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LLC’s and land trust ?s

This topic contains 25 replies, has 0 voices, and was last updated by Avatar of infinity infinity 10 years, 6 months ago.

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  • #29037
    Avatar of homesavers
    NULL
    Member

    @mtnwizard49 wrote:

    Homesavers: Sure your LLC can act as a Trustee or a beneficiary.

    USING ONE???S OWN CORPORATION OR LLC

    Would create a merger of title, invalidating the trust, should it be challenged in court as not being a bona fide land trust (see N.C. A.G.O. vs Russell and Dianne Barberio 2005)

    A privately or closely held corporation would not charge legitimate fees and therefore would not likely be seen by the courts as a bona fide holding company, whose business it is to hold titles in trusts and charge fees commensurate with industry standards.

    One???s own corporation would not be seen by a co-beneficiary as a mutually trustworthy, and wholly unbiased third-party holding (escrow) entity. Such a bias would not be in the best interests of co-beneficiaries. As well, using one???s own business entity would create a merger of title invalidating the land trust model.

    That is why I was asking if he was doing a long term or a short term Land Trust holding title to property. Short term it does not matter if the Trustee is his own LLC, don’t you think? In my opinion, (not that of an Attorney of course) you should have your beneficial interest held with an LLC or some other business entity.
    So to clarify- Short term does not really matter. Long term you better have all your NARS ducks in a row.

    On another note, I don’t know about anyone else here but I am not finding too many long term EHT type deals that cash flow lately.

    #29038
    Avatar of infinity
    infinity
    Member

    Thanks for the clarification gentleman.

    #29039
    Avatar of bill_gatten
    bill_gatten
    Participant

    An LLC can be either a beneficiary, a trustee or a settlor. Just not the trustee and beneficiary or settlor at the same time.

    As Gary said, the best arrangement is the one we espouse…a third-party unbiased fiduciary, non-profit corporation as trustee and either you or your LLC as the beneficiary.

    #29040

    What does everyone think about the settlor being placed as RB in a legal entity, if I want to help the owner keep his house, with a 3rd party trustee such as EHT?

    No longer mortgage banker, but can’t figure out how to change my username. Now alternative finance broker.

    #29041
    Avatar of buzzbox
    buzzbox
    Participant

    If I understand the question, the settlor SB automatically becomes the RB also and sole beneficiary at the time the trust is formed and the property conveyed to the trustee, unless and until alternate or other substitute beneficiaries are added, assuming of course that their residency is maintained. The terms SB, RB and IB are just that, a naming convenience. The actual beneficiary designation document is what matters.

    However, if the arrangement is intended to foil in some fashion, hide ownership, or put creditors at some disadvantage, it will likely fail miserably, in that existent creditors are already aware that the settlor owned the property before trust placement.

    #29042

    @Buzzbox wrote:

    If I understand the question, the settlor SB automatically becomes the RB also and sole beneficiary at the time the trust is formed and the property conveyed to the trustee, unless and until alternate or other substitute beneficiaries are added, assuming of course that their residency is maintained. The terms SB, RB and IB are just that, a naming convenience. The actual beneficiary designation document is what matters.

    True

    @Buzzbox wrote:

    However, if the arrangement is intended to foil in some fashion, hide ownership, or put creditors at some disadvantage, it will likely fail miserably, in that existent creditors are already aware that the settlor owned the property before trust placement.

    Not True

    It doesn’t matter who owed the property before the trust and the title to the property conveyed to the Trustee. If will not and cannot fail if it is setup properly. It doesn’t matter what the creditors are aware of. The only exception may be bankruptcy.

    #29043
    Avatar of buzzbox
    buzzbox
    Participant

    Here Scott, I was referencing privacy, or the lack thereof.

    If a settlor is known to their creditors as owning the property before it is placed in the trust, and should a creditor claim arise then the settlor may not have much protection from the trust.

    Recently I reviewed Adkisson’s site; http://www.assetprotectionbook.com in which he comments regarding land trusts in general (not EHT), “… In most states, self settled trusts offer no creditor protection at all.”, and “…that in about 10 states that give protection to self-settled trusts, if you are forced into bankrupcy there is a 10-year claw back that allows assets to be brought out of self-settled trusts unless they have been there at leasts 10 years.”

    He goes on to say that “If the real estate was gifted into the land trust, then it is susceptible to being a fraudulent transfer since there was no consideration paid for the transfer.”

    Then he further states, “If the trust is revocable, then in most states the trust will not even be recognized for creditor-debtor purposes. In other states, the creditor could get a court order forcing the trust to be revoked.”

    Lastly, he states, “The privacy afforded by land trusts is mostly an illusion. Creditors will hire private investigators to follow you around and see where you go home at night. Creditors will get your address from utility companies or mortgage companies and figure out pretty quickly that a trust is involved. Creditors can also subpeona the trustee to a deposition and ask who is the beneficial owner of the property. Creditors can force the disclosure of trust documents.”

    Interesting.

    #29044
    Avatar of silvio
    silvio
    Member

    @bill_gatten wrote:

    An LLC can be either a beneficiary, a trustee or a settlor. Just not the trustee and beneficiary or settlor at the same time.

    As Gary said, the best arrangement is the one we espouse…a third-party unbiased fiduciary, non-profit corporation as trustee and either you or your LLC as the beneficiary.

    How about a 3rd Party INDIVIDUAL as the TRUSTEE…? and beneficiary getting a POA from TRUSTEE…

    #29045
    Avatar of peter@amakya
    peter@amakya
    Member

    Hey guys. Your are complicating the whole thing. Use Equity Holding Corp, a non profit California Corp as the trustee. You, as the investor beneficiary can be an LLC (with your lawyer as the front man if you want) and the Resident as the Resident Beneficiary.

    Now if a creditor wanted to go after the trust, but I do not know why one would, as the only debt is the loan, then all he/she/it has to do is ask the Resident Beneficiary for a copy of the Trust documents and there, in black and white, is all the information.

    If a ceditor is going after you, as an investor, the partition of interest in the trust will protect you, the settlor and the resident beneficiary.

    There is little or no need for secrecy, you are no doing anything that would require it. This is no a Bernie Madoff deal of some sort.

    Just relax and collect properties.

    #29046

    @Buzzbox wrote:

    If a settlor is known to their creditors as owning the property before it is placed in the trust, and should a creditor claim arise then the settlor may not have much protection from the trust.

    My answer remains the same. It doesn’t matter who or what knew that the property had previously be owned by the Settlor. If there are two or more unrelated co-beneficiaries of a properly formed Title Holding Land Trust, a creditor would not be able to partition the trust to force the sale or lien against the property.

    A creditor MAY, if their stupid, receive a Charging Order against the Settlor’s Interest in the Trust, but not the property. If the Creditor is successful at getting a Charging Order, which in my opinion they would be stupid to do, then they would have to wait until a distribution was made to the Settlor before they could collect. In the meantime, the Creditor would have to pay income taxes on the Order “as-if” they received the entire amount today, even though they may NEVER received it.

    This “action” does not in any way affect the property or the other beneficiaries interests in the Trust.

    The only exception to this may be in the case of a bankruptcy where the trustee may be able to overturn the trust. However, I have a client who just went through a BK in Wisconsin who is the Settlor of a NARS EHTrust. The Trust was not “busted”, the property was preserved, and the Trust and RB is in still intact. If and when the SB ever receives any proceeds of a future sale, and if the creditors of the SB are not all paid off under the terms of the BK at that time, the SB is required to forward their proceeds to the court.

    #29047
    Avatar of buzzbox
    buzzbox
    Participant

    Thanks Scott.

    Key then, is the need for at least two unrelated parties as beneficiaries. At least an SB and an RB.

    #29048

    @Buzzbox wrote:

    Key then, is the need for at least two unrelated parties as beneficiaries. At least an SB and an RB.

    Yep as long as you have two or more unrelated co-beneficiaries and the trust is setup correctly (for example the NARS EHTrust System), you’ll be fine. BTW, in case you didn’t know, the NARS EHTrust System has withstood ALL Challenges.

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