Protecting Oneself Using Land Trust - Posted by Gary

Posted by jim on February 02, 2002 at 11:09:21:

That is a very good idea that I will put to use.

Protecting Oneself Using Land Trust - Posted by Gary

Posted by Gary on February 01, 2002 at 19:29:45:

I own a home and have decided to put it into a title holding trust for many of the benefits talked about on Creonline.

I spoke with another person interested in TH trusts today and he raised an issue I hadn’t thought of…what are you gonna do to protect yourself from a trustee who turns against you?

If you give someone legal title to your property…you no longer own it. They can kick you out, rent it out to someone else, etc.

I explained if that were the case, I’d just take my presigned and by my trustee “Transfer to a successor
trustee” grant deed and have it recorded, which would transfer legal title back to me.

Which is fine, but how about stuff a trustee could do to you prior to you finding out?..putting liens on property, etc. After all, since you’ve deeded your property to a trustee, you no longer own legal title but the trustee does and can do what they will with your property (and probably when you’re not expecting it) They could sell your property to someone, quit claim it to them, then take off with the proceeds. Likely? Maybe not. But a possibility? YES.

So my question to the smart folks here is this…just how do you structure such a thing to protect your interests in every possible way?

Gary (I’ve also posted this on the legal forum)

Re: Protecting Oneself Using Land Trust - Posted by RS (So. CA)

Posted by RS (So. CA) on February 02, 2002 at 22:55:33:

Disclaimer: I am not an attorney. What follows, is based on my understanding of the nature of land trusts and should not be relied upon when making legal decisions with regard to the disposition of your real and/or personal property. I, of course, welcome corrections to this understanding.

First and foremost, it seems obvious that you should only select a trustee in which you hold a high degree of trust and confidence. If you are concerned about not knowing anyone that can be meet your criteria for acting as a your trustee, then perhaps it would be best to look to a bank, trust company (make sure it is well established and financially sound), attorney, etc. That being said, let me see if I can help assuage some of your apprehension.

To begin, the trustee has a fiduciary responsibility to the beneficiary, which, in simple terms, means she/he has a legal responsibility to act in a high degree of good faith for the benefit of the beneficiary–note that is the beneficiary of the trust, not the trust itself, that enjoys this relationship.

The trust agreement states specifically how the property is to be handled and distributed. That is, in contrast to a what estate planners commonly referred to as “living trust”, where powers over the trust rest entirely with the trustee, the land trust beneficiary possess a “power of direction” which is used to direct the trustee on what to do with the property held in trust. This “power of direction” is what helps protect you in case your trustee is dishonest.

The “power of direction” is typically found in the section of the trust agreement which enumerates the powers and duties of the trustee. There are any number of duties and obligations that can be inserted or added later to the trust agreement, including the obligation not to execute any legal documents without the express direction of the beneficiary–note that consent is not enough; that is, the beneficiary must direct the trustee to execute legal documents.

With this in mind, you can see that the power of the trustee can be quite limited in that the trustee may not engage in certain activities, including those with which you are most concerned, without being told to do so by you.

Lastly, it should be noted that either the trustee or the trust, itself, can be removed/revoked at your discretion per the terms of the trust agreement.

I would look into Bronchick’s course on land trusts and/or a local attorney who is well versed in real estate and land trusts for further information.

I hope this helps.

good luck!


Re: Protecting Oneself Using Land Trust - Posted by Lisa in VA

Posted by Lisa in VA on February 02, 2002 at 19:26:11:

Lou Brown uses an Affidavit and Memorandum of Interest in Real Estate to cloud the title in the event a Trustee would try such a thing.

What if a total stranger put a lien on your house? - Posted by Don(CA)

Posted by Don(CA) on February 02, 2002 at 11:54:38:

Isn’t that the same as a trustee doing it without your permission? Isn’t it a crime in both cases?

Seems to me ANYBODY could lien or deed away your house at any time, doesn’t mean they can get away with it.

Here in Los Angeles this exact thing has happened, to the point where the county recorder AUTOMATICALLY sends a copy of every deed to the homeowner with a simply note that it is for information only and if you didn’t execute the instrument somebody stole your house (or words to that effect).

Re: Protecting Oneself Using Land Trust - Posted by Bud Branstetter

Posted by Bud Branstetter on February 01, 2002 at 22:38:23:

If you are worried about such misconduct utilize a professional trustee like an attorney. They have something to lose. Joe Blow can be sued for misconduct but it would only mean you didn’t do a very good job in picking them if you had to. A land trust is beneficiary driven. They are not supposed to do things without direction from you. If you want to get rid of them you can file a resignation and appointment of a new trustee or unilaterlly file an appointment of a new trustee. There is no need to refile a deed.

Re: Protecting Oneself Using Land Trust - Posted by jim

Posted by jim on February 01, 2002 at 20:30:56:

Have you thought about using a corporation or an LLC instead? What advantages does a land trust have over a corporation or an LLC?

Don… - Posted by Gary

Posted by Gary on February 02, 2002 at 17:19:54:


The difference between a total stranger putting a lien on your home and your trustee doing the same is huge.

When you deed your home to your trustee, he now owns legal title to your property. Since he has legal title, he can now sell your home, encumber it with debt, etc. He can forge docs and pretend he’s been instructed. It would be much harder to catch while the fraud is being perpetrated. If someone out of the blue wanted to get a loan and use your home as collateral, the beneficiary loaning the money would probably catch it early on, when they see the person asking for the loan isn’t on title.

Sure, the fraud from a trustee is actionable in a court of law, but how about that renegade that decides he’s had it with the US and leaves the country, leaving scorched earth and a chunk of swindled property owners in his wake?

Look, I’m really not a paranoid person…but I want to be fairly sure I’m not gonna be taken for a ride 4 years down the road. Take a large chunk of money - entrust it to a human being - and you have the potential for serious trouble.

I spoke with a distressed property owner 2 weeks ago over this exact same issue. In his case it was his stockbroker who embezzled nearly his entire portfolio. He’s filed suit against the brokerage firm. The broker has disappeared. He’s broke, in trouble, and under threat of losing his home…

The possibilities for fraud exist - surely someone has figured out a solution to this conundrum?

I heard about this happening in Miami Fl - Posted by osirus

Posted by osirus on February 02, 2002 at 14:13:46:

Several years ago I heard about the same thing happening in Miami, Fl on crime fraud special on The Discovery Channel. But they took it a bit further. These scammers would then get a line of credit against the property disappear with the money after illegally filing a quit claim deed.

I have always wondered how these crooks get around having the buyers notorizing the deeds. I guess they either forge the nortarization or the notary is in on them scam.

I think away to protect yourself maybe to make a point to file a preformance mortage aginst your on property. That way if someone illegally stole your property you could simply foreclose your preformance mortgage and get your property back that way. This may be better than having to prove to a court that someone stole your property. Nonetheless, someone who has the nerve to try this scam in the first place would probably have the nerve to file a forged satisfaction of your preformance mortgage or decide not bother scaming your property at all because of the preformance mortage. Which is what you want in the first place!

Re: Protecting Oneself Using Land Trust - Posted by Barry (FL)

Posted by Barry (FL) on February 02, 2002 at 10:33:58:

I know an investor that does all his dealing through trusts. What he does is always puts a small second, say $100 against all his properties, that way if there’s any hanky panky he gets notified.
Just a thought.

Re: Don… - Posted by RS (So. CA)

Posted by RS (So. CA) on February 02, 2002 at 23:14:57:

If you are truly concerned with being a victim of fraud, then you can certainly appoint yourself as the trustee. Of course, this removes some of the benefits of having a trust, but it also will remove the fraud potentiality.