It is fascinating to me that real estate starts out as personal property ( boxes of ceiling tile , carpet , lumber , etc .) and once it is assembled it becomes real estate . Then , when we place the property into a Land Trust , it again becomes personal property to the beneficiary of the trust . Why is this important ? Real estate laws and personal property laws are different . As all of my students know by now , the beneficial interest in a land trust is personal property and there are significant advantages to this truth .
When a piece of real estate is held in a Land Trust and the beneficiary sells the beneficial interest , this is a nonrecorded transaction . It is completely private and off the radar screen of tax assessors , lenders , transfer tax revenuers and in some states ( i . e . CA ) sales tax withholding requirements . You even bypass the Form 1099 requirement ( you still must pay any taxes due eventually ).
Once transferring property into a Land Trust , the Deed in Trust must include language that makes it clear that the beneficial interest in the trust is personal property . Likewise , the Land Trust Agreement should state that the beneficiary shall have no rights or interest in either the legal or equitable title to the property . The beneficiary ’ s sole interests are to the
rights of management , control , operation and to the receipt of proceeds from rents , mortgage financing , sales and exchanges .
Most rental real estate investors make the beneficiary of their Land Trusts an LLC or corporation ( for additional asset protection ). When an entity holds a beneficial interest , it should make sure not to lose its legal standing in the state it was formed . Not keeping the LLC or corporate uptodate ( e . g , paying the annual franchise fees and state taxes ), effectively causes the beneficiary to lose the rights to the beneficial interest . This is another good reason to designate Successor Beneficiaries even if your initial beneficiary is an entity .
After 46 years of investing in real estate and being a landlord , I can attest to the many benefits of using a trust to hold title instead your name personally . There are only risks and no rewards to owning real estate in your name . Crazy things happen in the real estate business and if you intend to succeed long term , you must learn how to protect your hardearned assets . The least expensive and easiest way to begin your asset protection plan is by using a trust to hold title . Be a smart investor , use a trust !
I encourage you to learn more by going to my FREE online training at :
www . landtrustwebinar . com / 411 or text “ reasons ” to 2062032005 for my free booklet , “ Reasons to Use a Land Trust .” You can also reach me the old fashion way by calling me at 8666967347 ( I actually answer my own phone unlike most other businesses in America ).
When a piece of real estate is held in a Land Trust and the beneficiary sells the beneficial interest this is a nonrecorded transaction .
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