Land Trust Questions
First - I just closed on some investment real estate in my own name. I have 45 days to record the new title. I want to transfer the title to a trust. Must I record the title with my name first, or can I go ahead and transfer the property to the trust and just record that one? Am I violating any laws if I "skip" recording the title that was in my name?
Second - If I want to insulate myself from lawsuits, and make a LLC the legal owner of the trust, should I create a different LLC for every trust? In other words, how many trusts should I assign to any given LLC?
Finally, JohnMerchant pointed out in another post about trusts that a personal residence should not be put into the name of a Corp (I'm assuming that applies to a LLC as well) because it will trigger the DOS clause. Does that mean that putting investment property into a trust owned by a LLC will not trigger the DOS??? Thanks - Z 
What he is addressing is the Garn St Gemain makes provision for a trust. I does not make provision for a llc. Putting your house into a trust sheilds you better from a lawsuit than a llc can ever hope to do. Im not sure on title usually the lawyer files that right away. You must have paid cash. Either way if you get it into a trust you should have no problem. I need a little more detail from you on that point
Zach,
I just wanted to note that moneyprivate's point that putting property in a land trust "shields" you from a lawsuit means only that the plaintiff will have a hard time finding out who the owner of the property is. This is only a sort of "cloaking device".
A land trust will not provide the protection that an LLC does in the sense that if an LLC owns the property only the assets of the LLC can be lost - not your personal property.
If you had a land trust and you were the beneficiary (not an LLC) then your personal assets are up for grabs, if the plaintiff can figure out who the owner is, and serve you with a complaint.
Ok, I understand what the uses are for the LLC, and the trusts, so I'd better clarify my questions.
1) I want to know if I can ignore recording the title that is in my name, and instead, create a trust and record the title in it's name. I'm saying that by doing this, I will have never recorded the title that was in my name. Is this legal?
2) How many trusts should any of us ever put in any single LLC? Should I Create a LLC for every trust, so that if any LLC is sued, all it can lose is one trust?
3)Finally, JohnMerchant pointed out in another post about trusts that a personal residence should not be put into the name of a Corp (I'm assuming that applies to a LLC as well) because it will trigger the DOS clause. Does that mean that putting investment property into a trust owned by a LLC will not trigger the DOS??? Thanks - Z
To clarify a little, putting home into a trust is exempt, by Fed law (Garn St. Germaine) from DOS penalties...but it isn't the same kind of liability insulation that an LLC would be.
Putting it into an LLC would probably NOT be a good idea because I suspect it would destroy the tax breaks that a homeowner gets from his own home, when he's ready to sell and move on.
I'd definitely recommend talking to a tax person before conveying home to LLC or corp.
Use of LLC, as per John Locke, THE expert, doesn't necessarily trigger the DOS as these days, the banks want to stay invested, and as long as the payments are brought & kept current, it appears they don't care if it's your favorite Martian paying same.
I've heard J Locke quoted as saying he's bought more than 500 properties, subject to, and never had one called on its DOS clause.
So is there a way to find out who legally owns a land trust?
Are we referring to an Illinois type Land Trust?
Thanks
As mentioned, the big protection of a trust is anonymity.
An asset searching lawyer, hunting for your assets prior to deciding to sue you, for his client, is not going to be finding any assets owned by you if your title is in the name of Smith Ave Trust #3, or a trustee's name, if it does NOT show your name or interest, at all.
And if he cannot find any signif. assets you own, he's not gonna spend any time working up a lawsuit which could cost him big bucks.
So, should I record the first title, the one in my name, and then the other, in the trust's name, or can I skip recording the one in my own name? Z[ Edited by Zach on Date 03/13/2004 ]
zach
I just post this question to my lawyer yesterday. She said if you don't want to break the chain of title that you would have to record the one on your name as well. I am trying to do the same thing as you. But if I record both any clever plaintiff would suspect something. She said if anyone is really going after you will find you anyway.
I am going to ask the estate planing atty on Mon. and see what could be done as well.[ Edited by s48098 on Date 03/20/2004 ]
Breaking the chain of title may make it difficult (if not impossible) to get title insurance.
If you deed your property directly into a land trust, the chain of title still shows you as the previous owner. Why not use two trust transfers? First transfer is from Zach to ABC trust, second transfer is from ABC Trust to XYZ Trust. If you are really paranoid about anonymity, make sure your name is at least one more step down the chain in the title history.
In 1982 Congress passed the Garn-St. Germain Depository Institutions Regulation Act. This law allowed lenders to enforce mortgage due-on-sale clauses to demand payment in full when the title to a property changed ownership. It overturned many court decisions that said due-on-sale clauses were not enforceable.
However, the Garn-St. Germain Law specifies title transfer situations when mortgage lenders cannot enforce due-on-sale clauses. The title transfer situation involving a trust isWhen title is transferred into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property. Millions of homeowners hold title to their residences in a living trust. The primary reason is probate avoidance. When the mortgage borrower makes such a title transfer, the lender cannot enforce the due-on-sale clause. Note, that this exception (by my interpretation) applies to the resident homeowner. Transfer of investment property title to a LLC or to a land trust would trigger the DOS, and the lender would be entitled to enforce it.
I am not an attorney. This is just my interpretation of the language of the Garn-St. Germain Depository Institutions Regulation Act. Perhaps there is case law to refute my interpretation.[ Edited by DaveT on Date 03/20/2004 ]
Those last two posts were extremely helpful. I'll record both titles, and I really like the idea of burying myself a few trusts deep to be sure no one can find me. I received a letter in the mail a few weeks ago from another invester who was interested in buying one of my houses. It was a nice gesture, but I don't like the fact that people can go looking for me and find me. I think I'll do what you suggested, Dave. In the meantime, I'm still curious to learn what the other attorney says s48098 about it. Thanks - Zach
I talked to the estate atty. last week. He said right now the popular method to do this is trust deed and with corp. entity as beneficiary. He said the land trust is not valid in MI. (I am not really understand land trust concept either. ) And he doesn't feel the trust is necessary. There is other way to do things. Sorry take me a while to post back. I hope this help. 8-) [ Edited by s48098 on Date 03/29/2004 ]
If land trusts aren't recognized in Michigan, I'm going to be very disappointed Now that you mention it, I can't say I know anyone who's tried to do it. But then again I don't know many r/e investors. I'll look into that, thanks. Anyone out there know about land trusts in Mi??? Z
I do know a few investors use trust deed to hold properties. If you go to the investor club mtg I will introduce them to you. But the atty always say no land trust. I have to go now, will post back later.
Quote:But the atty always say no land trust. I have to go now, will post back later.s48098,
What does the attorney say about using a living trust (an inter vivo trust) to hold real estate?
Louisiana is the only state that has problems with Land Trusts to my knowledge. Are you sure your attorney knows what he's talking about? Land trusts are easy to set up and give you privacy. I've been told you can use them in 49 states.
I thought Tennessee had an issue with land trusts also. I thought I read that in some other posts on this site a while back. s48098, I'd like to go to that meeting. I haven't gone to any or even to subgroup meetings. I'll check the dates and PM you after I see my calander. Thanks - Z
Dave T
He said it is common to use living trust to hold re title in MI. But the land trust is not valid. Myself is confused as well. My coach is in IL, he holds all his properties in land trusts. There are some investors in our club. They do the same thing. Non of the properties are in their own name. They said they use living trust. Would you explain what is the different in those two if you have time? Are they the same?
Another thing he said last week was land trust is not necessary, and he doesn't know how it will stand up if goes to court.
s48098:
Just a quick question about your attorney: is he a) a real estate attorney and/or b) a real estate investor?
Reason I ask: my attorney (we're in IL) is both and recommended land trusts for hiding my identity (but not for asset protection or shielding from liability: that's what the LLC/S-Corp/C-Corp is for).
On the other hand, he is warning me off buying Subject To because the DOS issue is "too risky" in his view.
Bottom line: 1) make sure your attorney knows what you are trying to do and understands RE investing and 2) be sure you understand that his job is legal protection, not making decisions about how and whether to invest--that's up to you.
You pay him for legal advice, you consider that advice and perhaps get another opinion (as you are doing here), weigh the info and then make an informed decision.
I'm with you when it comes to getting my ducks in a row, but at some point I realized my lawyer was just about talking me out of investing because of the "risk" and that's when I decided to pack up and leave the office. I went shopping for another opinion (in addition to visiting here and other RE sites) and confirmed the technical basics of my 1st lawyer's opinion--then it was up to me whether or not to put property into a trust or not.
As to how many properties to put in a trust or an LLC, I think someone mentioned it here: put as many properties as you care to lose in case you are sued. I heard one guru put a dollar amount limit and another used a property count (3 houses/LLC, kind of thing).
Remember what the others here have mentioned above:
A trust may shield your ownership interest from a bank or prying scavengers eyes, but they can't protect you legally: if a judge asks you if you have beneficial interest in a property, you'd better answer truthfully and the jig will be up.
An LLC won't protect you from being sued, but if you do lose a lawsuit, your personal assets (your house, cars, retirement funds, etc.) can't be taken to satisfy a judgment--only the assets listed under the LLC can be lost.
My .02--NOT legal advice,
Andy[ Edited by arytkatz on Date 03/29/2004 ]
ok to stray a bit from the topic, sorry...what about forming a llc and putiing your funds and stocks into..then if you were sued personally your retirement funds would just be in the llc and couldnt be touched?? thx.
I do believe you can place a house into a Land trust with out any problem of having the low called due, as long as the benificial interest has not changed. That is why we us a seperate change of benificial interest form. If the mortgage company wants to see the Land Trust fax it up no sweat. The change of benificial interest is on a differant sheet of paper.
Best to you
Sire