Land Trust Explained For Real Estate INVESTORS! [2020]

Land Trust Explained For Real Estate INVESTORS! [2020]

Toby Mathis – Hey guys, a question I get a lot from real estate investors is, “What is a land trust? “Why do people use it? “What is all the hubbub?” There’s a lot of bad
information out there, so I’m just gonna give you
the relevant information to help you make an intelligent decision. Subscribe to the YouTube channel. Click the bell notification icon so you know when a new video’s uploaded. Tax laws are changing all the time. The laws are changing all the time. This way you’re first to
know, you’re first to grow. So first off, every state
allows some sort of trust. And a trust at its basic inception point is three parties. And this is the easiest
way to think about it. Is think about it like it’s a triangle. You have your beneficiaries,
the ones who are ultimately allowed to use the property. You have the party that
runs it who actually manages the property, and then you
have the party that gives it, which is called a grantor or settlor. And all trusts have these parties in ’em. Any time you have a living
trust, a asset protection trust, charitable remainder trust,
personal property trust, irrevocable life insurance trust, they’re all just a
version of the same thing with different parties
and different requirements for who can act in what position. And so, usually the title of the trust, like a dynasty trust, all that tells me is that it’s a trust that’s
designed to last a long time. And some people go like, “Oh I heard about this dynasty trust.” It’s just a trust. There’s always gonna
be grantors, trustees, and beneficiaries, and then we’re gonna just have some relative idea
about what are the qualities of that trust. Is it revocable? Is it irrevocable? Is it for tax purposes? Is it defective for tax purposes? Like we go down this line. So, when we say land trust,
what we’re really saying is a trust that holds land. Yes, there are states that have statutes. The most famous is Illinois,
and they will call it an Illinois-style land trust. And it’s a fancy way of
taking the beneficial use of a property and separating it from legal title. That’s all it is. We’re literally taking away
what name is on the title from who gets to use and
control that property. I hope there’s some bells
going off now for people when you realize, “Wait a second, “the party whose name is on that title “is not the party that
gets to occupy or develop “or use the property?” Correct, that party is
whose name goes on the title is as a trustee on behalf of the trust. So let’s call it the Blue
Trust or the Pink Trust or whatever name. You could literally call them anything, and a trust cannot own
something by itself. It always has to own it through a trustee. So think of it like a parent for a child. The child’s name is not on the property if the child is a minor. It’s gonna be the parents’ name only because they are the only
ones who can contract. In a trust it’s a fancy way of saying, hey the trustee’s the only name that’s gonna be on the title. The beneficiaries are sitting out there and they’re not required to be disclosed. Now there is a state that does
require disclosure, Arizona, but most states don’t, and even then, we can still get your name off the title. That is why land trusts
are so flippin’ popular. It’s not that it’s an
asset protection tool because it’s not. If somebody says, “Oh I’m
gonna use a land trust “and therefore I’ll never get sued “and da da da da da,” no. Land trust has nothing to do with that. You have to use it in
conjunction with another entity if you want the asset protection. But what they’re fantastic at, what they are absolutely
bar none the best at is getting your name off
of a piece of property. And consider this, you
had 10 pieces of property. You had a slip and fall on one of them, and they pulled up your
name and saw that you owned nine other pieces of property. What are the chances of
you getting sued right now? Very high. “Hey, rich person, they’ve
got a bunch of properties. “They have something to lose.” Put it on the flip side. Now assume it was one piece of property, it was in Blue Trust. They pull up Blue Trust
and they see it has that one property only. That’s it. And by the way, this
trustee’s name doesn’t even have to be yours. You could have a professional sit in that. You could have a company sit in that. There are ways to get
your name off of title. But this is why they are so popular for savvy real estate
investors because savvy real estate investors know that there’s an extremely
valuable component of keeping your name
out of the public record when it comes to the real estate because it minimizes risk, and it keeps your affairs private. And it really is worth its weight in gold when you look at it from
just that standpoint. Such an easy tool where all
we’re doing is separating out legal title from true
beneficial ownership. And by the way, yes we can
take that beneficial ownership, and we can stick it squarely within an LLC or some other entity. Yes we can do that, no problem. But step number one is
let’s get the property out of your individual name. Once we get it into the trust, then the trust can absolutely
do some more things. And the beautiful part is 99% of the time, there’s not a paper trail in the public showing that this is going on. And that is one of the most effective asset protection techniques
ever is just making sure people can’t easily determine that you’re an attractive target. Now they are just going
off of merits only. I’m not saying do any skulduggery, but people do not need to know that you’ve got 50 properties. If they do know you have 50 properties, your chances of being subject
to needless litigation goes up exponentially. In fact, I think it
was Mark Cuban who said one of the worst parts about being wealthy was having to deal with all the lawyers. Because people are always
trying to take it away. The homeless folks are not getting sued to take away their assets. It’s the people with assets that get sued, and if you can prevent the
public from just willy nilly being able to see what you own, it’s an extremely,
extremely effective tool. (light music)

3 thoughts on “Land Trust Explained For Real Estate INVESTORS! [2020]

  1. Great info, been watching all 3 youtube channels. Clint and Toby is doing a great job.

  2. thanks for the info

  3. How would I use this for asset protection????

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