Asset Protection, LLC's, Land Trusts, Etc.

Thanks coach for sharing this information, I didnt know you can claim all those things on your taxes with an LLC. I will be forming my LLC in the next couple of weeks.

I did know about the deductions and did form my entity in time to claim start up expenses. You are right that you get another mindset as you have to treat this as a business and be more responsible for what you do and how you do it!

First, thanks femailceo and Reynold for your comments. It adds so much when others have had the same experience.

In this post, I'd like to begin exploring the Land Trust. This is a method of property ownership that converts the ownership from realty to personalty, with a trustee managing the trust for the benefit of the beneficiaries. The land trust version accepted in basically every state is similar to the Illinois Land Trust. In future posts, we can cover other elements of the land trust, but in this post we will simply state the benefits that come with the land trust. While some of these same benefits are available through an LLC, Land Trusts represent a viable alternative, or can be used in conjunction with an LLC for the tandem requirements of ownership and management of an asset.

Brief Statement of Benefits of using Land Trusts to own investment properties:
Privacy—If they cannot find you, they cannot sue you.

Avoiding Probate—Beneficial interest can be quickly and easily modified.
Keep Purchase Price Secret—No recordation of sales stamp tax, so no record of purchase price in public record.
Keep Sales Price secret—See above
Avoiding due-on-sale—Placing property into Land Trust shifts ownership without triggering due on sale, as long as the beneficiary is same as grantor. If, later on, beneficial interest is transferred, it does not notify the mortgage holder of transfer of ownership.
Avoiding Litigation—Due to privacy factors
Keeping Taxes Lower—Tax Assessors typically use sale of a property to increase tax assessments, but since there is no public notice of a change in beneficial interest, you should be able to avoid some tax increases triggered by sale.
Ease of Property Management—Resolves problems of dealing with tenants by separating landlord from trustee.
Ease of Negotiation—See Property Management. A beneficiary can enter negotiation, maintain friendly relationship with other parties, and defer decision making to trustee.
Ease of Changing Beneficiaries—A simple agreement document, which may or may not be filed can modify the beneficial interest.
Ease of Transferability—See Changing Beneficiaries.
Keep Liens off Property—Liens and judgments against individual beneficiaries cannot be attached to a property in a land trust.
Simplified Gifting—Simple transfer of beneficial interest to another party.
Limiting Liability—Can eliminate the possibility of a deficiency judgment on a property that was purchased by a Land Trust without personal guarantee.
Better Financial Statement—Beneficiary can show the equity on a financial statement without the mortgage debt if the property was purchased by the trust and without personal guarantee.
Safer Lease/Options—Can use separate agreements with lease agreement signed with trustee and option with beneficiary.

Thank you Dallin. This is excellent,usable information. I am searching for this type of information on using these entities (especially the trust by itself and in connection with the LLC) in purchasing property and would like to hear more.

Sincere Gratitude.

Hello Mr W. and others. Having recently participated in the buying summit in Vegas we were informed of the need for asset protection. A company that provides the set up for this entity (Or entities) presented and was absolutely 100% informative.

I already have established a LLC but if I'm not mistaken the best protection is to have each asset into it's own LLC with a Trust or Holding Parent company (Control everything, own nothing). If they can't find you, you can't be sued.

Also, (Again, if I'm not mistaken) most lawyers will require a potential "Suer" to cough up a substantial amount of fees (Retainer) upfront in order for a lawyer to continue with the lawsuit. We were also advised that a potential "Winner" of a lawsuit is immediately subject to taxes on their judgment whether they collect on you or not. This in a nutshell assumes that the "Suer" won a lawsuit against you but regardless of whether you pay up or not, the "Suer" is immediately exposed to taxes. Lets assume you got hit with a judgment of 500K....the person winning the judgment is now immediately liable to pay taxes on 500K whether they collected or not. I would suggest most people are not in that position to pay taxes on a "virtual" 500K. This is conceivable to think a ++++++ for our asset protection.

Please be advised I'm not a lawyer or advisor, just relaying information gleaned from the buying summit and a protection strategy we ought to seriously consider. I'm also a new investor trying to figure this information out.

Thanks for your comments Shammie and SafetyTiger. SafetyTiger, great additional information, I learned a couple of things about lawsuit distribution and taxes, good information.
If Land Trusts are an area of interest, I found the following title to be helpful: "Land Trusts for Privacy and Profit" by Mark Warda. It's a comprehensive book describing benefits, parameters, etc.
With any new type of document or entity, it is advisable to enlist professional help from an attorney in setting it up; however, if you're a do it yourselfer, once you have the template, it's easily duplicatable, and the costs are minimal.
I'll revisit this area with some additional information on Land Trusts in the near future.