Hi, Clint Coons here with Anderson Business
Advisors. In this session, I’m going to discuss how
many properties you should put in each land trust you create. Because you might think that putting multiple
properties into one trust is the way to go. In fact, just this morning, I was talking
to an attorney in California who made the assumption when I was explaining what I was
going to do for his client, that I was going to do in fact just that. We were going to create one land trust for
all eight properties. The attorney thought that the individual structure
will look as follows. There’ll be one trust created just like this,
so here’s your land trust and inside of it we would have eight separate pieces of property,
times four. Now, if you know anything about asset protection
and land trust, because you’ve been watching my other sessions, you understand that a land
trust does not provide asset protection for you. In order to get asset protection, you have
to actually assign your beneficial interest to an LLC, so your LLC must own your trust. If you put eight properties in one land trust,
if anything happens to anyone of those properties, then all of them are put at risk, so you’ve
defeated the purpose here. With asset protection, what we want to do
is segregate out our assets. We don’t want to keep all our properties in
one basket because if one goes bad, they all go bad. What I like to do is I like to create one
trust per property. If you had five pieces of property, I would
create five trusts for you just like this. I’m just going to stop at three. Then we would put one property per trust,
just like that. And then watch my session on naming your trust
because this also helps you at a later date, remember which property is in in which trust. I’ll explain that in that session. Each of those trust are set up, so you have
one property per trust. Then what you can do is you create limited
liability companies down here. Again, I would do one LLC per trust. Generally speaking, that’s how I set this
up. The only deviation to this, which I’ll explain
that in a second, generally speaking, we’ve created a structure like this so if anything
happens, let’s say this property right here comes under attack, then the only thing you’re
out risking is this one LLC together with this one property. We’ve segregated our assets to the maximum
ability with this type of planning. Typically, that’s how I’m going to recommend
someone create or setup their structures and their land trusts and their LLCs. But on occasion, maybe you’re investing in
a state where the property values are about $35,000, $40,000. Then you’re considering grouping properties
together. Well, in that particular situation you could
do this, you could have more than one land trust, like this, going into one LLC just
because you feel that the equity that you have at risk here doesn’t warrant additional
limited liability copies. For instance, the equity in this property
is 40K, or the value, not the equity, the value. Excuse me. The value on this one is 30K and the value
over here is $55,000. You could see here at total we have about
$125,000– $120,000 at risk. If we lose one, the maximum that we’ve risk
is that 125 grand. Whereas over here, if this was a $400,000
property, we definitely don’t want to mix that into this structure here. If they attack this, they commonly attack
the LLC. Whatever the LLC owns which are these two
trusts, they also get dragged into that if there’s any recovery that is warranted under
a judgement. Now, another thing to consider with this type
of planning when you’re doing this, is that by creating one trust per property, you’ve
also given yourself an out. I just told you, if somebody attacked this
property here, they’re going to go to the LLC, and then they may go after these two
trust over here if they get a judgement against the LLC, because the LLC owns those trusts. But if you did this, let’s say this property
comes under attack. They’re going to run an asset search on this
trust and it only owns one property. The only thing the creditor knows is that
this trust owns one property. It’s not going to see these other two, because
they’re not showing up under the trust name. They have their own trust name that they’re
under. Now, does the creditor know what this LLC
holds? Not at all, because until they get a judgement
against the LLC, they’re not going to find out what it owns. What happens here is if they were suing this,
you could do this. You could take these land trusts interest
here, move them over to here. Get them out of this LLC, put them over here
in LLC number two, so they’re no longer associated with LLC number one that’s under attack. The only reason you’re able to move this,
is because they’re in land trust. No one will see the transfer take place. This is something when I sit down with attorneys
who are not experienced in the use of land trust and question why I would do this, I
tell them, “If I held this properties directly in the LLC’s name, and you sue the LLC, or
you sue the land trust and the LLC held two properties and it held a beneficial interest
in the land trust, there’s going to be a record of these properties being transferred over
here.” An aggressive creditor attorney would come
after you and say, “Wait a minute, you transferred these properties after the lawsuit started,
therefore, I’m going to allege that was a fraudulent transfer and we can go after them
and bring them back into our LLC.” Because of that record, they can discover
that. If you use a land trust, they can’t discover
this transfer. Because when you move the land trust over,
there is no recording. When these properties transferred from LLC
one to LLC number two, it was via a deed so there was something that was recorded of record. When you move the land trust beneficial interest
over, it’s an assignment. Watch the segment on assignments. You’re assigning the beneficial interest,
so that doesn’t get recorded anywhere. That stays with your private documents so
no one knows about it. By setting it up this way, one property per
trust, you’re giving yourself some flexibility in your planning should something go wrong
in the future, and you’re also giving yourself the maximum asset protection that is available. My name is Clint Coons, with Anderson Business