How to Combine Land Trusts and LLCs for Asset Protection
A land trust is a revocable living trust established for the specific purpose of holding real estate. While a trust is an effective tool to help the grantor keep control of the property during his lifetime, it doesn't protect the land from creditor claims against the grantor. In simple terms, a trust is not judgment-proof. However, when a specialized land trust is combined with a limited-liability company, protection from creditors is created.
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Instructions
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Establish an LLC in the state where the property is located. Most states requires LLC owners to file articles of organization through the secretary of state.
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Write the trust document with the LLC as the trustee and yourself as the beneficiary. As the beneficiary, you retain all control over the property including designation of use, rent or sale of the property. This is unlike a traditional family trust where the trustee is the person making all decisions.
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File a quitclaim deed to move the property into the trust. Quitclaim deeds allow you to move an asset without realizing a capital gain. These forms are commonly found in real estate title offices or with family planning attorneys. County records offices will also have quitclaim deeds available for you to fill in.
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Tips & Warnings
A married couple using a land trust structure receives a step up in the cost basis of the property if one spouse dies.
Because the asset is quitclaimed to the trust, the county records office lists that name. Owners of an LLC are private information, thus privatizing the ownership of the property.
Consult with a competent business or family trust attorney to ensure that you are establishing both the land trust and the LLC correctly.
