Land Trust And Family. - Posted by Sol924

Posted by Houserookie on January 17, 2001 at 21:49:22:

Hi Randy and Sol,

Sol, what do you think of our MN vikings? : )

I could be wrong on this one but in MN any kind of business trust will offer both privacy and assets protection.

There is absolutely no liability to any of the trustees, benef, owners, etc…

You may want to check out the laws of MN, Sol I’m sure other states share similar advantages.

http://www.revisor.leg.state.mn.us/stats/318/02.html

I am also interested in knowing what your opinions are about the differences between revocable and irrevocable trusts.

An irrevocable trust can be setup for specific time frame. Why not just find a good trustee and terminate the trust as deem appropriate.

Houserookie

Land Trust And Family. - Posted by Sol924

Posted by Sol924 on January 15, 2001 at 13:35:15:

Could someone please tell me if it’s possible
to put real estate in a land trust, with
my spouse and chilren as part beneficiary
owners?

Would this pass the test of legitimacy?

Who can I use as trustee?

Thanks

Sol

Trusts - Posted by Randy M

Posted by Randy M on January 16, 2001 at 08:36:03:

Perhaps here is some information that can help you out. But to preface this, it is only GENERAL information. Do yourself a favor and get more information. And, of course, it is not legal or accounting advice…

  1. There are really two major types of domestic trusts - “revocable” and “irrevocable” trusts. There are COUNTLESS variations of these two major types of trusts.

  2. With a “revocable” trust, you - the Grantor - can make the trust and then change any and all provisions, including who is the trustee, beneficiaries, successor trustees, etc. Because you have the ability to do this you have what the lawyers call “power of appointment,” which means that you can decide how the assets in the trust are appropriated. Because you have power of appointment, the assets in the trust are basically still considered yours and are subject to claims and judgements.

  3. With an “irrevocable” trust, you literally give away the assets to the trustee of the trust to be held and administered for the benefit of the trust’s beneficiaries. After the assets are transferred to the irrevocable trust, you have no other say in how they are managed and distributed. Of course, there is a good way around this and that is to have a “friendly trustee.” This would be a person you REALLY TRUST to help you out and grant your wishes concerning the trust assets - but still completely according to the provisions of the trust. With this sort of trust you really must have your act together for it to become judgement-proof.

  4. “Childrens’ trusts” are typically not used to shield assets like you are talking about here. These trusts (called Section 2503 Trusts) are usually used to gift a minor child the $10,000 annual exempt gift amount without having to give the child control of that asset until he or she attains the age of majority. In this case it still qualifies as a present interest (or complete) gift. In many situations children are gifted cash or units in a limited partnership (like mentioned in a previous post in this stream) or other assets. Of course, marketability is usually diminished when limited partnership properties are broken up like this. That’s why limited partnership interests are often valued for less than the book value of that same interest.

  5. You need to clarify what you’re trying to accomplish with a land trust. Is it asset protection? Is it for privacy? Is it to take care of your children in the event something happens to you? You can’t map out a quality strategy unless you know your final desired outcome. Do some more studying on this subject and completely understand the ramifications of your actions before you act. The use of LLCs and corporations in addition to trusts has really protected many people - especially the wealthy - for centuries. There are many good strategies out there. Just make sure to not get in a hurry and pick one that’s wrong for you.

Randy M

Re: Land Trust And Family. - Posted by Bud Branstetter

Posted by Bud Branstetter on January 15, 2001 at 21:08:28:

When you deal with minors you create a problem if you would have to sell. It would be better to establish a children’s trust for their interest in any entity.

Re: Land Trust And Family. - Posted by Bill Gatten

Posted by Bill Gatten on January 15, 2001 at 19:54:02:

Yes you can. However, I’d suggest that the best protection is forming a Family Limited Parnterhip to hold your beneficiary interest in the trust. That makes it virtually bulletproof (oops, 'meant “armor-plated”…sorry Bill). You might want to check out www.landtrut.net, or go to the banner ad for NARs when it comes up.

Bill

Re: Trusts - Posted by Sol924

Posted by Sol924 on January 16, 2001 at 09:42:10:

Thanks Randy,

Finding a trusted person to be trustee is not
difficult. How can I be assured that that trustee
will not go haywire in the future? What if trustee
is a freind that turns in criminal?

Would you recommend using financial institutions like
Wells Fargo or Bank One to act as trustee? I know
they do offer the service.

A couple days ago someone here mentioned a
"business trust" also. Is this recommended.

Thanks

Sol

Re: Land Trust And Family. - Posted by Sol924

Posted by Sol924 on January 15, 2001 at 22:40:33:

Childrens’ trust? Why is it hard to sell? Age reasons?

How could a children’s trust handle this?

Thanks

Sol

Re: Land Trust And Family. - Posted by sol924

Posted by sol924 on January 15, 2001 at 22:42:44:

Hi Bill,

Bud mentioned setting up a childrens’ trust?
Why is it hard to sell? Age reasons?

How could a children’s trust handle this? And how is this different from a family limited partnership?

What’s best for privacy protection and assets protection?

Thanks

Sol

Re: Trusts - Posted by Randy M

Posted by Randy M on January 16, 2001 at 16:44:30:

Sol,

Thanks for all your great questions. I think you could do yourself a lot of good if you ask yourself one: “What do I want to accomplish here?” If you can outline your desired outcomes it will be easier to give you an answer. To respond to some of your questions -

How can you be assured that your friendly trustee won’t go haywire or become a criminal?

Well, you can’t. But you need to look at what a reasonable person might do. In most properly-authored irrevocable trusts there are provisions for the beneficiaries of a trust to remove a trustee if the trustee is not complying with the trust, is a known criminal or many other situations.

In my practice I rarely use institutional trustees - especially bank trust departments. There is too much turnover, too little knowledge by the people in the department and WAY too much corporate brain damage to effectively manage a sophisticated trust. I met a man last month at a seminar I did whose father died twenty years ago. The bank’s trust department was in charge of the deceased man’s trust. Well, the bank was supposed to give the man $50,000 when the estate was settled, but didn’t. He finally got his trust money twenty years later. Guess how much he got? $50,000! I can believe this story. It’s just crazy enough. The bottom line is that if you’re dealing real estate through trusts you need lots of flexibility and the ability to act fast. Your bank’s trust department simply doesn’t have that luxury.

A couple of days ago, someone mentioned a "business trust."
Well, it really depends what they were talking about. Was it a revocable or irrevocable trust? Was it a foreign or domestic trust? There are thousands of variations of trusts that could be called a business trust.

Sol, sorry to hammer on this point, but please let me know what you want to accomplish and I will probably be able to help you a lot more than I have.

Randy M

Re: Land Trust And Family. - Posted by Bud Branstetter

Posted by Bud Branstetter on January 16, 2001 at 02:16:47:

A minor(under the age of 18) can not be held accountable for a contract they sign. If it is in trust for them the trustee signs and holds the money for their benefit. You can have problems with the title company insuing a property in which the minor held an interest.

Re: Land Trust And Family. - Posted by Bill Gatten

Posted by Bill Gatten on January 16, 2001 at 14:36:21:

Don’t know a “children’s trust” from a hoola hoop. Our law firm only allows me to be a s.a. know it all when it comes to land trusts and related creative financing issues. But if Bud B. says it’s a good thing…then its worth looking in to, for sure.

Bill Gatten

To Randy…Trusts - Posted by Sol924

Posted by Sol924 on January 16, 2001 at 17:18:21:

I am trying to purchase a home and put it into a trust
for privacy and assets protection.

It is litterally given to me, but still has small
loan against it. If something were to happen to me
financially in the future, and creditors come after
my home, I don’t want to lose it.

So I thought about the trust idea. Someone suggested
that I have my wife’s name as co-beneficiary but not children due to age.

Also after having read about someone else’s marriage
problem here, how would I protect myself in the future from similar events. Not that I plan to…

I know that if the loan ever defaults, the bank can come get the house regardless of who or what trust owns it.

My understanding is that the home could be shielded from other creditors if owned by irrevocable land trust.

I then read here that a land trust is only good for privacy since you can’t get what you can’t find.

Now suppose a creditor does find it…what would be the best way to hold that property so that you don’t lose it.

This is not for business but for personal reasons.

Thanks

Sol

To: Bud…Land Trust And Family. - Posted by sol924

Posted by sol924 on January 16, 2001 at 07:56:15:

If I am the trustee for the children’s trust and
I end up filing BK one day & creditors
hounding me, will this be a problem?

Would it make any difference as to how much
share the kids, my wife, and I have in the trust?

Re: To Randy…Trusts - Posted by Randy M

Posted by Randy M on January 17, 2001 at 08:29:35:

Sol,

If you are trying for asset protection, it is best to have an irrevocable trust. A revocable trust probably can’t provide the level of asset protection you want in this case.

When it comes to beneficiaries, everyone in your family can be a beneficiary. The age doesn’t matter because you have the extra buffer provided by the Trustee. You want to be very careful here, however, because if you are a beneficiary you should not have anything to do with buying, selling, insuring the property or implementing any decisions on behalf of the property. That has to be up to the Trustee. You can’t show any incidences of ownership.

In the case of an irrevocable trust shielding the asset from other creditors, it really depends if it is an abusive trust or not. If a debtor owed a bunch of money and had claims against him, putting the house into an irrevocable trust would probably be considered abusive. That’s why the wealthy put properties directly into trusts when they make arrangements to purchase them.

You are right to a large extent with a revocable land trust providing a good level of privacy. You can deed the house to a revocable trust and that’s how it’s recorded from that point. A good investigator can usually pierce that privacy veil, however.

When it comes to potential marriage problems - I don’t know of what a person can do. I’m not really up on the divorce situation. I do know that if a property is placed in an irrevocable trust, it belongs to the trust and not to either party. There can be a provision in the trust that addresses divorce. In that event, the entire matter is already resolved.

Hope this information helps…

Randy M

Re: To Randy…Trusts - Posted by Sol924

Posted by Sol924 on January 17, 2001 at 15:01:40:

If a good PI can uncover ownership of a land trust, why would anybody wants to use it for property ownership.

Seems to me that a land trust is only good for temporary control over real estate for flips, purchase, options, etc…

But not to hold.

Is a land trust revocable or irrevocable or both - Posted by sol924

Posted by sol924 on January 17, 2001 at 11:08:23:

Can it be either?

Re: To Randy…Trusts - Posted by Sol924

Posted by Sol924 on January 17, 2001 at 10:34:42:

Randy,

I am amazed how somone like yourself could be so
dedicated to helping others like me. A newbie.

But it’s a great feeling!!!

And your not even trying to sell me anything.

Thank you for your help.

Sol

Re: To Randy…Trusts - Posted by Randy M

Posted by Randy M on January 17, 2001 at 19:22:39:

Hi Sol,

Land trusts are about the best way I know to hold property. Yes, a good PI may be able to find out who owns beneficial interest in a trust, but consider the following:

  1. Most people don’t have to worry about business going bad or the negative things we encounter out there. I help people put property in revocable living trusts all the time. They do it for several reasons, but mostly for estate planning reasons. (i) assets inside a properly-funded revocable living trust avoid probate (ii) the beneficiaries of the revocable living trust have immediate access to those assets, instead of having a court decide when and how they are disbursed. (iii) many other issues.

  2. If you have a property in the trust there are many creative things you can do with it. i.e. look all over this board for great ideas about how to handle the beneficial interest situation and the due on sale clause. I think Gatten has a real good program that alleviates almost every question or problem possible.

  3. Even though a revocable living trust does not offer asset protection, it still is desirable because it is flexible. I know many, many people who put assets in an irrevocable trust thinking they would be able to wheel and deal only to be disappointed because of the complexity of dealing with the trustee and the other issues involved in an irrevocable trust. Please don’t misunderstand me here - I love irrevocable trusts and use them for my own family trusts and help my wealthy clients use them and teach their attorneys how to use them all the time. I think they’re about the best thing since pockets in swimming trunks! (if you understand the mechanism)

I’m sure you know by now that a land trust (or any other trust) can be set up as either a revocable or irrevocable variety.

Hopefully I answered your questions on all three posts here. Will check to make sure they are all answered.

Best of success
Randy M

Either/Or, but never Both (NT) - Posted by Randy M

Posted by Randy M on January 17, 2001 at 19:23:49:

.

My pleasure. (nt) - Posted by Randy M

Posted by Randy M on January 17, 2001 at 19:24:44:

.