Hey Moguls, Mr. Land Trust is continuing his awesome series today with another terrific lesson.
Randy Hughes is certainly an expert in this arena, and he has been providing us loads of crazy-good info throughout this series. Land Trusts can get confusing, but not when Mr. Land Trust breaks them down into easy-to-understand lessons. If you want to start from the beginning, here’s Part 1.
Last time, Randy explained the difference between an Irrevocable Land Trust and a Revocable Land Trust and the benefits of each. Today, he wants to show us how to get creative…
From Randy Hughes…
Hey Moguls, today, I want to talk about creative strategies when it comes to Land Trusts…
In previous lessons, I’ve discussed the benefits of using an LLC as the Beneficiary to your Land Trust. Since the liability on the property in the Land Trust flows through to the Beneficiary, it’s a good idea to use an entity as the Beneficiary.
But there are other options besides using an LLC. Certainly, a Corporation could be the Beneficiary of your Land Trust, but this decision is a tax issue more than an asset-protection issue. The liability protection from a Corporation is about the same as from an LLC.
Consider Making it Personal – Property That Is
Another alternative to serve as your Beneficiary is a Personal Property Trust (PPT). There are basic PPTs (two-pages long) and there are more sophisticated PPTs that are 30-50 pages long.
How do you decide which to use?
Some states are more competitive for Trust business (from non-residents) and certainly South Dakota, Nevada, Alaska, Delaware, Tennessee and Ohio are the most aggressive ones…
Because of limited space in these lessons, I cannot go into detail about the virtues of each state’s laws. However, I can tell you that Ohio has been increasingly aggressive with their statute of limitations on creditor’s ability to attack their Trusts. Consider Googling “Asset Protection Trusts” for each of the above states and you will find more information about their differences.
Beware, there is an issue about Fraudulent Transfers when using an Asset Protection PPT. A court will ignore transfers to an Asset Protection Trust if:
A creditor’s claim arose before you made the transfer
You made the transfer with the intent to defraud a creditor
You incurred debts without a reasonable expectation of paying them
To put in simply and clearly: You need to seek competent legal advice when setting up an Asset Protection Trust.
Give Florida a Look
In past lessons, I have talked about the virtues of forming your Land Trusts in the State of Virginia. While I still like the VA trust law, Florida recently amended its trust laws. In 2013, Florida made the following revisions to their Land Trust Statute.
A creditor of the owner(s) of the beneficial interest cannot attach a lien to that beneficial interest. Similarly, a creditor of the land trust cannot attach a lien to the owner of the beneficial interests in the land trust. Accordingly, the owner(s) is (are) not liable for premises liability that occurs on the real property - only the land trust is exposed to that liability. And, the land trust is not subject to liability for actions of the beneficial owner(s) of the land trust interest;
This is a powerful Land Trust Statute Law and it makes Florida VERY competitive when considering which state to form your Land Trusts in. Remember, if you already have a Revocable Land Trust that you formed in some other state (other than VA or FL), you can always “amend” your Trust Agreement to make it a Virginia or Florida trust from that date forward.
What Does Native American Sovereignty Have to Do it?
Over the past two years, I have developed cutting-edge thinking as it relates to Trustee services and Native American Entities. Here’s a little background that I think you will find amazing… follow me here, this is super cool and creative…
President Lincoln was responsible for getting Congress to grant Sovereignty to Native American Indians. (Actually, Sovereignty is not something granted by the Federal government to Indian tribes, but is rather inherently possessed by the tribe.) This was recognized by the Supreme Court in the landmark case of U.S. v. Winans: “The treaty was not a grant of rights to the Indians, but a grant of rights from them – and a reservation of those not granted.”
To understand Sovereign Immunity, it is necessary to remember the following points:
Tribes possess inherent power to deal with internal affairs; they are their own source of power. The question is not, “whence their authority?” But rather, “whence the limitation on their authority?”
States are enjoined by Federal law and cannot interfere in the internal workings of tribal governments.
The Supreme Court has recognized the plenary power of Congress with Indian Nations. In the past, Congress has used its plenary power only to implement the Major Crimes Act and the Policy of Termination.
Consequently, there is first and foremost Federal Law. Then there is Native American Indian law and then there is State Law. In other words, Indian Sovereignty is ABOVE State law!
To sue a Land Trust, you must first sue the Trustee with the intention of getting him/her into court to divulge who the Beneficiary is so they can be drawn into the lawsuit. If your Trustee is a Native American Entity (i.e. LLC), it CANNOT be sued in State Court...
The lawsuit must be brought in Indian Court. There are a limited number of Indian Courts in America so access is not as easy as with State Courts.
I hope you realize the power of this concept and consider the merits of using this most creative technique.
Wrap it Up
This lesson has discussed several creative Land Trust Techniques including Personal Property Trusts, VA & FL Trusts and the Sovereignty of Native American Indians.
We learned that some states have better Land Trust Laws than others and we can use those states to create Land Trusts in other states. We also learned that Native American Indian Law trumps State Law and therefore might be a good structure for being the Trustee and/or the Beneficiary of your Land Trust.
Randy Hughes, a.k.a., Mr. Land Trust™
Comments or questions? Talk to me in the comments section below.
Research Asset Protection Personal Property Trusts in the key states that offer them.
Remember that Florida and Virginia have good Land Trust Statute laws.
more about Native American Indian entities.
bought his first single family home for rental while in college in 1969 and hasnít looked back since. Heís since purchased over 200 houses, and has developed a special expertise focused on how to protect your assets and how to become more private with your personal life through the creative, 100% legal and ethical use of Land Trusts. On the topic, Randy has written extensively for national real estate publications, has published a number of Privacy and Asset Protection books including Land Trusts Made Simple, and has been a licensed Continuing Ed Instructor for the Illinois Assoc. of Realtors for 20+ years. He even teaches land trust law and administration to attorneys.