LAWYER - TRUST OR NO TRUST? - Posted by jerry

Posted by Tony-VA on July 02, 2002 at 08:25:47:

Jerry, you would do yourself a great favor to buy a copy of Bronchick’s Land Trust Course to ensure that you have the facts to put this transaction in motion properly. This will also give you the knowledge to speak intelligently to others (such as your attorney) who question your reason or ability to use a Land Trust.

As for the timing of a Land Trust. You will likely find that when using a lending institution for the purchase, they will not allow you to use the Trust name. This however does not prevent you from transferring (quit claim or warranty deed) the property into Trust after closing. It does reduce the ability to keep your name off the chain of title but still provides you cursory inspection protection if a contingency based attorney does a shotgun type search for you name on public records.

Best Wishes,


LAWYER - TRUST OR NO TRUST? - Posted by jerry

Posted by jerry on June 30, 2002 at 16:05:51:

I’m a newbie who used the same RE lawyer for my buy and sell 12 years ago. I like the guy and he’s unbelievably accessible as well as generous with his time. He does almost exclusively real estate closings - tons of them. I recently put an offer on a property and asked the lawyer if I should take title in a trust instead of my name. He went into a long speech about how doing that would be a waste of time and money. He said that if I was concerned about liability (getting sued) to just increase my insurance to $500K or some such thing. He went on to say that he’s been an investor for decades and has never put a property in trust or been sued. Is there any possibility that he’s even largely right or is this possibly a good lawyer with a poorly-informed weak area? Like a dog that can do 500 tricks, but pukes on the carpet daily?

Don’t Trust this Lawyer . . . - Posted by William Bronchick

Posted by William Bronchick on July 01, 2002 at 12:49:51:

Any lawyer who says “just carry more insurance” just doesn’t know the law or has no experience in lawsuit protection.

First of all, $1,000,000 or more in liability coverage won’t protect you if the the claim is not covered by insurance in the first place. Breach of contract, discrimination, lead paint violations, toxic mold, etc claims are NOT coverage by ANY insurance. Also, if you fail to timely report a claim or injure someone as a result of a violation of law (eg, illegal basement apartment, electrical wiring not up to code), the insurance company will DENY COVERAGE. While insurance is good, it doesn’t cover everything.

Trusts are cheap, easy and VERY effective in protecting your privacy from lawyers, code enforcement, the newspapers, and any other cockroach that wants info about you. While they are not a liability shield, land trusts BLOCK INFO from people, which reduces the risk of someone suing you. I have personally seen multiple cases in which my clients avoided a lawsuit because the other attorney couldn’t figure out who was behind the trust (and wasn’t willing to spend thousands of his client’s dollars to figure out who was).

In short, anyone who tells you trusts are not effective hasn’t a clue . . .

I’m with SoCalFred - Posted by John Merchant, JD

Posted by John Merchant, JD on June 30, 2002 at 20:42:06:

Fred and I agree.

Why put all your RE eggs in one basket, with your own name & ID all over it, when you could diversify ownership into a number of entities, such as RE Trusts, that do not have your name or scent all over them?

And trusts are cheap and so easily set up that they’re basically trouble free…and remember you sure can’t do it AFTER the lawsuit hits you…that’s an obvious and voidable transfer that any court can set aside as an attempt to defraud creditors…but if your property at 123 Main St is owned now by 123 Main St Trust, with Joe Jones as the visible Trustee, and the mailing address is a P.O.Box somewhere, other than your house,that’s pretty darned good protection for you.

So if someone over there gets hurt and sues the owner, it won’t be you,and even if they win, the only asset they can grab, other than your liability insurance, would be that RE at 123 Main St.

And remember this point: the shoeshiner’s shoes quite often are never shined, and lawyers die without wills, and drive without insurance, and do other stupid things…so just because one tells he thinks trusts are a stupid waste of time is no reason for you to ignore good business tactics and fail to protect your own assets.

I remember a funny story that Wade Cook (himself a very tricky and cagey guy, not loved by one and all!) told in one of his little seminars he used to hold.

Seems WC had a Judgment against a guy who’d been a good customer of his, and had bought a bunch of his materials, and been to several of his expensive seminars. WC looked hard trying to find the guy’s assets, knowing the guy had a LOT of realty, in several states…and WC finally realized that the guy had done exactly what WC had advised him to do…put his assets in separate trusts, with different trustees, with other members of grantors family being the beneficiaries, so as to leave the Judgment debtor not only without property in his own name, but also without any beneficial right in those properties…so even if WC were to pin the guy down, in post-Judgment discovery, and the guy were to 'fess up to all the properties he’d put into various trusts, WC couldn’t get to them because of how careful the guy had been…all done by carefully following WC’s own directions!


Posted by GL(ON) on June 30, 2002 at 17:14:06:

He’s right. Most of the time a trust is a waste of time and money. Unless used for estate planning or some good reason.

There are “gurus” who recommend using a trust as a gimmick to pull the wool over the eyes of the bank and/or the seller. This may be where you picked up the idea. Unless you are trying to pull a fast one you don’t need this.

Re: Don’t Trust this Lawyer . . . - Posted by jerry

Posted by jerry on July 01, 2002 at 12:58:59:

I’ll consider this a word to the wise. Thanks for your counsel. I will act accordingly.

What if… - Posted by Michigan Andy

Posted by Michigan Andy on June 30, 2002 at 21:14:02:

You were sued, and specifically asked by the attorney for plaintiff if you have beneficial interest of any property held in trust?

The reason I ask this, is because I was asked this very question by my ex’s attorney in a written interrogatory in a motion to increase child support. I had no properties in trust then, but do now. How does this shield you, if at all, as obviously you have to answer truthfully. I’m not being antagonistic, but rather inquisitive. I have no objection to paying child suport, and that is not the rationale behind my question. I went through a lead paint case this year that made me lose sleep. Never again.

Thanks in advance for any insight.


Re: LAWYER - TRUST OR NO TRUST? - Posted by SoCal Fred

Posted by SoCal Fred on June 30, 2002 at 17:50:04:

“Most of the time a trust is a waste of time and money.”

-time: about 5 minutes to fill out the boiler plate forms.

-money: A couple of extra notary fees and 1 extra recording fee.

Benefits? If you start to do a significant amount of deals, there is a pretty good chance that eventually someone is going to try grab some of your toys. Should they try to do this by suing you, their lawyer may very well go down to the county court house and see if the case is worth pursuing on a contingency basis by seeing if you have any assets. If all your property is titled in well-designed trusts, guess what? For all he can tell you own no property and therefore are judgment proof. Now will the lawyer continue with the case if he thinks he won’t be able to collect?

In Los Angeles there is an investor who owned over 250 units. The city code enforcement agency decided that it was his day in the barrel and came after him with everything they had. It turns out they couldn?t pin much on him, but they could put liens on all his property until the various infractions were cleared up. Well this landlord was a bit cash-poor and needed to tap into his equity to get the funds for the required work and fines. Opps, big problem, with liens on all his property he couldn?t borrow against them. Long story short? he lost everything and actually spent 7 months in L.A. County Jail.

Contrast that with the well known (to city and state officials) slumlord who runs dozen and dozens of rat infested hovels. They know who he is and what he owns, but for over 10 years they haven?t been able to prove it or shut him down.

Now I?m not advocating that you become a slumlord, nor am I saying that if your building collapses, killing 6 families, that you?ll avoid litigation, but I am suggesting that maybe it?s worth your time to spend a few minutes exploring proven asset protection methods.

BTW I recently read that real estate related lawsuits are at an all-time high and top the list for popular suit categories. Investors beware

Re: What if… - Posted by William Bronchick

Posted by William Bronchick on July 01, 2002 at 21:22:32:

A child support interogatory is essentially the same as a debtor’s interogatory … everything is fair game. Discovery in a normal lawsuit (before judgment) does not permit a party to ask about all of your assets (unless the assets are germaine to the lawsuit, such as a claim of lossed income or an issue of whether someone had legal control of an asset for liability).

Re: What if… - Posted by Rob FL

Posted by Rob FL on July 01, 2002 at 10:11:10:

If the attorney really wants to, regardless of how you have your assets placed whether in trusts, corporations, LLCs, partnerships, etc. If they ask enough questions in a deposition they can find out what your assets are and where you derive your income from.

On the other hand though, they may not be able to attach those assets if you have things set up properly.

Re: What if… - Posted by JohnBoy

Posted by JohnBoy on June 30, 2002 at 23:33:49:

Simple answer. Don’t name yourself personally as beneficiary of the trusts. Use LLC’s as beneficiary. Then you can answer truthfully by saying no, that YOU are not a beneficiary of any trusts.

Very meaningful, heavy-duty question (NT) - Posted by jerry

Posted by jerry on June 30, 2002 at 21:17:12:

Glad you asked.

Re: LAWYER - TRUST OR NO TRUST? - Posted by Nate(DC)

Posted by Nate(DC) on June 30, 2002 at 22:46:48:

“I am suggesting that maybe it?s worth your time to spend a few minutes exploring proven asset protection methods.”

I agree with the sentiment, however, I would disagree that a trust is an asset protection method. A trust provides only privacy. It does not provide any protection for the owner of the beneficial interest.



Posted by DB on June 30, 2002 at 19:59:36:

Fred, could you share where you read about real estate related lawsuits being at an all time high? Was it in a paper, magazine, or from the govt.? I would like to read this article.

Thx, dave

Okay, then… - Posted by Michigan Andy

Posted by Michigan Andy on July 01, 2002 at 22:56:52:

Thanks for your response, Mr. Bronchick. As always, I appreciate your candor, thoroughness, and I even enjoy your sarcasm (My kinda guy).

On to the ?:

…what if, as JohnBoy suggested, I did deed properties into a trust, then name an LLC (without the use of surname) as beneficiary, using an agent as POC for the LLC?

Please don’t misconstrue that I would ever attempt to evade child support (she lost anyway), as all of my cards were on the table. The rationale behind my question is if I were to become the subject of the debtor’s interrogatory…I’m playing devil’s advocate here.

Again, I appreciate your candid responses.

By the way, ever consider moving to Michigan?


Re: What if… - Posted by jerry

Posted by jerry on July 01, 2002 at 12:45:30:

Then isn’t the attorney’s next question: “If you’re not the beneficiary of any trusts, are you an officer or do you have any controlling interest in any LLC or other entity?” Then, next could be: “Does that LLC control, direct or administer any real estate?” I know I’m reaching, but isn’t that what a knowledgeable lawyer would do if he’s smart?

Re: LAWYER - TRUST OR NO TRUST? - Posted by SoCal Fred

Posted by SoCal Fred on June 30, 2002 at 20:17:47:

That was a tidbit from the San Francisco Small Apartment Owners literature. It may be specific to SF were draconian rent-control laws invite many rentboard hearings and lawsuits.

Re: What if… - Posted by Tony-VA

Posted by Tony-VA on July 02, 2002 at 08:17:10:

Jerry I think your experience with your own attorney answers your question here. He apparently considers himself a sophisticated investor and “knowledgable attorney”, yet do you think he would see through this particular use of Land Trust with LLC beneficiary?


“knowledgeable attorney” - Posted by William Bronchick

Posted by William Bronchick on July 01, 2002 at 12:52:44:

Jerry, you are making the presumption that most attorneys are knowledgeable about this stuff. 99% of lawyers in this Country don’t have a CLUE about this stuff! Every week someone posts on this board that he went to a local attorney and was told “never heard of land trusts.”

Re: LAWYER - TRUST OR NO TRUST? - Posted by jerry

Posted by jerry on June 30, 2002 at 20:49:03:

Considering the few minutes and the few bucks to form a trust, what is the latest stage at which I could properly and comfortably do this? Do I wait until I’ve got an accepted offer, financing and a closing date? Is a few days before closing Okay? Does the title company have to know the name of my trust in order to give me title insurance?
Before the negative words from the lawyer, I was thinking of having each property (I’m thinking positive) in a trust named for its address and have all those trusts owned by a main trust. Do I know enough to be a danger to myself? Etc. etc. Thanks.