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Most people at some point in their lives will own their own home. Not only is your home probably your biggest investment it is also your greatest potential target of exposure for a lawsuit. This is especially true if you are among the many Americans who are self-employed and operate as a sole proprietor, or a partnership. Most people who operate in this capacity are at least somewhat aware that they expose their own assets, and are personally liable in the event they are sued. One lawsuit can wipe out a lifetime of hard work building up equity in your home, and or investment properties. The good news is that you can take a few easy steps to help protect your assets. The first step in this process is to hold title in all your properties in a “Illinois-type” land trust. Commonly referred simply to as a land trust. What exactly is a land trust? A land trust is simply an entity with which to hold title for your real estate. Practically speaking a land trust comprises of a deed that moves the asset from the owners name into the trust, and the accompanying trust documents. A land trust is often confused with a living trust. They are not the same. In fact, it is very different then a living trust in that a living trust often holds ownership to multiple asset classes such as stocks, real-estate holdings, bank accounts and such. Where as a Land trust simply holds title to your real-estate assets. Privacy is the main benefit The primary benefit to holding title in a land trust is privacy. That is because no place on the deed, which records a piece of property into a land trust, is the name of the actual homeowner. Instead the deed to a land trust is recorded in an arbitrary name. For example if Jim Jones owned a house located at 324 Main Street he could name the trust the “Main Street Trust.” He would then name anyone other than himself as the trustee, otherwise known as the custodian of the trust. I should note here that the trustee could be anyone whom the homeowner has trust in but has a different last name. The homeowner could also name an entity such as his corporation, or LLC as a trustee. This is powerful because nowhere on the deed is Mr. Jones’ name listed for public consumption. Jim Jones however would hold the beneficial interest in the land trust through an important silent, or non-recorded document called an “Assignment of Beneficial Interest”. Thus avoiding having your name on public record. Unlike a living trust, a beneficiary in a land trust for all intents and purposes directs or maintains control the property. It is the beneficiary who calls the shots not the trustee. The trustee is simply the legal owner in name only, and has virtually zero authority to do anything unless directed to do so by the beneficiary. A trustee acting unilaterally would be acting in a fraud manner, and not in accordance with the land trust document. How does a Land trust protect the property owner? The land trust acts as a first line of defense in your real estate holdings because a property owner will typically not know they are being sued until you are actually served a court summons notifying them there is a pending lawsuit. It is important to note that before service was executed the litigating attorney probably conducted a basic asset search on the homeowner. Since most people hold title to property in their own name it is very easy to determine if someone has sufficient assets and or equity in their house to pursue a lawsuit. A Land trust will often stop dead in their tract the prosecuting attorney. The logic being that an attorney will not risk pursuing a lawsuit if they cannot find sufficient assets on public record to attach against a judgment. Therefore it is easy to see how an Illinois-type land trust is your first line of defense because the homeowners name does not show up on title. In other words no one would know you control your property. Are you confused yet? Without getting into too much detail in this article the main point to understand is that the land trust holds title to the property. The custodian to the land trust is the trustee. Only the trustee’s name is on public record. However, the land trust document clearly states the trustee has no authority to conduct any business on behalf of the land trust unless directed to do so by the beneficiary (The real homeowner). Therefore it is the beneficiary that holds all the power to the property. The beauty to this arrangement is the document that names the Beneficiary commonly called an Assignment of Beneficial Interest is a silent document and is never seen by anybody other than the trustee. Therefore the beneficiary is NOT on public record. No one knows who the beneficiary is and no one can ask unless there is a court order to do so. This is a beautiful arrangement because essentially no one knows who the real owner of the property is. Is a Land trust Legal in my state? Yes, this method of holding title to property has been around since the mid 1800’s and is legal in all fifty states. Most real estate attorneys might insist otherwise but they are factually incorrect. The Illinois-type land trust is the only true method for any property owner to hold possession of real estate. In my next article I will go into some of the other nuances and benefits of a land trust as there are many. Happy ownership to all and remember to keep your real estate holdings private from public consumption.
Article Source: http://www.realworldtactics.com/articledirectory
Michael Cressey is a full time Entrepreneur and Real Estate investor. He specializes in developing passive income producing business models. Visit him at www.myspace.com/freedom2livelife and learn more about him, or for more information please go to: www.mybestwayout.com.
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