What's up, guys? Hey, it's Clint Coons here.
And in this video, I want to discuss trustee liability for land trust.
Are you at risk?
All right, let's get started.
So here's the deal.
I hear this a lot when it comes to setting up a land trust
and we talk about being a trustee.
People assume that, hey, if I serve as the trustee of a land trust
or I set up an entity or I use an existing entity, I have that
somehow I'm going to be held liable if something goes wrong.
For example, we set up a land trust right here
and it has a piece of real estate inside of it.
And you are serving as the trustee.
Now, I typically don't recommend you serve as a trustee of your own land trust
because it defeats the whole purpose of setting up a trust
or one of the main benefits that is, which is anonymity.
I mean, that's why we set these things up.
So instead of using yourself, you're using a limited liability company
that you own and you're thinking that, hey, if my LLC is the trustee,
if something goes wrong with that, trust the creditor of the land trust that is
the person that's injured the attorney, they're going to sue the trustee.
Now, here's what happens in a lawsuit.
They will name the trustee of the trust in that case.
And why are they naming the trustee?
Well, it's because that's how you bring the case.
When you're suing a trust, you have to appoint someone to represent the trust.
And that's going to be the trustee of the trust, or the trustee gets named,
but they're named in their representative capac varsity
as the trustee of the trust.
They're not individually liable.
Now, that is the general rule.
And now there is always specific situations that will change this
for example, if you're serving as a trustee or entity,
you have set up like we talk about using a Wyoming LLC is the trustee of the trust
and that trustee is performing some type of function beyond just
sitting there on the sidelines and making sure that the rents get collected.
But see, the trustee is going out and in your representative capacity and you're
fixing the electrical work on the property, you're repairing the plumbing.
I mean, if you're doing things like that, then there's liability.
It's going to come back to you.
And it's not because
you're a trustee, it's because you've actually done the work in that capacity.
So you have to be very clear,
if you have a structure
like this set up in your self, managing your own real estate,
and you're going to go out and do the work,
make sure that it's obvious that you're not doing it in the trustee capacity.
Maybe you have a
memorandum of understanding or a letter that you put together that you as a,
you know, an individual here,
your trustee is requesting that you come out and perform
this service, maybe as the beneficiary or someone else or individual,
so that this documentation then would rebut a presumption
that the trustee itself was out here doing the work.
Because, you see, you're over here doing the work, but you're also on this side.
And we don't want to tie this entity up if we don't have to and get and allow them
to come after it and name it, not just in name only representing the trust,
but name it as an actual defendant in this case.
So we want to keep that that separated.
So that's how I would look at it.
Now, why do I feel so comfortable in telling you
this is because, as you know, I serve as a trustee on many trusts.
I can't tell you how many thousands upon thousands of trusts
my name appears on as a trustee and I'm there as a nominee trustee.
So my clients will set up trusts.
They'll name me as the initial trustee.
I resign.
But even if I wasn't, they didn't want me to resign.
They asked me to stay on.
I don't have liability for that that position
because I don't really do anything.
I'm they're my representative capacity.
The other thing about it,
when you set up these trusts is you provide the trustee indemnification.
And so the way it works is that, hey, if you want to sue the trustee
individually, understand that the trust has to indemnify me.
So whatever judgment
you get against me personally, the trust is responsible to pay it.
So therein is a situation where you really operate
in the same pool of assets as that.
You come after this the, the, the ultimate recovery is going to be
against that property and the insurance that that is on it.
So when it comes to setting up a land trust, the trustees are not personally
liable unless the trustee goes out and does something that brings
personal liability back to the trustee because of their own negligence.
So if you're considering, hey,
should I be a trustee, there's no problem, you won't have liability.
All right, guys, take care.
This is a great little short video
here on what it means to be a trustee and the liability associated with it.