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