7 Super Powers of Land Trusts in Real Estate Asset Protection

welcome guys today we're going to be talking about land trusts and their appropriate uses especially in real estate I'm going to demystify it break it down into its little pieces give you guys a bunch of examples and how they're used and who uses them and why and when they're appropriate and how they work together with an LLC so we're just going to jump right in before we do that I do want to ask you guys if you could click that like button and the Subscribe button it helps with the analytics and gets the message out and also lets me know what you guys actually like I'll bribie with a picture of one of my cats boom there we go all right let's jump in uh I'm gonna share out a screen and put myself up in the corner so you can kind of see it we're just gonna be talking about Land Trust in general but I do like to kind of draw out who the players are I'm going to start right away with kind of the three three main players uh so there's something called a grand tour a trustee and a beneficiary anytime you have a trust you have these players there's always three of them the grantor in some circles is called the settler that's who's creating the document and putting in the asset so in a land trust this is usually the party who's contributing the real estate the trustee is whose name is on title and so when you're dealing with a Land Trust nothing more than an agreement between these three parties it's a paper agreement there's no repository for it the only way somebody even knows it exists is because there's a a name on a on a title somewhere so if you go into a County record you might see hey here's so and so Trustee of the such and such Trust right this is no different than a living trust by the way they're both grantor trusts they're both revocable the land trust is just there to hold real estate I'm getting way ahead of myself the trustee is his name and this is really just going on title on a property and I want you just to really think about that for a second this is just the person who's out there or entity who's out there to hold title they're the disclosed party told title like if I go buy a house and I'm buying it I'm putting my name unless I create a trust in which case now I have a trust but the trust name isn't sufficient we always have to have a trustee so it's kind of like having little kids the kid can't own anything they're not age of majority yet so you always have a parent who's holding a forum right and a trust it's similar the beneficiary's name is nowhere the beneficiary gets to do thing like rent the property collect the rents sell all this good stuff all the benefits occupy all that stuff is with the beneficiary the only thing the trustee gets to do is put their name on title they're just acting on behalf of the trust grantor is the one who creates it and by the way grantor could go through and revoke it can change it do whatever they want with it like the grantors in a really good spot because or during their lifetime I'll just say that because it's a revocable instrument you're in any of an agreement that you could change at any time so hopefully some light bulbs just clicked off like some of you guys are starting to figure this out wait a second so it's really just to hold title yes is there any asset protection over here does the beneficiary get any asset protection not when it's replicable zero zilch that beneficiaries fully exposed as though they own that property they have all the liability that goes along with it what about the trustee nope trustees aren't they're they're they're they're only a liability they could have is perhaps to the beneficiary trustees don't have any liability here trustees just putting their name on it but in both those cases guess what we do we still want to avoid any possible negative stuff that could go on with a disclosure of that trustee on title and also any liabilities that could occur by having a beneficial interest in that property grantor not worried about we're not really worried about them we're just going to say hey don't even worry about the grantor we'll just take them out of the equation what we really care about is the two parties that have interaction with the public so the trustee their name is Untitled so we used an LLC for that because we don't want your name disclosed we like to use it anonymous LLC for that so we would use a Wyoming LLC for the trustee position and before you completely lose your mind yes this is legal and in Wyoming we don't have to disclose a party so you literally can you you could have Anonymous ownership and again I always get these people like you can't do that whatever what if their law says you you can't what law right this is common law there's about maybe 15 states that have statutes and that'll have restrictions like that the beneficiary could enforce it if if you hate you're not supposed to you're supposed to have a natural person okay if there is that situation whose right of enforcement is it sitting over here with this beneficiary you're going to sue yourself kind of doubt it so what you do is you use that LLC without a name attached to it so it's Anonymous LLC I call it security through obscurity if they can't see it they don't know you're involved they're not going to sue you for it right so in in this works in Reverse if somebody can't find all the assets you have and let's say that hey let's say you get into the car accident and you hit a stock broker right the stock broker is rich and they're going to pursue you for three or four million bucks right you just wanna you wanna end the nonsense hey come on that's not a legitimate client coming you're getting crazy maybe you hurt them but still they're inflating the value or they think they could get that and they go to the lawyer lawyers looking for contingency fee and they see a automobile insurance policy let's say it's 500 Grand that's what they're looking at they're gonna maybe do a profile on you they're going to get get their buddy the pi to do a profile on you and see what assets you hold if you're using a land trust guess what is not showing up on your asset search any real estate that you have what about your house could we make your house disappear Yeah we actually could oh but there might see a mortgage if they know about the property and they know you probably have a home but let's say they figure that out the rest of it is your investment properties like this is rich people stuff right where they say Hey you know you got 10 rentals the last thing you'd want to do is tell everybody by the way here's my 10 rentals here's how much Equity is in them we don't want to voluntarily give that out to somebody because they may use it full to try to hurt us and so in this particular case let's say that you got into a car accident it's somebody you think that they could inflate the value of the claim because they could say Hey you hurt somebody who's a real high income producing individual and now they're restricted maybe they want to be able to work the same whatever the case you have this large liability looming only if they have assets that they can collect against they take a look they don't see a bunch of assets so the attorney who's trying to do the best by his client says you know let's settle for the insurance proceeds because that's a bird in the hand we don't want to wait three or four years to go through a whole bunch of lawsuit and a lot of added expense you got to hire all these experts it's going to be tens of thousands of dollars if not hundreds and I don't want to work that hard for my for my 30 or 40 percent whatever the cut is and it's uncertain whether we'll even be able to collect a you know we really need to just settle this thing right now that's 99 of the cases by the way is you're just trying to get it into a settlement posture can't see everything you have you're much more likely to get into that settlement posture and that's what we're doing here by the way what actually shows up on title so I'm just going to give you guys an example let's say that we put one two three main street into we have a piece of real estate and we put that into the trust how do you put it into trust by the way like is this filed with the state no you're actually putting it in Via a deed so a lot of times it's a warranty deed some states it might be a quick claim deed but let's just say we're putting it in a warranty deed and all we're doing is changing the title and I like to use the actual address in the name of the trust so I might call the trust the 123 Main Street Trust and then it's going to be by its trustee and let's just say this LLC up here is called ABC LLC right it's trustee ABC LLC so what ends up on title I'll show you exactly what ends up on title but ends up on title is the one two three Main Street Trust dated I like to put the date in there so to find you know separates it from any other Main Street truss or 123 Main Street trust but let's just say it's January 1st of you know 20 XX whatever it is whatever date you actually sign it so whatever you know so hopefully you're not signing things on New Year's let's just say you did so 123 Main Street trust dated such and such by its trustee and I just put it a b c LLC that's literally how that thing's going to be titled notice what's not on there you or your LLC so remember how I said we still want to protect the beneficial interest we're going to put that into an LLC as well so we're going to have two llc's one that is a you know again you're not doing this necessarily on one property hopefully you have multiple properties that you're putting this into you might do this on a situation where like for your house where you don't want people to be able to find out where you live depending on what your profession is like if you're a doctor especially a psychiatrist or a therapist or somebody dealing with some folks that you may not want to know where you live or you know law enforcement already has this but let's just say you want to be a little extra careful you don't want people to know where you are or you're somebody who's wealthy or you have family that annoys you or you've been the victim of abuse you want to make sure that nobody can figure out where you live you could do this easily even with your home and again some people's heads explode when you say by the way you can literally keep your name off of title your name does not appear anywhere we just did this that's exactly what would be Untitled period full stop well I what about that ABC LLC in Wyoming you don't have anybody listed well the Main Street trust that you got surely you have to file it with the Secretary of State naida it's simply a trust agreement signed by the three parties you remember our grand tour our trustee and our beneficiary and then we take the beneficial interest and we assign it to an LLC the reason we do that is because if a liability occurrence occurs it's stuck inside the LLC if you have a fire somebody falls down the steps whatever it's stuck inside this LLC nobody sees that LLC we just assign it to the LLC but it is not on title in other words when I look up 123 Main Street I do not see the LLC that's holding the beneficial interest on title it's not listed it's not in a public record it's not sitting there available for somebody to look at guys this is so effective especially for people that don't want to have an LLC for every single property they have if you're somebody who really likes to invest in real estate like me and you're buying lots and lots of properties sometimes you don't want to especially in a particular State you may say you know what I don't want to have an LLC for each property it's too expensive to maintain maybe your state is like my state where it's 400 bucks a year or 800 bucks a year whatever it might be you may say you know what I want to have three or four properties in an LLC and here's a way that you can keep anybody from knowing that your LLC has three properties in it you use three land trust there's no filing fee for it the only thing you have to worry about is the deed transfer depending on your state it could be 10 bucks it could be 25 bucks 50 bucks I don't even know if there's any that are really much more than that it's pretty inexpensive to do a deed transfer and I'll get into some other savings that occur too like for example if you are in Florida and you're putting a property directly into an LLC you have to pay doc stamp fees for the the value of any mortgages on it you actually have to pay a transfer tax all right that stinks you don't have to do that if it's a land trust or in Nevada where I'm in Clark County right now and you could put a property in an LLC but if you transfer it out of the name of the LLC like let's say you're doing a refi or something like that you put it back in your name to do the refi or just take it out and you're gonna put it into a different LLC you have to pay a transfer tax so we can avoid that by using a land trust and so both those situations and there's lots of them all around the country there's the land trust avoids any nonsense that might hit us but again getting ahead of myself I want to make sure that we're nailing this point down really really hard this guy right here the name on the actual deed is all that's a public record if somebody searches you your name does not show up associated with this property if they dig into you if they know the existence of the property they may be able to dig into it or if you have a mortgage on it sometimes they can try to search via mortgage document but when they're looking to see what do you own I am doing an asset search to see what you own it's not showing up are you in chain a title somewhere if you used to own this thing yes but that is a much deeper dive if somebody already knows about the property then they'll look at it but if I am just doing a plain vanilla asset search on somebody like I would if I was if I was contemplating being a plaintiff and an action or representing the plaintiff in an action if I'm the attorney and I'm doing a you know not a five six ten thousand dollar asset search but I'm doing a the regular asset search you know paying a few hundred bucks to a pi they're not seeing this they're not seeing it at all it doesn't show up boom gone that's the power of this second power of this you can have as many land trust as you want you're not dealing with a whole bunch of filing fees it's not expensive uh and I can keep a different name on each property so if I have five llc's that own a total of 25 properties so there's five properties or a per LLC it you cannot see which LLC owns Which property or holds the beneficial interest of which property with the land trust the name on each property is unique in other words there's nobody that owns 25 properties they can't see who has five of them which five at all it's all in your file cabinet which can be pulled out at the opportune time if somebody comes and knocking that's why these things are so effective third superpower of that of that Land Trust do on sale Clauses so this land trust as I said earlier and I'm just gonna make sure that it's very very clear it's revocable and it's called an inter vivos Trust living you ever heard of a living trust it's the same type of trust neither one of them neither a living trust or land trust files a tax return it's gonna they're called grantor trusts so if we transfer the beneficial interest to an LLC depending if that LLC files a tax return but never the land trust itself same thing as if I have a living trust I may file a personal 1040 I'm married so my wife and I file a 1040 but the living trust does not file a separate trust or a separate tax return until it becomes irrevocable it's revocable during my lifetime when I pass away it becomes irrevocable same thing with the land trust these are no different do on sale clauses not work against a living trust do not work against a land trust by default you're always looking at it you look at the Garden St Germain act it's it's four less units if you're using it as a as a pro as a residence primary residence no Bank can call a do on sale period but when you have a land trust immediately the banks look at it in the same vein it's irrevocable trust and you could actually show them the revocable trust you can even show it to where they see that you're the beneficiary you could assign your beneficial interest at that point I would not be showing that to any bank I'm going to keep their life very easy I'm going to show them a the certification of trust where it has me as The Grand Tour there's the name of the trust and they know that it's me we've never had a do on sale on a land trust trigger and we've done tens of thousands llc's it's seldom you appar every now and again you get a bank squawking about a transfer into an LLC but it's still very seldom but with the land trust we don't have to worry depending on your state you don't have to worry about transfer taxes depending on your state you can avoid things like Doc stamp fees so land trusts are very very effective there fourth superpower if you're amassing some real estate together you can have different ownership groups approaching different Parcels in other words I could hack because I can change the name on this and I could have different trustees I could even hire like it doesn't have to be an LLC that's your trustee you could have a trusted advisor I'd probably stay away from people in your own State especially relatives that have your last name I might be looking for somebody that has a different last name out of my state but again you're kind of pushing a lot of faith on that individual maybe an attorney maybe a maybe a fiduciary somebody that that owes you a fiduciary duty you can hire and put in that place I know that my partner Clint likes to do the the trustee work on a lot of them and so his name's showing up as the trustee but you could have different trustees going in and putting offers on on properties so somebody does not realize you are accumulating the property maybe for a project maybe because you're going to build a multi-family maybe it's storage maybe you're just getting land maybe you're doing a manufactured housing Park whatever what's occurred over time is this happened for Disney World and this also happened for the Sears Tower where they were huge groups of like they were buying tons of property and if they had had holdouts it would have been very very pricey you get to the end there's you know the last few people that haven't sold their lots and they're they're charging your King's Ransom on it right you want to avoid that or you don't want people knowing that it's you accumulating properties this is another way you go if you don't want your tenants knowing that you owe on a whole bunch of property you can always say I work with the management and if they ever look the nosy tenant and they're going in there they're Googling and seeing who owns their property and they're seeing what else they own and they don't see like a one two three main street Main Street trust okay that's it what else does 123 Main Street Trust on oh nothing okay so they're not seeing you and they're not seeing that you have 20 properties in town right you want to just be able to keep that stuff to yourself fifth superpower is you can switch out that beneficiary you can move that property as as needed depending on how your asset protection needs change so those are all very very effective six superpower of a land trust really has to do with your home this is a great use of it is getting your name off of your personal residence if you don't want people to to uh to track you um that's a huge one is being able to actually affect your home without affecting your homestead without it doing a due on sale out triggering any additional taxes all those things you don't have to worry about when you're doing a land trust because again it's still a living trust it's still an inner vivos trust it's still revocable it's easy to change and because of that we don't have any of the any any negative uh consequences tax or losing again like you still get your 121 exclusion which is the capital gain exclusion you still have your homesteads you still have all these great things when you're using that Land Trust because of the type of trust it is it's just it's again it's a great tool for holding title it does not the land trust itself in any state except for Florida I should say the land trust itself does not create asset protection the land trust itself just the trust the grand tour with the trustee and the beneficiary no asset protection you really have to add that next layer on you know putting in that LLC into that document then you have asset protection it's the same as it being in the LLC which is so powerful you've isolated the liability you've isolated uh not just the property from you but also you from the property again you get into a car accident and you hit the stock broker the Mr Richie Rich or whatever and they're coming after you you can still have this asset protection put in place and if you follow our other videos you know that we're big proponents of having a Wyoming Wyoming holding entity for your real estate they won't be able to take it from you they'll never be able to force the sale of the property if they're coming from the outside on the inside we can isolate that liability so if somebody falls down the stairs and they sue you for a million bucks or whatever they have mold and they see you for a million bucks or whatever the case they make allegations against you on a piece of property for way more way more than the property is worth you could just hand them over hey this by the way is out of my name this is the beneficiary this is the most you can get and by the way it's the equity in the property that's at risk so if you have encumbrances on your houses even if it's liens with related entities they still affect they're they're still effective and the party coming after the asset is looking for the equity after the Foreclosure sale so like these are super super effective and the last thing that I want to talk about with the land trust and uh and I'll get you off of this big screen oops there we go um and I'll just tell you from personal experience when I go out and I'm putting offers on properties uh which I used to do in Mass like here in Vegas it was really active 2008 9 10 11 12. you know right right after we had this big recession some people called it a depression but we had massive losses of of property values and we were putting in some days 20 offers on properties it is really tough if you think you're going to put an LLC together per property a lot of people will do something like a a t Mathis and or signs you know and then they'll set up an LLC if you want to avoid all that I would just use the same nabing convention my partner and I Clint we used to buy these things and I would just use the the name of the street so sometimes I use the address and the name of the street so again if it was one two three main street trust I may just call it Main Street Trust and I might you know number them you know one two three four five whatever if there's multiple Properties or I use the one two three main street Trust and I just put in offers on properties in that name I already know exactly how it's going to be named it's going to be the the street uh number name trust dated by trustee right and so I just use that same convention every time I put an offer in and if it's accepted great I create the document I signed the document same day I'm probably closing I'm literally like you know I'll probably take title in directly in the name of the trust I wouldn't even have to come to me first my name will never been associated with that property this is also very effective for you wholesalers out there who sometimes you get caught with the property sitting in an entity and you're like gosh darn it or you end up closing on a property and you don't want your name on it and here you just closed and you're hoping that you're going to sell it maybe you're trying to do a double close and something bad happens and you're not able to do it if you just did it in the name of the trust you don't have to worry about doing that you know having to close twice or any that you could literally just put your hey I'm just going to use the I'll use the Main Street trust as an example I put my offer in as the one two three main street Trust and that's it I get accepted who's the party who's had their offer accepted it's the 123 Main Street Trust The Beneficial interest is what everybody wants I go shop that around to my investors somebody pays me they get the 123 Main Street trust sometimes I'm on there as a trustee and I'll just switch the trustee nobody really cares about that what they care about is who's the offer or you know who's making the offer on the property so for wholesalers these trusts are you know godsend a lot of times wholesalers are playing the game of setting up multiple llc's and they're trying to figure out where they should be putting their offers and that LLC exists you know so maybe they did a whole bunch of wholesaling and they use the same exact LLC and they get sued for something that occurred three years ago and boom now they have liability where they're doing business and it sucks so this is another great way of making sure that each property has separateness so it's it's in the trust name hey I didn't do any transfers it was never in my LLC all I did is is you know go out and bring in another somebody basically pay me off as the uh to become the beneficiary so much simpler to do things that way easy peasy all right so what did we hit on settler Grand Tour the beneficiary your main parties technically there's something called the Corpus of the trust which is the asset where's the body of the trust it's the piece of property that's in there there's a trust agreement and uh and we can take the beneficial interest and we can put it in an LLC the trustee can be an LLC and we have basically a document that goes in my file cabinet some people will hear this land trusts are not legal in my state absolutely 100 fall all 50 states recognize trust the same ways you know but they say well there's not a statute on it okay there's multiple States the minority have a statute that doesn't mean that it's illegal means that it's under common law the same way as if I want to wear green shoes there might not be a lot prohibiting it right it doesn't mean that it's illegal if if there's not a a statute that says you can wear green shoes right if if there was ever a statute that says hey you're allowed to wear green shoes therefore you can right that's not how it works unless there's a statue that says you can't do something then you can do it land trust living trust they work in all 50 states it's nice to work under a state that has a statute but it's not necessary any state you can use this in in fact there's certain advantages to just using the common law because it's strictly court-based strictly contract based makes life so easy you're not paying a state for anything you're not doing any of that nonsense I'm not asking for permission on anything I'm literally just doing it and then I'm making sure that title is not in my name that's where these things really start to shine they work well in an asset protection plan where they they where you have another LLC now again conservative people like a property per LLC but it's not necessarily recommended when you start getting into a lot of properties what do I mean by a lot of properties I would say more than 10. right once you get above a certain threshold and you have a certain amount of net worth you're not too worried about losing a property you know you might be okay saying hey you know what if I lost five it wouldn't matter it's usually about 20 percent of your asset base where you're not going to sit there and cry if it if you lost it so you divide everything up so if you have 100 properties you may have an LLC that has 10 to 20 properties in it and this is a great way of making sure nobody goes in to that LLC and starts digging at it because they can see there's 10 properties in it this way they would never see the LLC in the first place and they don't in in each each property has a separate name on it so you don't see a whole bunch of names in the same LLC for some of you guys I bet you that that's the first time you're hearing that and this is an easy way to make sure that you can unring that Bell make sure it's not sitting there in the name of an LLC so that's it we really get down to this whole idea of common law versus statutory law all states allow the living trust all states allow in revo's trust all states allow revocable trusts that's all this is it's an agreement which means the agreement is what is critical here and you're putting a trustee on deed that's it you have those basic things you've got a very viable land trust that works like it's really really inexpensive and effective you learn how to use these things you're going to save yourselves a lot of headache you're not dealing and waiting for states to give approval on certain documents like oh I have to close then I need my LLC and your state might take six weeks and you're dry you're sweating bullets and you're worried and you got these people saying take title right now I could set up a land trust very simply closing it be done takes me all of about 15 minutes to put it together sign it get it there boom I can take title my name's not on it so I don't have to worry about it it's great it works like a charm wholesalers this is another tool you want in your toolbox buying holders this is a great tool in your toolbox especially in certain States where there's transfer taxes and things like that that could be triggered if you're putting in an LLC directly this is another very very effective tool that all Real Estate Investors should be aware of uh because it's so applicable especially for the you guys who like doing the buy and holds like me this is a great vehicle to allow re-assignment of your portfolio without having to go out and do a whole bunch of deed changes and this that and the other and it allows you to kind of unring the Bell sometimes when little mistakes are made and keep your keep your asset protection plan very clean and private which unfortunately this day and age is hard to do but it's probably the most effective asset protection plan I'm not seeing too many homeless folks getting sued so I kind of look at it saying there's a reason it's not because they don't do anything it's because nobody thinks they can get anything out of them for the most part and you know again if there's a way to kind of look hey not Wealthy on paper this would be a good way you don't want to attract the lawsuit this is a very effective way because I don't want you guys to look like a homeless person right but on paper you you definitely want to look like you don't have a ton of assets if somebody's sniffing around thinking does this this person here look like they'd be a good defendant and have lots of assets for me to take if we're able to Prevail you want the answer to be a resounding no and one of the most effective ways is this obscurity or security through obscurity is making sure that they can't see everything you have and there's always that big question mark in a lawsuit that question mark is in your favor if they don't know what you have it devalues the settlement which is in your favor to force things to settle if there is a liability occurrence and you don't attract frivolous lawsuits and things like that where somebody thinks hey this person's really going to have something created so again fast easy effective land trusts are a invaluable tool and so many asset protection plans yet they sit around not people don't know what they are they don't know how to use it and if they're not up on it they're oftentimes down on it and they'll be like I don't know what that is that's illegal it's whatever they just don't want to learn it super easy to learn in fact share this video with them and if you want more videos like this put down in the comments what you're looking for and hopefully you're able to use this information to help yourself happy investing

Channel: Toby Mathis Esq | Tax Planning & Asset Protection

Views: 66,039

Keywords: land trust, asset protection, what is a land trust, land trusts, land trust explained, land trusts for real estate investors, land trust for real estate investors, land trust vs living trust, asset protection trust, land trust beneficiaries, beneficiary of land trust, land trust vs llc, real estate land trust, land trust real estate investor, how to protect real estate assets, what are land trusts, purpose of a land trust, trusts, land trust real estate, using a land trust

Id: uARhp_OJ-I0

Length: 35min 33sec (2133 seconds)

Published: Wed Oct 19 2022