Do you know
There are two essential documents
every investor needs when they're setting up a land trust.
If you didn't, then watch this video because I'm going to go through
what you need.
If you're going to create a land trust and make sure you can sell
that property in the future and take care of your investments.
All right. Let's get started.
Okay. So here's the deal.
I was recently approached by an individual who had set up multiple land trusts
with another law firm. And these land trust.
Okay. Documents that have been created.
But they were missing two crucial documents
that need to go with every land trust.
One, it's getting created
to ensure that the individual who is transferring property into the
trust is going to be able to effectively dispose of that property in the future.
Or if they wanted to revive the property, that they're not going to cloud
title to the assets that are held in that trust.
And what am I getting at here?
Let me just show you basically what we're talking about with a land trust.
So one of the reasons why individuals like to create
land trusts as real estate investors is for anonymity.
All right.
So we want to hold title to our property and not have our tenants know
that we own this property because it's no longer in our name.
So an easy way to do that, then, is to create a trust.
So we create a land trust here.
And let's say we have this individual over here.
His name is Ben that owns this property.
Well, he sets up the 1 2 3 main trust.
So that's the name of the trust that we've created.
But the thing is, is that Ben cannot be the trustee of his own trust,
because when you transfer title into a trust and you want anonymity,
you can't put your name on as trustee of this trust or that is the initial trustee.
So what we'll do is we use a nominee trustee and that is
someone other than Ben.
And many times you'll end up using an attorney.
I've served on thousands upon thousands, I don't know, probably 12, 13,000
different trusts.
My name appears on as a nominee trustee
to your point, your initial trustee, that's also how we refer to this,
you know, an attorney or maybe you're using an LLC.
So in my case, I would say Clint Coons,
trustee
of the 1 to 3 main trust.
And so I'm listed there as the trustee on this trust.
Ben's going to be appointed the beneficiary.
So he's the owner of the trust down here.
So it's the the trust beneficiaries.
Ben, on the initial trustee.
Now, Ben understands the reason we're doing this is so that
when we did the property from Ben's name into the trust,
he will no longer appear on title because Ben was the guarantor on the deed.
The grantee,
the person who's taking title is Clint Coons as trustee of the main trust.
So there we go.
Now we have anonymity of ownership.
Ben, you're no longer the owner.
No one knows this because the trust agreement is not recorded anywhere.
That's how we maintain that privacy.
Now, obviously,
as the trustee who is listed on that trustee agreement,
I don't want anything to do with the trust.
I'm there just to help Ben out, to get him the anonymity
and once that's accomplished, I resigned my position and Ben
is listed in the trustee agreement as a successor trustee.
So upon my resignation, he steps in and now he's in control of the property.
So all of that works.
Now, this is where we get to the point where the individual or the attorney
that drafted these trusts for this client of ours made two crucial mistakes.
And if you're setting up a land trust, do not make these mistakes.
If you're doing exactly what I'm describing here.
So what is the first mistake that was made?
The first mistake was in the resignation
on that trust.
So in the actual trust agreement itself, it stated that upon
the funding of the trust, the trustee shall resign their position.
Now that's in the body of the trust.
And in my experience, what you need to do when you're dealing with title,
they want something more substantial than that.
They want to see that the trustee actually
had the intent to resign their position.
It's typically not enough just to put that predatory language
in a trust agreement and assume that a third party is going to be there.
So when it comes to the resignation, you want a separate
document
from your trustee.
Okay.
So every time I resign my position, I draft up a resignation letter.
I state that
I resign my position as trustee, and then I'm turning it over
to the successor trustees.
And I sign that document and I provide it to my client.
So what it shows there is that, yes, I had the intent to resign my position
in that trust, and I no longer want to be a trustee of that trust.
So I think that's really important as well.
I was recently dealing with a client
who was selling property in the Trust, and that is what the title company
wanted to see that I had formally resigned my position.
Okay, that's important.
But the most important document you're going to need
is a trustee deed.
All right?
This is crucial.
And if you don't have this, you risk clouding title to your property,
making it difficult to sell in the future or do a refi now.
What is a trustee deed, a member?
In my example, what Ben did is Ben deeded the property from his name
to Clint as trustee.
Okay, so I'm on title and if Ben tries to refinance his property
or sell this property, the title company is going to wonder, where is Clint now?
Ben can give him my resignation.
You might think that's sufficient.
My experience that only works about 10% of the time.
And so relying just upon a resignation
to put you in a position where, yeah, you're control
of this trust in a title company is going to look at it and say, oh, I see here.
Yeah, Clint resigned and you're the successor trustee.
So yeah, we'll just allow you to deal with the,
the asset and we'll accept that doesn't happen very often.
So you need to cover your bases
in a resignation or a trustee deed.
What that does for you is it's a deed from the trustee
back to Ben as a successor trustee
to every time a trustee, a nominee
trustee resigns after title has been taken in the trustees name.
So it says Clint Kunz, trustee of the main trust.
What I end up doing and what you should get from your nominee
trustee is all draft a new deed called a trustees deed.
We'll say Clint as trustee
of Main Street Trust
hereby conveys blah, blah, blah to Ben
as successor trustee of the Main Street Trust.
And I give that to Ben.
I sign it, execute it with all the required formalities of a deed,
and I provide that to organize it.
Here's your trustee's deed, Ben.
Hold on to this deed.
And then when you're ready to refi the property or sell the property,
if you have run into any problems by just providing the resignation letter,
and they won't accept that and they want to see your name on title,
you can now record this deed and it will put your name on title
because I deeded the trusteeship back to you.
This document
is crucial.
It has happened before.
I've dealt with clients
that have been trying to sell property or refinance property.
The person that they use as their nominee trustee is disappeared.
They can't find them and they get stuck and they have to open up
a legal proceeding to clear title to your property.
So if you're dealing with someone who's setting up a land trust for you
or you're going to set up your own land trust, make sure if you're
using a nominee trustee, you always prepare a trustee's deed.
It's going to protect you down the road.
Hey, guys, if you like the video, smash the like button.
And if you want to join me
at one of my upcoming tax and asset protection workshops, it's a free event.
One day event, I got a link right down below.
Go ahead and check it out.
You'll get all your questions answered when you come there.
They're bringing together
attorneys and CPAs, and we go really deep into business entities and tax planning
for real estate investors. Baker
Uh.