Mr. Land Trust, Randy Hughes, is back today with Part 5 of his awesome series about all things land trust. (If you need to catch up, start here with Part 1.)
In the last lesson you learned all about Trustees and their role in the Land Trust structure. You also learned that picking the proper Trustee is VERY important and can help you structure a Trust that is hard to find, hard to serve and hard to sue. Our goal is not to avoid our just obligations in life, but to protect against frivolous lawsuits that drain us of money, time and energy.
Today’s lesson will educate you about who should be the Beneficiary of your Land Trust. You might say, “Well, of course, I should be the Beneficiary of my own Land Trust.”
But, that may not be your best course of action. So, let’s charge on and see how the big boys do it!
Take it away Randy…
From Mr. Land Trust…
One of the many benefits to putting your property into a Land Trust is the privacy aspect…
In other words, you can control property through the Trust without your name showing up in the chain-of-title (at the court house). Many people, for a number of legitimate reasons, do not want their business known or their activities tracked. As you have learned in previous lessons, you are less of a target for a lawsuit if you stay out of the "Recorders" office publications. (That bull’s eye should be elsewhere, amIright?!)
However, just because you put your property into a Land Trust does NOT mean there is no more liability. The liability on the property held inside a Land Trust flows through to the Beneficiary! This is why most real estate investors make their LLC, Corporation or another Trust the Beneficiary of their Land Trust.
By linking your Land Trust together with other entities you are obtaining the best of both worlds…the privacy element of a Land Trust and the asset-protection benefits of (for example) the Limited Liability Company (more later about which state is best to form your LLC in and what type of LLC is the best to form).
I digress…
Getting back to our main character of this lesson...
People set up Land Trusts to keep the Beneficiary private from public records. The Trust Agreement (which is the only document that shows who the Beneficiary is) is not recorded anywhere on planet earth, so the Beneficiary is not known to anyone other than the Trustee.
So, how does anyone find out who the Beneficiary of a Land Trust is? You have to sue the Trustee, get him on the stand (in court) and bend his/her thumbs back until they confess who is really in control…the Beneficiary (But, what if the Beneficiary is another entity in another state…more about that in a future lesson).
If the Trustee refuses to "give up" the name of the beneficiary, the Plaintiff's attorney would have to file a motion with the court to force the Trustee to divulge the name of the beneficiary based upon the Trustee's failure to comply with the discovery request (the interrogatory).
The judge hearing the case would then have to rule on the motion and decide if the Trustee has the right to remain quiet. The judge will decide this motion based upon the need for privacy (the right to privacy) of the beneficiary vs. the need to know who the beneficiary is to resolve the case.
As you can see, all while this legal wrangling is taking place, the plaintiff is spending legal fees. If you have set up your Land Trust agreement and designated your Trustee properly, it will be a long time (and a lot of legal fees later) before the Plaintiff's attorney would get to the point of asking the Trustee under oath, "Who is the Beneficiary?"
Remember, from our lesson on Trustees, You have to find the trustee to serve him/her/it!
Give me a D for Defense.
Look, we have not even scratched the surface of other defensive moves the Beneficiary could have made...
For example, the Beneficiary of the Land Trust could be an "Agent for an undisclosed beneficiary." This means that once you force the Trustee to tell you who the beneficiary is, you will just find an "agent" for the ultimate Beneficiary.
Or, the Beneficiary could be the Trustee of another Trust. Or, the beneficiary may have changed from the original beneficiary to a new beneficiary (oversees). This is a short list of the defensive possibilities.
The point here is that when you hear on the street that Land Trusts are old, outdated and not used anymore or that Land Trusts have no benefits, you should question the knowledge and experience of who is telling you this. There is a lot of misinformation "out there" about Land Trusts.
Learn all you can...it will set you apart from the crowd.
Let’s sum it all up.
This lesson has taught you that Beneficiaries can be like an enigma wrapped inside a riddle. They can appear and disappear on a moment’s notice. They are easy to change without recordation and can be assigned easily with a simple one-page form.
Beneficiaries can be individuals, groups, entities or other Trusts. Beneficiaries are hard to determine, hard to locate and even harder to serve legal papers on.
Stay tuned as we continue this great series with more helpful Land trust info soon.
In the meantime if you want to continue your Land Trust education, please feel free to enjoy a webcast training I’ve prepared on how to create your first Land Trust.
Randy Hughes, aka, Mr. Land Trust
Questions, Comments, Thoughts…
Hit me up in the comments section for below for anything Land-Trust related. I’d love to answer questions and hear your thoughts.
Learn as much as you can wrap your brain around about Land Trusts. It will make your REI dealings so much smoother.
Remember that privacy is king in Land Trusts, never ever give that up. Play dumb if you have to.
Just say no if someone comes to your door and asks you if you are the beneficiary of a Trust. It’s none of their business, tell them you have
no idea what they are talking about!
Randy Hughes
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.