Realty411 Magazine Featuring Eric Counts, Credit Nerds | Page 81

There are lots of ways to
hold the Beneficial
Interest in a Land Trust
(i.e. individually,
through another entity or via the
Trustee of another trust). This article
will concentrate on using a Limited
Liability Company (LLC) to hold
the Beneficial Interest in a Land
Trust and the many benefits of this
strategy.
Just because you put your property
into a Land Trust does not mean you
have avoided all liabilities stemming
from that property. The liability from
property held in a Land Trust flows
through to the Beneficiary of the
Trust. This is why most real estate
investors (holding title to investment
property in a Land Trust) make the
Beneficiary of their Land Trust, an
LLC.
Linking the Land Trust with the
LLC is a good structure that yields
the privacy (of ownership) benefits
from the Land Trust AND the asset
protection benefits of the LLC. The
basics of asset protection is rooted in
privacy and the most inexpensive
(and effective) way for real estate
investors to obtain privacy is through
the use of a Land Trust to hold title.
Unlike all other forms of holding
title, the Land Trust is NOT
registered anywhere on planet Earth!
This prevents everyone from
Using a Limited Liability Company
As The Beneficiary
of Your Land Trust
By Randy Hughes, Mr. Land Trust
“looking you up” via the internet to
determine your assets (and your sueability
potential). Yes, most attorneys
will try to determine your assets prior
to suing you to make sure if they win
their lawsuit against you, they will get
paid (thus, your “sue­ability
potential”).
Not holding title to real estate in
your name will help you avoid 90%
of potential frivolous lawsuits. The
remaining 10% of potential lawsuits
can be effectively dealt with at the
Beneficiary level with your LLC.
However, many real estate investors
are under the mistaken assumption
that all LLC’s are the same when it
comes to asset protection. THIS IS
NOT TRUE! Single­member LLC’s
are particularly vulnerable to
attack. Here is why. Real estate
investors use LLC’s primarily
because they seek the protection of a
Charging Order in case of legal
attack.
A Charging Order is the remedy a
creditor uses to place a judgment
against a Limited Liability Company. A
judge may award the creditor the rights
of an assignee (distribution of profits)
but not the membership interests of an
assignee (ownership). The judgment
creditor as assignee therefore cannot
force distributions, maintain
managerial rights, or exercise any
measure of control over the Limited
Liability Company. Additionally, the
judgment creditor is obligated under
IRS Revenue Ruling 77­137 to report
and pay taxes on their share of
income regardless of whether such
earnings are distributed or retained!
The charging order protects LLC
owners and investors (that were not
involved in the litigation that produced
the “assignment” to the creditor) from
the creditors of a debtor owner.
81