Are Land Trusts Good For Asset Protection?
Land trusts are increasingly popular for real estate investors who want
anonymity as an extra layer of protection. The property in trust isn’t
directly connected to the owner through the public records. However, privacy,
not Asset Protection, is then the land trust's major advantage. The
beneficial owners’ name is not in the public records because the
property is titled to the trustee. However, there are three disadvantages
with land trusts: First, they do not offer great Asset Protection. Second,
they are costly to prepare and administer. Lastly, financing and managing
the trust properties is also more cumbersome.
The land trust can own any type of real estate, including the family home,
but usually it's used to title investment properties. A bank is normally
the trustee. How well the land trust protects the beneficiaries' interest
in real estate depends mainly upon whether the trust contains spendthrift
and anti-alienation provisions. As with any entity, the land trust must
be properly drafted. As the trust beneficiary, you don’t directly
own the real estate, the trustee does. You would own only a beneficial
interest in the trust, but owning only a beneficial interest in a land
trust doesn't, in itself, sufficiently protect you. Your personal
creditors can usually seize this beneficial interest.
To sufficiently protect yourself you need added protection. To achieve
this in a land trust you would title your beneficial interest to a limited
partnership, LLC or irrevocable trust. You and your spouse can also own
the beneficial interest as tenants-by-the-entirety if your state recognizes
this form of ownership.
As with LLCs, it's also best to use separate land trusts for each property.
One limited partnership or LLC can be the beneficial owner for multiple trusts.
However, a common strategy that would offer better protection would be
to have each property owned by an LLC.
By itself the land trust only provides you with a level of anonymity which
is a form of protection, but for real protection you must also add a protective entity.
For more information contact The Presser Law Firm, P.A. for a complimentary
preliminary consultation with one of our experienced attorneys today.
The Presser Law Firm, P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(561) 953-1050 or e-mail Info@AssetProtectionAttorneys.com