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The Step-By-Step Process of Forming a Land Trust

Ok, so you have read and heard about all the wonderful benefits of using a title-holding trust to hide and protect the ownership of the real estate. But now you ask yourself, “How do I actually set up my first trust?” I wrote the following to answer the often asked question, “What exactly do I do next?”

NOTE: The following itemization will make more sense to you if you have

read my Land Trusts Made Simple® Course Guides. Buy Yours Now

Step One

Print out the Basic Land Trust Agreement (6.0) version from your forms USB, download, or directly from the Land Trust University. Throughout this writing, I will refer to the Land Trust Agreement simply as Trust Agreement.

Now, you have a hard copy that you can fill in and make notes on. Once you are done with the construction of your first (hard copy) Trust Agreement, you can go back to your computer and finalize an electronic version.

 

Step Two (Preambles of the Trust Agreement 6.0)

Decide which of the three preambles fits your situation and follow the instructions given before deleting the two preambles you will not use. Once you select the preamble that fits your needs you will also insert the name of your trust and the name of your Trustee.

Naming your Land Trust: Starting on page 58 of my Land Trusts Made Simple® Basic home study course guide I discuss the importance of choosing the “right” name for your trust. You may name your trust virtually anything you want if the name is not infringing on copy write laws. For example, you should not name your Land Trust, “General Motors” or “General Electric.” You could, however, name your trust the “GM Motor Trust” or the “GE Investment Fund.” Naming your trust is just one little piece of a big legal puzzle that you are creating to hide and protect your assets. It may seem insignificant to some but, if you have ever experienced the prospects of a frivolous lawsuit and avoided the suit because of the name of your trust or the situs of your trust . . . you become a believer!

Naming your Trustee: keep in mind that it is best if you have a Trustee from the same state as the situs of your Trust Agreement. (i.e. Virginia Trustee for a Virginia Land Trust or a Florida Trustee for a Florida Land Trust). You might legitimately change the Trustee to an individual in another state after at least one year.

Also, remember the best (most private) Trustee is one who lives out of your state (or at least out of the county where the property is located) and has a different last name than yours.

 

Step Three (Paragraph 1.1 of the Trust Agreement 6.0)

Revocable vs. Irrevocable?   Paragraph 1.1 of my Basic Land Trust Agreement requires a statement of the type of Land Trust that you are forming. You need to decide if the trust will be Revocable or Irrevocable.

What is the difference?

Revocable means that you can make changes to the terms of the Trust Agreement by amending it.

Irrevocable means that you cannot change the terms of the Trust Agreement. The trust must remain intact (as you formed it) until the expiration of the trust term (usually 20 years, but that is not mandatory . . . it could be less). While Irrevocable trusts have more asset protection than Revocable trusts, they may require Federal tax ID numbers AND have to file separate tax returns (and are taxed at a much higher rate than individual tax rates).

Therefore, be sure to seek competent tax advice prior to forming an Irrevocable Land Trust.  Follow the instructions for either including or removing the paragraph relating to Irrevocable trusts in 1.1

 

Step Four (Paragraph 2.2 of the Trust Agreement 6.0)

Your next decision is to decide who will be the Beneficiary of the Land Trust?  Be careful here because if you are currently the owner of the property being placed into the new Land Trust and you make someone other than you or your spouse the beneficiary, there could be a gift tax problem created by this action. As discussed in the Land Trusts Made Simple® course guide (if you are placing investment property into Trust), you may want to consider making your personal property trust, LLC, or corporation the Beneficiary for future asset protection benefits.

NOTE: Some advisors encourage multiple Beneficiaries or Co-beneficiaries. I have included a sample Beneficiary Agreement (in the course materials) to use if you decide to have more than one Beneficiary to your Land Trust. However, I do not suggest multiple Beneficiaries because of the potential liability between co-beneficiaries (unless you use each other’s entities as co-beneficiaries).

 

Step Five (Paragraph 2.4 (b) of the Trust Agreement 6.0)

Depending on whether you will have a Single Beneficiary or Multiple Beneficiaries, follow the instructions (Just prior to 2.4 (b)) carefully and delete the paragraph (Option 1 or 2) you will not be using (keeping the one appropriate for your situation).

 

Step Six (Paragraph 2.5 of the Trust Agreement 6.0)

Decide who will be the Successor Beneficiaries. One of the many benefits of using a Land Trust is the fact that upon the death of the Primary Beneficiary the Successor Beneficiary succeeds to full Beneficiary status immediately. This occurs outside of the purview of the public because the probate process is avoided.

If you are forming a Revocable Land Trust you may change the Successor Beneficiary, or Beneficiaries, later if you so desire. However, I still suggest you think through this decision wisely prior to naming your successors as life has a way of changing our attitudes quickly.

 

Step Seven (Paragraph 3.1 of the Trust Agreement 6.0)

Your next big decision is who will hold the Power of Direction? As you learned in the Land Trusts Made Simple® course guide, he who holds the Power of Direction over the Trustee controls the trust’s destiny. So, choose this position wisely!

Typically, the Beneficiary is also the Director (at least initially at the formation of the Trust Agreement).

In paragraph 3.5 you will decide if you want a Successor Director or not. Remember, you can always amend your Trust Agreement if you change your mind about any of these “players” later.

 

"If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest."

~ Ben Franklin

Step Eight (Paragraph 4.5(f) of the Trust Agreement 6.0)

Decide who will be your  Successor Trustee(s).  You may want to review the section on who can be and should be your Trustee in my Land Trusts Made Simple Basic® Course Guide.

Like step 6 above, now you select your Successor Trustees in your Trust Agreement. Successor Trustees will provide for a smooth transition of title if your Primary Trustee (the initial Trustee that you select) dies, retires, quits, or is fired by the Beneficiary. You can name as many Successor Trustees as you want. I suggest using a P.O. Box for your Successor Trustee’s address.

NOTE: Successor Trustees do NOT have to be notified of their status until they ascend to the position of Primary Trustee.

 

Step Nine (Paragraph 7.1 of the Trust Agreement 6.0)

You may not have a choice in how much you pay your Trustee if you use an institutional trustee.

Typically, a “professional” trustee will charge 300-500 dollars to set up the trust, 300-600 dollars per year to maintain the trust, 50-75 dollars for each signature the trustee provides, and 50-75 dollars to perform administrative functions (like forwarding a real estate tax bill to the beneficiary).

One of the reasons why I suggest private trustees is to save on these costs. You can pay your trustee whatever you two agree on but make sure it is reasonable and customary for your area.

If you use an individual as your Trustee and have an agreed-upon amount of annual compensation, state the amount here in 7.1 (b). If you are using an institutional Trustee, he/she/it will write in their amount of compensation in 7.1 (b) when you set up your Trust Agreement with the professional Trustee.

 

Step Ten (Paragraph 9.2 (b) of the Trust Agreement 6.0)

This paragraph states how long you want the Trust Agreement to last. As stated previously, most Land Trusts are created for a 20-year period. However, this is not a statutory requirement and therefore you may want to consider some other term for the existence of your trust. I have given you some suggestions in 9.2.

Be sure to delete my suggestions and instructions after making your decision and stating the term of your Trust Agreement.

 

Step Eleven (Paragraph 9.5 of the Trust Agreement 6.0)

Your next decision is going to be which state’s Land Trust laws are you going to use as the situs of your trust?

If you decide to use Virginia for example, you would put the Virginia statute citation. You will find each state’s trust Statute cited in the “50 State’s Trust Laws” section of the Land Trust University. Which state law will govern your trust is extremely important to the asset protection benefits you are seeking. So, do your research and choose wisely!

 

Step Twelve (Pages 34 & 35 of the Trust Agreement 6.0)

Type in the party’s names (under the signature lines) that will sign the Trust Agreement (whether they are individuals or representing an entity). While it is not mandatory that the Trust Agreement be notarized, I suggest that you do this because it adds validity to the date on which you formed the trust.

At this point, you have made all the big decisions to form your first Land Trust Agreement. All you need to do now is date your Trust Agreement (be sure it is dated prior to the date on the Deed in Trust) and get the signatures of the Trustee, Beneficiary, and Notary. DO NOT record the Trust Agreement ---- only the Deed-in-Trust gets recorded! The Trust Agreement stays in your personal files as a private contract document.

 

Step Thirteen (The Last Page of the Trust Agreement)

Your final act in completing your first Trust Agreement is to list the property being held by this Trust. Be sure to include not only the Legal Description but the Common Street Address of the property you are placing into this trust.

However, this will not be your final step. Please proceed to Bonus Step #14 below. Step 14 is extremely important so, please do not by-pass this step.

 

Step Fourteen

This is the point where many investors drop the ball in the important process of forming their Land Trusts. Properly insuring your property is a very important part of being a successful real estate investor.  If you make changes in the ownership of a property it is critical that you follow a certain process to communicate those changes to your insurance company and insurance agent. Step Twelve is written to give the sequence of steps necessary to report changes, acknowledge changes being completed, monitor the necessary coverage, and keep all information accurate between you and the insurance company.

Make certain that you insure your property “held in trust” properly. This is CRITICAL to receiving insurance coverage (payment of a claim) if there is a loss/claim. I highly recommend that you sit with your insurance broker, agent, or advisor before you buy any property, make a change in ownership or deed your property into a Land Trust.

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See How Easy it is to Create a REAL ESTATE LAND TRUST?

Remember how I talked about my competitors and how they give you the FILL IN approach with no training? GOOD, because if you bought their product, you would have received some of the above information. BUT WOULD YOU UNDERSTAND A LAND TRUST NOW?

NO! You would then start looking for an attorney to help you form your trust and (s)he would CHARGE YOU hundreds of dollars each time you needed assistance. This assumes you can even find a knowledgeable Land Trust attorney.

My Land Trusts Made Simple® System

 I will make this Simple. In fact, I call my courses “Land Trusts Made Simple®” which is important when covering an ESSENTIAL component of real estate investing that very few talk about.

My courses not only cover the steps as I have given you above, but I explain the LOGIC behind each part of the process. THIS WILL GIVE YOU PEACE OF MIND THAT YOUR TRUSTS ARE SET UP PROPERLY FOR YOUR  INDIVIDUAL SITUATION.

My System of Land Trust Creation

I have broken my system into two courses. You will start with the Basic Course to create your own trusts. This is all you need if you want to just learn how to create a Land Trust (and get all the forms you will ever need). My Advanced Course is a MUST if you want to take your trusts to a new (bulletproof) level. This advanced course will add a deeper understanding of trusts and complex privacy structures. You can get both my Basic and Advanced Courses together in my "Complete Package" at a discounted price.

 

 

Here are comments from satisfied students of mine.

"Today I received the mailing of course materials ordered. I'm very pleased to say that your package containing the CD's & DVDs looks very professional for a first impression. I'm very pleased up to this point. 
I just popped in the first DVD and have only watched about ten minutes. There is something about listening to a presentation that makes a course come full circle. I'm not only impressed with the physical look of the package, but additionally the few words heard in just these few minutes of viewing was a indication that more valuable information is to follow as I watch the entire course. Don't get me wrong, I'm not saying that reading and looking at the written course material is not adequate, but just seeing one give the course is an added bonus when taking in all the information."
~ B.J. from California

TJ is a college student that was looking for a better answer when taking title to real estate. He found my site, called me, and then purchased the Land Trusts Made Simple® Basic Home Study course. He was able to create his own Real Estate Land Trust without an attorney or REALTOR®.

TJ W.

College Student & Real Estate Investor, Florida