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December 20, 2023 | Becoming Invisible, Part 11: Privacy Land Trusts

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What To Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website DollarCollapse.com in 2004 and sold it in 2022.

The Nestmann Group is doing great work on privacy-related topics like second passports and offshore investing. Here’s their take on “privacy land trusts” that make it possible to own real estate anonymously — which sounds useful in this increasingly litigious, authoritarian world.

What is a Land Trust and How Does it Work?

(Mark Nestmann) – You may have heard of a Land Trust and wondered if this structure is right for you. The answer is, it depends. Land Trusts come in several different forms, but here we’ll cover a trust that holds title to a specific piece of property in a manner designed to protect the privacy of the buyer.

A Land Trust designed for privacy has three parts:

Grantor / Settlor: This is the person transferring the land into the trust. That’s you.

Trustee: This is the person who acts as the legal representative for the Land Trust. Because property ownership is public record, the lawyer who drafts the trust usually serves as the trustee to shield you.

Beneficiary: This is the person (or people) who benefit from trust assets. It’s usually the person setting up the trust. But family members can also be named as beneficiaries.

Why Set up a Land Trust?

There are a lot of supposed benefits on the Internet to this type of Trust, most of which are wrong (and often confused with a Living Trust).

Basically, a Land Trust is useful if you want to accomplish the following…

#1: Keep your ownership interest anonymous

For instance, in Illinois, Land Trusts originated as a way for wealthy business owners and politicians to purchase property anonymously.

The buyer and seller make a private agreement in which the seller conveys ownership of the property to a trust set up by the buyer, rather than to the buyer directly.

The buyer’s identity is protected in this manner.

The buyer appoints a trustee who will appear as the property owner on all official documents. But the trust names the buyer as the beneficiary and gives them effective control of the property.

The trustee can only make transactions or significant decisions about the property when directed to do so by the beneficiary.

There’s no public record of the trust agreement containing the name of the beneficiary.

Whenever someone—journalist, competitor or someone who just doesn’t like you—looks up the address, they won’t find you. All they’ll see is the name of the Land Trust.

In some cases, the lawyer serving as trustee resigns and names the beneficiary – you – as the replacement trustee. This change doesn’t have to be publicly registered.

But whoever the trustee is, they have a legal responsibility to ensure that beneficiaries get full benefit from the assets in the trust.

#2: Estate Planning

As mentioned above, the beneficiary of a trust is the owner of the property themselves. But it’s possible to add extra beneficiaries like your children.

This will allow the asset held in the trust to move onto the next generation without having to go through probate.

And avoiding probate will help the kids (or whoever you want to give the land to) avoid fees and long court proceedings.

#3: Asset protection from creditors (sometimes, maybe, probably not)

There’s a lot of information about how Land Trusts can be used for asset protection.

Frankly, most of this is untrue. We’ve found articles that claim that Florida Land Trusts offer some protection in some cases, but we’re not aware of any case law and aren’t convinced by the claims we’ve read.

If asset protection is your main motivation, there are better options out there depending on which state you live in.

About the only way to add asset protection to a Land Trust set up is to take possession of the property through an LLC that is owned by your Land Trust.

But this is an advanced technique and should not be done without the help of a qualified professional. And there are some disadvantages you need to know about first.

Pros and Cons of a Land Trust

We’ve already covered some of them, but to summarize:

Advantages

Anonymity: In some states, Land Trusts can form a useful barrier between you and snoops.

Avoid probate: A Land Trust – like any trust including the more common (and often confused with) Living Trust – will bypass the hassles and costs of probate.

Asset Protection: To the extent asset protection exists in a Land Trust, it’s because a creditor might not realize you own a particular piece of property. But there are better options.

Disadvantages

It can be tough to get a mortgage

Other than Illinois, banks in most states don’t like property held in Land Trusts and don’t know what to do with them. Because of this, they might not be willing to give you a mortgage, or if they do, they might force you to do so in your own name, which destroys the privacy of the structure.

It can be tough to get banking services

Banks need to know who their customers are. The anonymity of Land Trusts makes that hard. The banks may just refuse to offer their services as a result.

Setup Fees

You’ll need a lawyer to draft the trust agreement. If you have a third-party trustee, that’ll be another few hundred dollars a year minimum.

Unintended Results

If you don’t follow “the rules”, you might end up creating trouble for yourself.

Maybe you accidentally do something that ruins the privacy aspect… like getting the utility bill in your own name instead of the trust (because it’s usually easier). Or it could be more serious.

Arizona, for instance, does not see any difference between a “normal” trust and a Land Trust. Indeed, an Arizona land deed that names a trust as buyer but doesn’t disclose the name of the beneficiary is null and void.

That means, in the worst case, you’ll have a situation where you don’t actually own the property you’ve paid for.

So if you move ahead, just be sure to:

  • Have an advisor who will help you figure out if this is the best structure for you.
  • Work with that advisor to make it fit your circumstances.

There’s much more. Read the rest here.

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December 20th, 2023

Posted In: John Rubino Substack

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