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Why Everyone should be using Land Trusts

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Just a couple of weeks ago, I did a class on Land Trusts. This is one of those subjects that everyone wants to learn about, but most people never get around to using. There are all kinds of excuses as to why they haven’t done a Land Trust yet, but I think the biggest reason is that most people just think that it is too much trouble and that nothing will happen to them. That is until something actually does happen to them.

For example, just the other day, one of those students called and need some help. He needed to put his multi-family rental property into a land trust. He was a little frantic and had a sense of urgency about it. When we asked him what was going on, he proceeded to tell us a story that I have heard many times before.

Just a couple of days after the Land Trust Class, a tenant fell on the sidewalk. Now she wasn’t hurt at the time, but over the last week, she has been calling the landlord and complaining about her neck, she thinks she has whiplash. Having that feeling in the bottom of his gut, he decided to call his insurance agent and report the incident, just in case the tenant got worse and decided to make a claim. That is when the insurance agent kindly informed the landlord that he did not have an active insurance policy on the property. The policy lapsed over the holidays and the landlord had not realized this at the time. Money was not the issue, the holidays where. He had the cancellation notice sitting in a stack of mail that he just handed gotten around to opening yet because of all the hustle and bustle of the holidays. He didn’t think much of it because he didn’t think the insurance policy was due for a few more months.

He immediately re-instated the insurance policy, but the insurance agent informed him that the incident that had just happened would not be covered. You can imagine what the landlord thought about that. That’s right, all he could think about was getting his property into a Land Trust so that if the tenant called a lawyer, that they would not be able to find out who ones the property. That is why he called me ASAP with such urgency. I then had to explain to him that putting the property into a Land Trust right now would probably not help him in his current situation. That is not the purpose of Land Trusts. Land Trusts are not a tool to quickly hide assets. Land Trusts are a tool to create a long term level of privacy and frivolous law suit protection.

If he had the property in a land trust long before this, he could have been positioned correctly. The tenant would not have known that he was the landlord because he would have been acting solely as the property manager. Then had this situation happened and the tenant got a lawyer, the lawyer would have had to first do a property address search to find out who the owner was, which the lawyer would have found out that the owner was a Land Trust. But in the current situation, the tenant already knows who the owner is and even if he does get the property transferred to a Land Trust right now, it will still take several months for the county records to be updated.

After the lawyer found the Land Trust, he would then do an asset search for that Land Trust and the only thing he would be able to find is that one multi-family property which is the one that the tenant fell and allegedly got whiplash from. This is where most frivolous law suits stop, because the lawyer is not certain of assets. If the lawyer could find assets, then the lawyer would probably pursue the case on a contingent fee basis.

In the current situation, the landlord has a couple of other rental properties and his personal residence in his own name. If the tenant brings a case on, all the lawyer would have to do is find all hi assets before the landlord can transfer everything into a Land Trust. If the lawyer is successful, he could bring a case to a judge to have all those transfers reversed and put a free on all his assets until the law suit was over.

Had the landlord had all his properties in individual Land Trusts and this case happened as described above, then the only thing the landlord would have at risk would be that one property. This is the reason why everyone should start using Land Trusts ASAP, because of what we think could never happen to us.



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spidermedium@gmail.comThe purpose of a land trust is to allow one to have the legal title to his property held by another person, or trusteewhile retaining all of the rights and privileges of property ownership (the beneficial interest). You have to choose someone you really trust!

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audreyross18@yahoo.comGood example, we should not chances with our insurance policies. Its important to keep it active because we never know under what circumstances we might be compelled to make a claim. Also, very valid point on the importance of Land Trusts.

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mikej@realestatepromo.comHi Martin, I would start by finding your local REIA (Real Estate Investors Association). They will know who the lawyers are that understand Land Trusts.

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