In this episode of Coffee with Carl, attorney Carl Zoellner explains how you can achieve asset protection when using land trusts.

Updated September 21, 2021

If you tuned into the last episode of Coffee with Carl, you already know the basics of using land trusts with real estate investing. You also know that land trusts do not provide asset protection.

Basically, land trusts are title-holding vehicles. Using a land trust essentially puts a property into a box. You can then move the box around wherever you want. The named beneficiary designates who has the ability to ‘move the box around’.

This is how it normally looks with the county recorder’s office when you put a property in the name of a land trust: since the property was most likely in your name to start, the records list you as the grantor. When you file the land trust with the county recorder’s office, the records should also list the grantor as the beneficiary.

A note on this: you want the land trust documents to look as clean as possible when filed. This prevents any needless delays or red flags.

Asset Protection

Now, the real question is: how can I have asset protection when using a land trust?

Normally, you protect your assets by putting them in an LLC or another business entity. Since land trusts don’t offer asset protection, you need to assign the trust’s beneficial interest to something that DOES provide asset protection (i.e., a business entity).

Thus, the next question is: how do I change the trust’s beneficiary from an individual to an entity?

The answer is: with a simple form. If we created your land trust here at Anderson, then we’ll even populate the form for you so all you have to do is sign. What the form entails is an assignment from the original beneficiary and an assignment to the LLC. If you’re a manager of that LLC, you’ll sign an acceptance of assignment. This means that you’re allowing that property’s interest to be held by your LLC.

And just like that, the process is complete. Now, you have asset protection for that property held in a land trust.

The county recorder’s office does not document the assignment of beneficial interest. It’s not public information. Because of this, I recommend taking the assignment of beneficial interest form to a notary. Having the form notarized evinces the date. This way, if you’re ever sued, you have third-party verification that you didn’t assign the interest upon learning of the lawsuit.

Watch as Carl explains how to have asset protection when using a land trust.

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Got an idea for a future Coffee with Carl? Send it to Carl at cwc@andersonadvisors.com.

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