The protection afforded to either partner, whether a person or entity, using a trust is not just good business practices, it’s vital to success over failure of the venture.
We use a Revocable Land Trust for real estate or real estate related documents and is used in all fifty states. There are many, many advantages and benefits in holding your property in a trust such as protection from attack, privacy, avoiding probate, keep purchase price secret, keep sales price secret, avoiding due-on-sale clause, avoiding litigation, keeping tax lower, etc.
Most people, especially attorneys, will claim that Land Trusts won’t protect your assets. And they are somewhat correct. However, when your personal or investment property is owned by your trust, the property is protected from you. To be clear… if you are legally attacked by creditors, by lawsuits, by judgments, or even the IRS for money damages, and the court awards the judgement against you, it cannot be attached to your personal or investment property.
Note: The exception: within one year, if you are facing creditors and try to hide your assets by using a trust, the court could overturn the trust for violation of the Fraudulent Claims Act.
My History:
In 1985, one year after I began investing in real estate buying, rehabbing, and holding houses in a little town named Englewood, Florida, I ran into trouble with my renters. When I tried to collect rents from many of them who were not paying, it became obvious that I needed legal protection. Why? Because I owned all my properties as an individual. What that meant was I was at risk with everything I owned. Basically, if I went to court and lost by some creative lawyer, I could have ended up with a money judgment. And as an individual in everything I owned, whether personal or business, all my assets could be attached.
So I began researching for a way to protect myself. I knew I had to separate myself from my assets, especially if I was personally sued. So I started looking into Corporations (C and S), LLCs weren’t really an understood option at that time, etc. I learned the IRS could pierce the Corporate veil under special circumstances; and today, even a creditor can get a court-authorized lien, known as a charging order, on distributions made from a business entity. Getting desperate by the second, I noticed a book on Land Trusts in a bookstore. Unsuspecting, this was my answer.
It was the 1st edition and written my Mark Warda, a Florida attorney. I got excited and bought the book, then after reading it cover to cover, I started researching everything I could about its history. One interesting fact was when Walt Disney purchased all his land to develop Disney World in Florida he used a trust because of the secrecy it offered. Since he bought many, many properties at different times, it wouldn’t have been wise to let the public know he was buying land or land values would have soared.
Therefore, I transferred every property I had from me as an individual to me as a trustee as quick as I could. But then, on my next new purchase, I tried to buy a property in a trust; but the title company and their underwriters acted like it was some kind of hoax. So I called Mark Warda and told him of my dilemma. Over the next six months, Mark and I worked with some of the largest insurance underwriters for title companies in many cities in Florida and throughout some Midwestern states; by educating them, we finally got approval. Today, properties owned by Land Trusts in every state in the country are common and for good reason.
