits you get by taking title to property in a Land Trust. Let's look at a few of the benefits associated with these entities and WHY it's vitally important for you to be familiar with them, shall we?
Some Benefits of Owning Property in a Land Trust:
- Will SAVE you MONEY
- Will SAVE you Time and Aggravation
- Privacy & Anonymity
- Asset Protection
- Avoids Probate
- Will MAKE You Money (Profit)
- Can Help You Save Money on Closing Costs
- Will Highly Reduce the Possibility of a Lawsuit
- Helps Keep Creditors and Predators Away
- Will Help You Sleep at Night (Peace of Mind)
- Lender can't call the loan due on sale
(When someone puts their own property into a trust) - And Many, Many More!
When To Use a Land Trust:
Whenever you buy a house - whether it's for an investment or to live in, you'll want to buy it in a LAND TRUST. Why? Because of all the benefits listed above (in addition to all the other benefits I don’t have room to list here)!
Honestly, there's not a single reason I can think of on why you wouldn't want to buy in a trust. Well, actually, there is - when you're getting an institutional loan (from a bank) to buy or refinance a property, they'll usually want you to close on it in your own name, because you have to personally sign for the note (that's one of the big ways the banks 'get' you).
But since you're not going to be going to the bank to get a loan, you don't have to worry about that, right?
The Main Entities You'll Need In Order To Form A Trust:
- The Grantor: The person/entity putting the property in trust (Usually the seller)
- The Grantee: The person/entity receiving the custody of the trust (Usually the Trustee)
- The Beneficiary: The person/entity who will have the BENEFIT of owning the Trust (Usually YOU or one of your entities)
You'll also need to pick a NAME for your Trust. This could be anything you want it to be. One popular naming strategy is to name the trust after the address of the property, and that's fine. What you DON'T want to do is name it anything with your name in it, because one of your goals of owning a property in trust is anonymity!
The Trustee and the Beneficiary CANNOT be the same entity, or the trust is invalid.
In Order To Create a Trust, You'll Need:
- A DEED. This could either be a Warranty Deed to Trustee or a regular Deed (Warranty, General, or Special), just as long as that Deed names the TRUST, the TRUSTEE, and the date the trust was formed. The Legal Description also needs to be a part of it.
- A Trust Declaration. This is the document that sets the framework and names the parties, conditions, and powers of the various people/entities of the trust. Think of it as a set of instructions. It also stipulates who the beneficiary/ies is/are, what percentage of ownership he/she/they has/have, what the powers of the Trustee are, etc.
NOTE: This is a PRIVATE Document that is NOT recorded! - An Affidavit of Trust. This is a powerful piece of work, because it lets you show people that a trust exists, what the Trustee's powers are, and the basic/main information that the outside world needs to know - WITHOUT revealing any of the 'juicy details' of WHO owns the trust, etc!! I like to think of this like a receipt for something. This CAN be recorded with the deed.
Did You Know...?
Putting real estate into a trust converts it to Personal Property? Therefore, if you want to SELL (or Assign) your beneficial rights in a trust, you can do so without anyone in the outside world knowing about it?! All you'd need to do is create and execute a simple 'Assignment of Beneficial Interest' form and have it Notarized! Let that sink in.
Naturally, there's a bit more to it than that. And there's still a lot to learn about all the wonderful details of how to properly form and use a land trust in your real estate investing business.
We've only scratched the surface here, so I encourage you to continue learning all you can about Land Trusts and how to leverage them for your maximum benefit.
I hope you've found this report/article to be informative.
Thanks for reading!
Until Next Time,
Tony Pearl
About Tony Pearl
Tony Pearl is an entrepreneur, copywriter, proud father, mentor, marketing consultant and talented teacher who resides in the Washington, DC area. He has traveled to over 26 countries, speaks 4 languages, and continues to travel extensively. He has been a professional Ballroom and Latin dance instructor, competitor, and exhibitor for over 19 years. As a Real Estate Investor, Tony has bought and sold over Ten Million dollars worth of real estate, and has been educated by and associates with the best.
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