PUTTING PERSONAL RESIDENCE IN LAND TRUST

[JnWalla18]

Can you guys tell me if it's a good idea to place your personal residence in a Land trust to protect the asset. Is it difficult to accomplish this?

Thanks for your advice.

[mtnwizard]

Yes, it's a great idea and No, it's not hard to do.

Da Wiz

[NYCATLHOLDINGS]

How do you go about putting your personal residence into a Land Trust? Additionally, if you own an LLC -- can the LLC hold the land trust?  What are the benefits of holding property in this form?

[mtnwizard]

You create the land trust which protects your real property and shields you from judgments, bankruptcies, liens, etc., then assign it to your LLC which will protect your personal assets.  If you are the Managing Partner, you can take 100% in your LLC.  If not, 90%.

Da Wiz

[NYCATLHOLDINGS]

Thanks ... very helpful.  Also, I assume I can hold 2-3 properties in each trust under my LLC for asset protection -- is that right?

[AMGILP]

Do land trusts work in California?

[mtnwizard]

NYCATLHOLDINGS,

Yes, you can hold up to 4 properties in a land trust, but I don't recommend doing that unless you are holding them for a long period of time.  Reason:  if you refi or sell, you will have to remove all 4 properties from the trust, do the transaction, then re-establish the trust.

If you are holding properties for a short period of time, then I use one property per land trust.  Taking title to your land trust in your LLC is the ultimate protection.  

AMGILP,

Land trusts are legal in all states.  They were developed in Illinois in 1891 and perfected by Chicago Title for Al Capone in the 1920's.  Bill Gatten perfected my way of doing land trusts in 1984.  Yes they are legal in California, and the program is accredited as continuing education for realtors by the Calif. Dept of Real Estate.

Placement of real-estate into a living trust (i.e., a land trust) in which the borrower requests no release of liability and retains full directive powers [as trustee or as "directing-beneficiary"] does not trigger a “Due on Sale” action, providing that: A) the trust is revocable by the borrower; B) the trust is in the borrower’s name; C) the borrower is and remains a beneficiary, and D) the trust itself conveys no rights of occupancy, which it does not.

• Pub. “Using California Trusts, Planning, Implementing Administering and Terminating,” Cont. Ed. of the Bar, CA. ©1991 Regents - U of Ca.
• Barnet Resnick, “Is There Such a Thing as a California land trust?” LA Bar Bul. 4/73, pp 216-228 Bentley Mooney Jr., Esq., Preserving your Wealth [68-112];
• H. Kenoe on land trusts, etc
• La Sala v. Am. S&L, 5 Cal. 3d 864, 489 P.2d 1113, Cal.App. 91 Cal Rptr. 238; 97 Cal. Rptr. 849 (LA No. 29851 Supreme Ct. of CA)
• Coast Bank v. Minderhout, 61 Cal. 2d 311, 317 [38 Cal. Rptr. 505, 392 P.2d 265] 12 USCA §1701-j-3

Da Wiz

[AMGILP]

mtnwizard - I know putting your home in a living trust is beneficial upon death, due to avoiding probate, etc.  Since you retain control in a revocable living trust it does not provide asset protection.  I asked my attorney this question regarding living revocable trusts and asset protection.  The key is the control.
  When you speak of land trusts, are you speaking of other than living revocable trusts?

[mtnwizard]

AMGILP,

That's OK. Your attorney, like most attorneys, apparently doesn't understand the benefits of a land trust.  I suggest that you refer him to the following information regarding asset protection which is supplied by my attorney.

PROTECTION FROM LIENS AND JUDGMENTS (ASSET PROTECTION)

"A creditor may reach the corpus of a land trust, (1) unless the trust is irrevocable, or (2) there would be more than one unrelated beneficiary (as with the model of our Holding Trust System). This concept appears to be based upon the idea that a co-beneficiary in a land trust can be seen as a “partner,” and a claim (or charging order) effected against a co-beneficiary would be impossible without a dissolution of the entity (the trust), and since an unrelated co-beneficiary is not responsible for the actions of the other: such dissolution would not be allowed."

 Henry H. Keno on Land Trusts, IICLE, Springfield, Illinois (1989)
 Smith v. B of A; Houghton v. Pacific Southwest Trust and Savings Bank: 111 CA 509, 295 p. 1079,
 The CA. Code of Civil Procedures §697.510]
================

Also, MORTGAGE LAW VS. U.C.C. REGULATION (ART. #9)

“Mortgage law" would rarely, if ever, govern a security interest in a beneficiary’s land trust interest.
• Eric T. Freyfogle, “Land Trusts and the Decline of Mortgage Law," University of Illinois Law Review, Vol. 1988, p. 76-99, spec. referring to: “Horney v. Hayes [1957] and its Progeny” (See “Personal Property” below).

I'm not an attorney -- I just have access to them. This system has been proven over 24 years by many attorneys.  

Da Wiz

[AMGILP]

mtnwizard: "A creditor may reach the corpus of a land trust, (1) unless the trust is irrevocable"   We are basically saying the same thing.  A revocable trust does not provide protection, while a irrevocable one does.

[mtnwizard]

OK, your attorney is right and every other attorney and court are wrong. PLEASE.  You are right about revocable vs. irrevocable trusts -- BUT ignoring the applicable part of the law that provides asset protection.  You quote part 1, but ignore part 2.  Please note that it doesn't say 1 AND 2, it says 1 OR 2.  

Please read again:

(2) there would be more than one unrelated beneficiary (as with the model of our Holding Trust System).

This concept appears to be based upon the idea that a co-beneficiary in a land trust can be seen as a “partner,” and a claim (or charging order) effected against a co-beneficiary would be IMPOSSIBLE without a dissolution of the entity (the trust), and since an unrelated co-beneficiary is not responsible for the actions of the other: such dissolution would not be allowed."

Here again are the legal citations:

Henry H. Keno on Land Trusts, IICLE, Springfield, Illinois (1989)
Smith v. B of A; Houghton v. Pacific Southwest Trust and Savings Bank: 111 CA 509, 295 p. 1079,
The CA. Code of Civil Procedures §697.510]

In other words, the trust cannot be broken and provides the asset protection sought.  Trust me.

Da Wiz

[AMGILP]

mtnwizard - Thank you.  I do understand.  You have made it perfectly clear.  The "charging order" is the same as with using a limited partnership to hold investments such as stocks; with a corp as the general partner.

[johndito]

Wiz and mcwagner, thanks for all the great advice. I do have a question about the entity that should be established when purchasing a property with a partner.  The background is this - we own our own residences but no rental properties.  We plan on partnering for one deal but may do further deals alone or with others.  Does this impact how we would use a land trust (if the land trust truly is the best vehicle to use)?  If the land trust is the way to go can you explain to me when it should be established.

Also, the last post made reference to a limited partnership with a corporation as the general partner.  Are there benefits to using that structure to a land trust?

Thanks again and keep up the great work!

[mtnwizard]

John,

No.  The best asset protection is taking title in the land trust in your LLC.

Best time to set up your land trust is once you have acquired your property, unless you purchase "subject to" using a land trust as part of a system I use that includes a triple net lease and equity share with my tenant/beneficiary.  

To answer your question, there are eight ways to take title, six of them allow for co-ownership:

1) Community Property;
2) Joint tenancy;
3) Tenancy in Common;
4) Tenancy in Partnership;
5) Title Holding Trust
6) Community Property Right of Survivorship.

For an independent analysis, here is a report from Chicago Title Company.  I  recommend that you download it to have on hand.  Enjoy:

http://www.chicagotitle.com//pdfs/8ways.pdf

Da Wiz

[johndito]

Thanks Wiz, I appreciate the reply. I do have a couple additional questions.

Is there a transfer tax that has to be paid if the land trust takes title of the property?  Also, do you have a separate land trust and LLC for each of your properties to further limit liability?  I've heard of using a statement in the agreement of sale that says that the buyer is:

"Bob and Ray Joint Tenant or their assignee"

how does this statement change to get it into a trust/LLC.

Thanks again.