Why use a land trust? What are the benefits?

Real estate is a must have investment everyone needs. Even if you choose not to own the home you live in, property investments will greatly determine your financial future, and the futures of those you care about.

Investing in real estate has a lot of upside potential, from organic appreciation, to value add opportunities and passive income generation. However, like any other type of investment or asset, that upside is only as good as the downside and risk protection you have. Real estate is recognized as having some of the best risk-reward balance, between high return potential and brick and mortar security. Yet, smart investors who really want to optimize their upside, and defend against threats will take it a step further.

Land Trusts 101

There are a variety of variations of trusts out there. A land trust is one which is specifically designed for holding real estate related assets. Such as homes, land, multifamily apartment buildings, and even mortgage notes.

Put simply, a trust is a legal entity of its own. Kind of like a corporation. Only in a trust, there is a grantor who gives their assets to the trust. A trustee who independently manages and oversees that trust, and the beneficiaries who get benefits of the income and cash produced by the trust, and one day the assets or proceeds of liquidating those assets.

So, what are the benefits of a land trust? Why use them to hold your real estate investments?

Privacy

Unfortunately, when you start making a lot of money and building a lot of wealth through real estate, not everyone is going to be rooting for you. The sad truth is that instead of learning from you and being happy for you, or just working to better themselves and their finances, some people just see it as being easier to take what you have instead.

Some people make a professional career out of looking for property owners with equity and finding frivolous and malicious ways to sue them. They’ll make up accidents, or incidents and finding an equally greedy lawyer who likes making their money on the back of other people’s hard work. Or maybe it is the new romantic partner who thought you would make an easy meal ticket.

Step one in preventing this, and any type of attack in life is not to be seen as an easy victim. If you are not using a land trust, it is like walking through the worst neighborhood in town, by yourself at night, with hundred dollar bills hanging out of your pockets.

Wealthy individuals and investors also use vehicles like this to protect their privacy when buying and selling property. So, that they don’t end up in the news and with a voicemail and email inbox full of requests for handouts, or the seller and their Realtor don’t jack up the price, just because they think you can afford it.

Separating Investment & Personal Assets

Just like separating your business and personal assets, trusts help keep your finances defended by separating them. If someone does get bitten by a neighbor’s dog at one of your properties, they aren’t going to be able to sue you personally and come lien your income, take your home and your new baby’s crib.

Or if you personally get sued for an auto accident or other issue, your trust assets can remain intact.

Estate Planning

One of the most powerful benefits of land trusts is for estate and succession planning. Without tools like these, your assets can be tied up in probate, and be bled dry by the system, courts, lawyers and taxes. All right when those you care about most need the financial help the most.

Set up correctly, a land trust automates the transfer of assets to your chosen beneficiaries. They don’t have to be stuck in probate court for months, or deal with criminal levels of inheritance and transfer taxes.

Assets remaining in the trust can be professionally managed for your heirs after you are gone. This way they get the income they need, while the wealth is preserved, and they don’t blow it all.

If you don’t have a land trust yet, be sure to find out more about them and let BBI help setting one up today…

Call us at 951-280-1900 for more details on how to move your property in a land trust.