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Business Development

Land Trust Essentials: LLCs… Better or Worse Than Land Trusts?

Well Moguls, Randy Hughes, aka Mr. Land Trust is joining us again today to continue his awesome series about everything – yep, you guessed it – Land Trusts.

They can be kinda confusing, but over the course of this great series, Randy has been breaking them down into easy-to-understand bite-sized lessons. If you want to start from the beginning, here’s Part 1.

His most recent lesson was all about the important asset-protection technique of choosing the right name for your Land Trust. So, check it out, too: What's in a Name? (More Than You Think)

For now, we’re gonna toss it back over to Randy so he can continue sharing his awesome Land Trust wisdom with us…

From Randy Hughes…                             

Well Moguls, we are nearing the end of this series of lessons on the many benefits of using a Land Trust to hold title to your investment real estate. Soon you will “graduate” from this undergraduate course and possibly want to matriculate into a Masters level education in Land Trust knowledge.

I would feel honored to continue as your professor and hope that you will continue seeking knowledge that will aid you in hiding and protecting your assets from the nefarious characters in our society who would rather sue to get rich instead of working hard for it… like the rest of us!

In this lesson, we will cover the controversy over the best way to hold title. By now you realize that holding title in your own name is not smart. But, what is THE BEST way to hold title? In a Limited Liability Company (LLC) or Land Trust? Let’s explore the possibilities…

LLC vs. Land Trust                        

Many attorneys will tell their real estate investor clients to title their properties in an LLC. They give this advice for asset-protection reasons.

judgeUnfortunately, most attorneys are NOT asset-protection specialists (but they give advice as if they were). Only 5% of all the attorneys in the United States are asset-protection specialists.

Since only 3% of the lawsuits filed in America actually go to trial, this means that most lawsuits are designed to “settle” out of court AND that a vast majority of lawyers do not even know how to litigate a case in an actual court room!

The cheapest form of asset protection is privacy. The cheapest form of privacy for us real estate investors is not holding title to our properties in our own personal name.

Look, titling your property in an LLC is not smart for several reasons.

First, LLC’s are registered with the state they are formed in and are therefore easy to look up on the internet.                                                    

There is no “registry” for Land Trusts anywhere on the planet!

Furthermore, most attorneys will also advise their clients to put ALL of their properties into 1 LLC. If you follow this advice, you are creating a nexus for a lawsuit! If you have a legal issue arise regarding one property and a judgment is filed against its “owner,” your LLC will have a lien against it and ALL properties held inside of it. NOT GOOD!

Liability exposure is why I suggest to all of my students that they put each property into its own separate Land Trust… so each property is insulated from the other. Then, if you lose one property to a lawsuit, you will not lose them all. Or, if a judgment is rendered against one property, you will still have your other properties unencumbered.

You could isolate each property by titling them in separate LLCs for great asset protection. But, this is not practical for the active real estate investor who owns more than one property. The costs of setting up, operating and maintaining multiple LLCs would be prohibitive AND they would still be exposed to easy identification via the internet.

LLC + Land Trust

So, what’s a smart real estate investor to do?

Combine the Land Trust AND the LLC for dynamite asset protection! That’s right, you can use both of these wonderful tools to protect you and your family from legal attacks and frivolous lawsuits.

Here’s how...

comboFirst, put each property into its own separate Land Trust. Then, make the beneficiary of each Land Trust your LLC. Assuming you and your significant other are the controlling members of the LLC, you might consider making your Living Trusts the successor members upon your deaths.

Okay, okay, I hear the skeptics saying to me, “But wouldn’t the LLC (as beneficiary to all those Land Trusts also be a ‘nexus for a lawsuit?’” And the answer is: ‘YES!’ So, google the following, “Series LLC” and learn all you can about this wonderful creation.

The Wrap Up

In this lesson we discussed whether it’s best to hold title in a Land Trust or an LLC. We analyzed the differences and concluded that the best structure is a combination of both of these entities.

But, we also learned that the Land Trust is best for holding title and the LLC is best used as the Beneficiary of the Land Trust.

Randy Hughes, aka Mr. Land Trust

I’m Listening

Got any questions? Hit me up in the comments section below.

Do It To It! Immediate Action Steps

Understand the differences of holding titles in Land Trusts vs. LLCs.

Recognize that the best structure for holding title is a combination of a Land Trust and an LLC.

Know that a Land Trust is best for holding title and the LLC is best used as the Beneficiary of the Land Trust.

Learn as much as you can the Series Limited Liability Company.

Remember that Land Trusts have better privacy than LLCs.

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