Land Trusts by Bill Roberts
The LAND TRUST is a venerable estate planning tool and a tremendous privacy shield.
It was developed in England hundreds of years ago and was brought to this country by Chicago Land Title and Trust in the 1890s.
The primary purpose of a LAND TRUST is to provide anonymity in the ownership of real estate. Privacy and anonymity are getting more difficult in this modern technological age. People have learned how to "snoop" on the Internet.
The DEED to your property is probably recorded with the County Recorder. I say probably because a deed does not have to be recorded to be valid, but it makes your claim to title stronger and easier.
The County Recorder's records are available to public scrutiny. Anybody can search those records to see what you own and where you live.
The Land trust provides anonymity by transferring "Bare Legal Title" to the trust instrument. The Land Trust has a name, but it doesn't need to reflect your name. It could be something as innocuous as "The San Diego House" Land Trust. It is recorded and held by a TRUSTEE that you appoint. You are the TRUSTOR.
All real estate incorporates what we call a "bundle of rights" which include the right of ownership, the right to sell or otherwise convey, the right to use, the right to hypothecate, and the right to bequeath. There are also other rights including water, oil, gas, minerals, air space, farm products, and more. This "bundle of rights" can be "stripped" from the property. You can sell your mineral rights, you can lease your right of possession and use to another, and you can mortgage your property.
The holder of the bundle of rights is called the BENEFICIARY.
The trustor establishes who the beneficiaries are and what rights they hold.
What about the Mortgage?
Almost all mortgages include what is known as a "due on sale" clause. If you sell your property the lender may call the loan due.
Does this mean that if you "sell" your property to your Land Trust the lender can and will call the loan due?
No. Federal law allows you to establish a trust (or more than one trust) for estate planning reasons and transfer your property to the trust without the lender being allowed to accelerate (call due) the loan.
It should be noted that the title to the property is considered "real" property while the bundle of rights is primarily personal property.
After the Land Trust is established, you may sell one or more of your rights without affecting the title to the real property. You do this by changing the beneficiary for that particular right or even the entire bundle of rights.
This would constitute a sale of personalty or personal property. It is not necessary to record this sale, merely inform the trustee.
The trustee has a fiduciary duty and a duty of confidentiality to the beneficiary or beneficiaries under the terms of the trust and state law. The trustee can only confirm known information and may not divulge new information to any party without written instructions from the trustor or beneficiary.
This means if you are sued, your trustee may not respond to a motion for discovery (for the most part. Exceptions do apply.).
If you have "sold" your beneficial rights nobody can find out who the new beneficiary is unless that beneficiary tells them.
If there is more than one beneficiary, the trustee CANNOT answer any questions about the trust regarding a single beneficiary.
There are many uses and applications for a Land trust. If you would like to discuss Land Trusts for your real estate holdings, call me. Bill Roberts (619) 244-4610.
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I think I need to read this a few more times...sounds like a lot of valuable information, but need to be able to digest it a little. Thanks for the info.