Reasons to Own Property in a Land Trust

Articles for the Ambitious Real Estate Investor

Hide your name on public record and in turn discouraging litigation. 

Attorneys tend to sue those who they think have money since most work on contingency.  They are only likely to take cases which they can not only win but collect since their fee is based on the collection. If your properties are hard to find, you will appear broke and less worth suing. Even if a potential plaintiff thinks you have assets, the difficult prospect of finding and attaching these assets will discourage litigation against you.

Protection from title claims.

If you sign a warranty deed in your own name, you are subject to potential title claims against you if there is a problem with the title to the property. For example, a lien filed without your knowledge could result in liability against you, even if you purchased title insurance. A land trust in your place as a seller will protect you personally against many types of title claims because the claim will be limited to the trust. If the trust already sold the property, it has no assets and thus limits your exposure to title claims.

Protection from liens. 

Real estate titled in a land trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into trust, the personal judgments or liens of the seller will not attach to the property.

Facilitates the assignability of contracts. 

The ownership of a land trust also called the beneficial interest is assignable, like the way stock in a corporation is assignable. In addition, once a property is titled in trust, the beneficiary of the trust can be changed without changing the title to the property. This can be very advantageous in the case of a real estate contract that is non-assignable, such as in the case of a bank-owned or HUD property. Instead of making your offer in your own name, make the offer in the name of a land trust, then assign your interest in the land trust to a third party.

Protection from HOA Claims. 

When you take title to a property in a homeowner’s association (HOA), you become personally liable for all dues and assessments. This means if you buy a condo in your own name and the association assesses an amount due, they can place a lien on the property and/or sue you for the obligation. Don’t take the title in your name but instead take the title in a land trust so that the trust itself and thus the property will be the sole recourse for the homeowner’s association’s dues.

Have Questions?

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Randy Rodenhouse
Author: Randy Rodenhouse

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