MustReadReport! VisitMyWebsite ScanTheBarCode. ProtectYourAsset!Don tbuyanother. Folow ontwi er:mrlandtrust Folow onfacebook:realestateforprofit

Transcription

1 LAND TRUSTS MADE SIMPLE! TM TM MustReadReport! ProtectYourAsset!Don tbuyanother PropertyUntilYouReadThisReport! VisitMyWebsite ScanTheBarCode Folow ontwi er:mrlandtrust Folow onfacebook:realestateforprofit

2 DISCLAIMER This publication is intended to provide accurate and authoritative information with regard to the subject matter covered. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be retained. From the Declaration of Principle jointly adopted by committee of the American Bar association and a committee of Publishers and Associations Every effort has been made to reflect current tax law and interpretations as of the date of publication of this book. However, this is a dynamic field of endeavor in which new laws are enacted, old laws precede case laws, Revenue Rulings, Treasury Policy and tax laws are constantly changing. Readers are advised to proceed with caution before implementing the strategies contained herein and to consult with appropriate professional advisors prior to committing time and financial resources as a result of the material contained in this book or in the seminar from which it was obtained. It is for instructional purposes only. ALL RIGHTS RESERVED Investment Seminars, LLC, Wyoming All rights reserved. No part of this booklet may be reproduced or copied, stored in any information retrieval system or transmitted in any form or by any means without the specific written permission of: Investment Seminars, LLC, Wyoming 1

3 LAND TRUSTS MADE SIMPLE (One piece of Armor) Much has been written about land trusts. What are they? What do they accomplish? Why would anyone go to the trouble or expense of using a land trust? A trust is nothing more than a piece of paper. With this legal document (known as a TRUST AGREEMENT) you transfer the ownership of property to a TRUSTEE. A trustee can be a friend, business associate or institution (i.e. a bank, title company or law firm). The trustee technically "owns" the property and is shown as the owner of record at the county seat. However, the trustee cannot do anything with the property unless directed to do so by the BENEFICIARY. The beneficiary of the trust agreement is usually the person who put the property into trust to begin with. The identity of the beneficial owner is held privately, protected from the public eye in the Trust Agreement which is not a public record. The beneficiary retains the right to full management and control of the property. The trustee executes deeds, mortgages or otherwise deals with the property at the written direction of the beneficiary. The beneficiary collects rents (if the trust holds title to rental property), improves and operates the property and exercises all rights of ownership other than holding or dealing with the legal title. When the beneficiary dies, the trust does not cease (or die with him/her). The trust continues on for the benefit of the SUCCESSOR BENEFICIARY. 2

4 As a result of this almost continuous life, a trust by-passes probate upon the beneficiary's death. Thus giving privacy to the transfer of assets after death. Trusts can hold real estate, notes, options, mortgages, or leases. The cornerstone of asset protection is financial privacy. Financial privacy begins with not making public the extent of your holdings. Trusts provide privacy by taking ownership of assets out of your name (or preventing them from going into your name to begin with) and keeping you out of the "public eye." If someone does get a judgment against you, they cannot levy against your trust. There are numerous types of "trusts" that have been used in our country over the last 200 years. In fact, LAND TRUSTS and the law behind them followed the settlers over from England. Almost 500 years ago in medieval England, land trusts were used by the common man, "serfs", to protect their property rights from those who were in power at the time. Trusts served not only to protect assets, but also to avoid taxes and laws of descent. Even though King Henry VIII tried to bypass the use of trusts (to prevent serfs from holding title to property in "trust" and avoiding the responsibilities of land ownership), the medieval courts of England (and most courts since) have upheld the use of land trusts and the rights of their beneficiaries. This report will concentrate on the unique benefits of using land trusts. Other types of trusts such as: Testamentary, Inter-Vivos and Business Trusts will not be explained here due to the limited space available. Land and the improvements built upon land have been the most exposed evidence of wealth since man began accumulating assets. Imagine walking out to your mailbox 3

5 one breezy Saturday morning and finding a letter from a local shyster (contingent fee lawyer). The gist of the letter is that you are being sued for 1.2 million dollars because one of your tenants in your 10 unit apartment building was broken into, robbed and beaten by an assailant. The negligence claim against you includes pain, suffering, medical bills, legal fees, loss of income, personal property replacement, and perhaps long term disability payments. How can you protect yourself from unwarranted lawsuits? Read on, serf. Now, just because you have put your apartment building into a land trust doesn't mean that you will not get sued. But, let us analyze what protection a land trust affords the landowner and how this type of ownership could slow down the legal eagles swarming around your assets. First, in a land trust, you do not hold the title to the property (as is typically done by most property owners). Your Trustee is the "owner" and therefore, his/her/it's name appears on the local county registry as the owner of said 10 unit building. This is your first line of defense. NEVER OWN PROPERTY IN YOUR OWN NAME! (Unless it is property you do not mind losing--which may be an intentional move on your part). The trust agreement (signed by both the trustee and the beneficiary) spells out the rights and duties of the parties involved. All the benefits, rights, and powers of ownership are retained by the beneficiary. Different types of property can be placed into a land trust including but not limited to; land, improvements, leasehold interests, options and a variety of personal property. The distinctive feature of the land trust is 4

6 the separation of ownership from the rights of ownership. It must be emphasized that a trustee for a land trust is NOT an agent of the beneficiary in any sense under the law. Once you have placed each of your properties (or individual assets---it does not have to be real property) into its own individual trust, you have at least removed yourself from the public eye. Now, do not thwart this move by bragging to all of your friends about the 10 unit building you own over on Main Street, USA. Keeping the knowledge of your assets private is your second step to concealment and therefore, protection from unwarranted litigation. Beware! When you first acquire property is the time to place it directly into a trust. Do not put the property into your own name first! This way no record of an individual's ownership exists in the public record. However, if your property is already in your name now, it is still better to transfer the ownership into a trustee's name then to leave it in your own name. When placing your property into a land trust you will need the services of a trustee. The best trustee is a private individual that lives in a state other than yours and certainly lives in a state other than where the property is located. Also, please understand that YOU DO NOT HAVE TO LIVE IN ILLINOIS TO USE AN ILLINOIS TYPE LAND TRUST IN YOUR STATE! The reason why you want each property in its own individual trust is for the utmost protection of each asset. Should someone get a judgment against you it will be much harder (and a lot more expensive) to attach each and every trust. If all of your assets are located in one trust, it is a slam dunk for your opponent, once he gets his judgment 5

7 against you. Remember, the name of this "game" is: delay, delay, delay and make it as difficult and expensive as possible on your adversary. You might consider being the trustee for property owned by your out-of-state trustee, so you can help each other out---and save trustee fees (that is right, you CAN use another state s trust laws when putting property into your land trust). Now, when your adversary s attorney goes looking for the "owner" of the property to set his lawsuit in motion, he will have to find out who the beneficiary is. This process of looking for the real owner is one in which you want to put up as many obstacles as possible. You are trying to slow down the process and make it expensive to reach you and your assets. These are the types of techniques I teach in my Land Trusts Made Simple Basic course. Ultimately the property itself can be reached in a lawsuit (even with an out-of-state trustee), but your plan should be to stay as far away from the eye of the storm as possible so they do not reach any of your other assets. A judgment lien levied against your individual 10 unit building is one problem. But, a judgment rendered against you--in your personal name, is a much worse situation. The next important piece to the land trust puzzle is the DIRECTOR of the trust. When a deed is prepared conveying a property into a land trust, the deed must state that the trustee is merely holding title to the property without any rights to mortgage, lease, convey, exchange, option, barter, etc. Without written direction from the beneficiary or someone he has appointed, the trustee cannot act and nothing can happen. However, if the beneficiary designates a director to act on his/her behalf, then the fun begins. 6

8 The length of tenure and limits of authority can be restricted for the director in the land trust agreement, thus insuring no abuses would occur. After the term of the director has expired, the power of direction can automatically pass to the SUCCESSOR DIRECTOR or revert back to the original beneficiary. It is important to maintain a director for your trust if you want "control" of your trust out of your hands and in the hands of someone you can trust. It is possible for one person to be all of these people: trustee, beneficiary, and director. Hopefully by now you can see the disadvantage in such a structure. Oftentimes lawyers recommend that the trust be named after the owner such as, THE JOHN DOE LAND TRUST and that the owner fill all the positions mentioned above. If your lawyer suggests this, get a different lawyer (preferably one that has actually studied Land Trust law longer than one hour). Your director should be chosen as carefully as your trustee. Again, if you have developed friends that understand "the program", you can all help each other and accomplish the privacy you are seeking. Once you begin to understand land trusts you will discover that you really do not even need to name a trustee when forming a trust. You can just give the trust a name (what's in a name?--see below) and "wing it" until such time as you need to deed the property back out of the trust. These are the types of techniques that I teach in my Land Trusts Made Simple Advanced course. Again, your director should ideally be located in a different state (and use a P.O. Box address) than the rest of your "group." If this is not possible at least select your director from another city than yours. All of these positions that we are discussing 7

9 should have successors listed in your trust agreement to insure the orderly passing of power, according to your desires. It is extremely important to keep the trustee and the director legally separate. The trustee should never do anything with the trust assets unless directed to do so by the director through a Letter of Direction. If you don't have confidence in a single director, you can create a Board of Directors. Thus you can require a majority vote before any action is taken (direction given to the trustee). You might select some relatives and some non-relatives to serve as co-directors. Or you might put some of your heirs on the board of directors to initiate them into the world of land trusts (so they will be familiar with the subject matter when it is their turn to "take over the reigns"). Whatever you do, be sure that you can trust your director(s) implicitly and select someone who is of a like mind as yours. If no such person is available to you, then you can be the director of your own trust. The appointment of a director is a private nonrecorded act that need be publicized only when made necessary by an act of the beneficiary (you). So you can still retain control in a very indirect way. States have different laws when it comes to the use (and abuse) of Land trusts, but Illinois is by far the Granddaddy of them all. Illinois actually developed the modern day "land" type trust from English common law; however, specific statutes in other states permit the existence of land trusts. 8

10 When properly drafted, land trusts can be used in most all states. However, some states are smarter than others so, check your own state laws. For example, in some states you can avoid the transfer tax levied on real estate transactions by placing your property into a land trust and then selling the beneficial interest in the trust. But, other states have passed laws requiring notification of the taxing bodies if even a part of a beneficial interest is transferred (i.e. Illinois). This way they can not only charge you a transfer tax, but also increase your real estate property taxes as a result of the new sale price. Fortunately no state has yet been able to figure out a way to tax the sale of an OPTION on a beneficial interest. Options are extremely private transactions and will be addressed in future reports. When financing property held in trust, a commercial lender will (if they are smart) require an assignment of the beneficial interest and an assignment of the power of direction. This effectively gives the lender control of the property and prevents any funny business by the beneficiary. Obviously, dealing with a commercial lender violates your confidentiality as the beneficiary. Although by having your trustee sign the note and mortgage (and you just signing the assignment forms and guarantee), you at least will not have your name published in the local county recorder when all the documents are filed. In other words, no one will know that the property is yours and that you are placing financing on it. One of the most important concepts to place in your land trust agreement is the restriction on your trustee to never reveal the name(s) of the beneficiaries nor their locations. You can also prevent the trustee from revealing the location of the 9

11 beneficiaries or releasing a copy of the Trust Agreement without written permission of 100% of the beneficiaries, or a written court order that contains an indemnification clause protecting the trustee from a lawsuit for "breach of trust." Now, if too much pressure is put on your trustee, his only alternative is to resign as your trustee--thus keeping your confidentiality. Furthermore, if your trustee is out of state and only has a P.O. Box for an address, it is going to be very difficult to find him to begin legal proceedings. It is not illegal to operate under a "fictitious" name. Just fill out a simple form at your county court house and viola--you're someone else! Imagine that your trustee is operating under a fictitious name and your trust is operating likewise. This will drive the process servers crazy!! 10

12 What s in a Name? What is so important about the name of your trust? Most trusts formed by institutions (Banks, Trust Companies, Title Companies) are given very predictable names like, NSB Trust # This name is an abbreviation for the Nevada State Bank Trust # Everyone in Nevada (especially the lawyers) knows that whenever they see NSB before a trust name and number, that the trust is located at the Nevada State Bank. So, why don't we just help out all those benevolent lawyers and name our trusts (if we live in Nevada) with the NSB prefix? (But keep the trust privately held instead of by the NSB bank.) This might keep those lawyers busy for a long time while we relax at the beach, secure that our Land Trust will never be located. If you do not live in Nevada, maybe you should use the name of a local institution that does a lot of trust business. Be creative, let your mind wander. When attorneys are setting up private trusts they like to use family names and some of the dumber attorneys even use a person's Social Security number (can you imagine that?). So, a trust might read, "The Smith Family Trust # " Once again, I think that we should follow suit with those trustworthy lawyers and do as they do. The only difference is that if your name is Jones and you call your trust "The Smith Family Trust, you might throw those hounds off track for a while. If you also used a trust number that looked a lot like a Social Security number, they could spend months trying to track down the trust's true owner. If you are real creative you might use a name for your trust that is real close to the name of a very powerful 11

13 and influential person in your area. Perhaps someone who you know gets "preferential" legal treatment because of their money, power, influence, social position, age, and heredity or property holdings. Now, here is a point that 99% of the attorneys do not know or understand (you might even have to explain this to the judge). When the beneficial interest of a land trust is transferred to a new beneficiary, it has the effect of canceling the power of direction too (which automatically would be transferred to the new beneficiary). However, since the power of direction has been deemed (by case law) to be an interest in property, it can be conveyed under specific trust terms to a 3rd party--irrevocably-- until some future event transpires (like a minor growing up) and the beneficial interest can so state that acceptance of it by anyone else is subject to those prior conditions. What this means in English is that if someone were able to persevere long enough to have a court take your beneficial interest away from you and give it to your creditor, the real power (over the property) vested in the trust would still be held by your appointee. Chances are your appointee will not make decisions favorable to the new owner. What if you held the power of direction over your spouse's trusts and your spouse held the power of direction over your trusts? Can you see where this might be advantageous? A stable, cooperative marriage would obviously be needed. Beware of legislation enacted in recent years in many states that could allow a creditor to breach a trust document like a knife through butter! The law is commonly known as 12

14 the Fraudulent Conveyance Act. Under these laws, a creditor, both present and future, may set aside a transfer or obligation incurred by the debtor if the debtor made the transfer or incurred the obligation to hinder, delay or defraud creditors. As we already know, the definition of a creditor is someone who has a claim against us. We also know that a claim is a right to payment. The payment right can be reduced to a judgment, liquidated, un-liquidated, fixed, contingent, matured, un-matured, disputed, legal, equitable, secured or unsecured. The question here is what was the debtor's intent in transferring the property? The criteria are commonly referred to as the "Badges of Fraud" and are relevant evidence. Once the intent to hinder, delay or defraud creditors has been established, it becomes almost impossible for the trust document to avoid successful action by a present or future creditor with judgment in hand. The trust is then breached for all intents and purposes. What can you do? First, place all of your properties (or major assets) into separate trusts before any trouble starts. The longer the time lapse between placing the property into trust and possible litigation, the safer you are in defending your position. And speaking of your "position," the second defensive action you can take is to NEVER, NEVER, NEVER tell anyone that you placed your properties into trust "to protect your assets." Your reason for putting your assets into trust should be for other reasons like; 1) educational fund for your children 2) estate planning purposes or 3) tax planning. You can see that with a little creativity and "off-track" thinking, you will be able to 13

15 protect your assets and your family privacy. Just do not expect anyone else to do it as effectively as yourself. If you find yourself needing more detailed information and instruction, about Land Trusts, Privacy, Asset Protection and Identity Theft Prevention attend one of Randy s training classes. All seminars are advertised at: If you cannot attend a training seminar, the next best thing are my home study courses. You can buy my Land Trusts Made Simple Basic and Land Trusts Made Simple Advanced home study courses as downloads from my website at: or If you have questions and just want to talk about Land Trusts, give me a call Randy Hughes, Mr. Land Trust 14

16 LANDTRUSTSMADESIMPLE! TM Hisfatherwasanalcoholicwhochargedtheweeklygroceriessothatthe familywouldhavefoodonthetable.therewasnostableincomeforany futureeducationmuchlesthecurentneedsofthefamily.nointelectual or nancialdirectionwastaughtinhisschoolorchurch.nobloodrelatives hadanythingtoofferotherthan"workingfortheman"foranhourlywage. Banksavingsand nancialsecuritywaswhatonlytherichhad.hewas doomedfor nancialfailureandunhappinesfortherestofhislife.randy knewthattheremustbeabeterwaytolive. Randydecidedtobreakthecycleofpovertyinhisgenes.Educationcame rst.hebeganbuyingsinglefamilyhomesforrentalwhileincolege.after hegraduatedfrom colege,hetriedmanydifferenttypesofbusineses,but alwayscamebacktothesinglefamilyhomeastheidealinvestment.since purchasinghis rstrentalhousein1969,randyhasn'tlookedback!today, Randyhaspurchasedover200houses.Hehaslivedthelifeofhavingnothingandwilnotletthathappenagain. Hisprimarygoalnowistoteachothershowtoconcealandprotecttheir asets.hehaswritenbasicandadvancedlandtrusthomestudycourses, PrivacyandAsetProtectionCoursesandisthefounderoftheLandTrust University in Ilinois.Randy writes formany nationalpublications.heteachesliveseminars personalytohelprealestateinvestorslearnhow tosetupandadministertheirownlandtrustsfor privacyandasetprotection. CALLMETODAY (866) Mr.LandTrust InvestimentSeminarsLLC.