Land Trusts-Beyond the Basics

    Wait! Before you continue here, have you first read and understood the basic training I provided in this earlier post?:

Land Trusts! What You Need to Know to Get Started

    Look at it this way: That training is “Land Trusts 101,” and what you’re about to learn HERE is “Land Trusts 201,” (for my fellow college educated people).

    So if you haven’t already read that, I HIGHLY suggest you stop, click on that link, read it (and listen to the audio), and THEN come back here to learn more. Chances are this may not make much sense without that foundation.

Now that we have that out of the way, let’s continue…

How To Take Title to a Property in a Land Trust:

    First, let’s start with the paperwork…

For the purposes of this training, we’re going to use Ron’s way. Yes, I have more advanced ways & means of accomplishing this, and if you need more help, just ask. But for now, we’ll stick to this.

First, Gather These Docs (Click the links)

  1. Warranty Deed to Trustee (Word Doc)
    Warranty Deed to Trustee (PDF)
    (the DEED that’s recorded at the county courthouse) (regular-sized paper), or…

    Warranty Deed to Trustee (Word Doc)
    Warranty Deed to Trustee (PDF) (Legal Sized Paper – Recommended!)
  2. The Agreement & Declaration of Trust (Word Doc)
    Agreement & Declaration of Trust (PDF) (this doc is NOT recorded. Keep it in your home/office filing cabinet)
  3. Assignment of Beneficial Interest in a Trust (Word Doc)
    Assignment of Beneficial Interest in a Trust (PDF)
    (Optional. You’ll only need this if you’re assigning/selling the beneficial interest/ownership in a land trust)

Next, Prepare the Paperwork

    Now that you’ve gathered the above paperwork, you’ll print it out & prepare it.
It’s really only difficult the first time or two that you do it.
You’ll need to choose who your Trustee will be. It should be someone you know, like, and (obviously) trust. OR you could use an entity that you’ve formed, such as an LLC. That’s what Ron likes to do.
    You’ll also need to NAME your Trust. Depending on what your strategy is, you can pretty much name it anything you want. A good rule of thumb is to name the Trust after the address of the property. Just use the house address as the Trust number.
    After the paperwork has been prepared, you’ll have the existing Sellers (aka “Grantors”) sign the paperwork.
…And you’ll also have the Trustee sign the paperwork.
…And you’ll have a Notary witness & Notarize the paperwork where appropriate to do so.

     Please note that it’s BEST & highly recommended that you have all parties sign everything at your real estate closing attorney or title company’s office. Use their Notary.

    Many years ago, we used to do ‘tabletop closings,’ where we’d have a mobile Notary Notarize the seller’s signatures at the house or a local restaurant, bank, etc. We do NOT recommend doing it that way any more, because it’s a lot more solid, there’s more credibility, and less likelihood of a lawsuit coming back at you if you have everything signed at your attorney’s office. So be smart.

Finally, Record the Right Papers    

    This is simple (but not necessarily easy). All that needs to be recorded is the Warranty Deed to Trustee. That’s it! This is the document that transfers ownership from the OLD Seller to the NEW. And who is the new owner? The Trust, as controlled by the Trustee.

    The Warranty Deed to Trustee will show all the powers that the Trustee has for this property, and should usually suffice to show whatever professional that wants to cast a wandering, curious eye in that direction. 

    Let me be perfectly clear about something. You will NOT record the Agreement and Declaration of Trust. That document is filed in your file cabinet in your home or office. Again: DO NOT RECORD THE TRUST DECLARATION!!
will come find you if you do. And you don’t want that.

    The Assignment of Beneficial Interest in a Trust is also NOT recorded!
This is the document you’ll use if/when you want to transfer/assign/SELL the beneficial interest in the trust that owns the property. If you’re buying a property from a seller (if you’re doing a deal rather than dealing with a property you already own), then you’d want to use this document. Keep in mind that if the closing attorney or title company helps you with this, it will be triggering a sale, and there will be transfer taxes/doc stamps due. This will add to your closing costs. So keep that in mind.
Remember: This document is ABSOLUTELY NOT RECORDED at the courthouse! Got it? Good.

How To Fill Out the Paperwork

    This is the fun part that most people struggle with. Hard. Especially the first time or two. Or three. But don’t worry. Just do your best to fill it out. As with the rest of the paperwork, such as the Purchase & Sales Agreement or the Lease Option agreement, you’ll simply need to fill in the blanks according to what needs to be put there.

    Filling out the Warranty Deed to Trustee
Here is how we typically fill out the first couple paragraphs of the Warranty Deed to Trustee. This is the only tricky part of the Deed & it must be done correctly. 

Here’s an example how we usually fill out the Deed:

    The Grantor(s)        Sellers’ Names             of the County of County of Sellers’ Residence, State of  State of Sellers’ Residence   , for and in consideration of     Ten    Dollars ($10.00  ), and other good and valuable considerations in hand paid, conveys, grants, bargains, sells, aliens, remises, releases, confirms and warrants under provisions of Section

    Unto    Trustee (individual’s name or entity, e.g. LLC)       as Trustee and not personally under the provisions of a trust agreement dated the    (date)   of   (Trust Date)  , 20XXknown as Trust Number    (House Number)        the following described real estate in the County of    (County of Property)      State of   (State of Property)    , to wit:  
    (Enter FULL & ACCURATE LEGAL DESCRIPTION HERE)

—————–Rest of the Deed goes below this——————-

    For the part that’s signed, remember that the EXISTING Sellers/Owners of record are the ones who sign this part. And their signature(s) MUST be Notarized properly & Witnessed. 

    Regarding the signatures, you’ll notice that the word SEAL appears. That’s where the existing owners/sellers sign. For your reference and understanding, “Seal” refers to the old English way that Kings and Lords would sign an official document, typically with a wax “seal” to show their family/house/country/title’s official “seal.”  I’m sure you’ve seen this in the movies or tv shows!

    In other words, “Seal” is just another word for “Signature.”

    And for the WITNESSES, just get SOMEONE…anyone… to witness the person signing. You could practically grab someone off the street, but it would be best if it’s someone legit w/ i.d. who witnesses these signatures. Note that most banks could have their employee witness this for you, but they won’t anymore, because of fear of liability. You can thank the attorneys.

    But since you’re probably going to be closing this with your closing attorney or title company, they should hopefully be able to witness this for you.

    So do your best. And when you’re done, just share it with me & I’ll take a look to see what you did & how we can fix it.

    Please NOTE: This usually works just fine, but there are always exceptions when it won’t. This usually happens when we have a closing attorney insist on preparing the Deed. There are some states that have their own specific language and provisions that must be accounted for and incorporated into the Deed. California (Grant Deed). Washington State has some specific language. There are others. So if that’s the case, just let them make their changes. But make damn SURE that they still have the specific language that grants the Trustee their powers incorporated into whatever special modifications they need to make for the Deed. Ok?

What If I Just Don’t Want To or Can’t Do It?

    If you just can’t do it, don’t want to prepare these docs, or are ready to smash your head through the wall at the thought of doing it on your own, don’t worry. I have you covered. Just let me know if you want my help, and we’ll go from there. Fair enough?

    You should now have the basics for creating your very own Land Trusts.

BONUS! Here’s a Couple PRO Tips To Help You Out:

    After creating hundreds of Land Trusts (for my deals, for students, and for consulting clients), I have a perspective on things based on lots of experience. One of the biggest challenges we’ve come across is: Dealing with other so-called “professionals,” such as attorneys, title companies, agents, other investors, etc.  Many times, these seemingly well-meaning professions won’t understand what we’re doing or WHY we’re doing it. So they’ll ask you questions. 

    Here are some of those common questions and HOW to answer them to avoid problems:

    Q: “WHY do you want to take title to this property in a… land trust? Why not just do it in your personal name… or an LLC, like everyone else?”
A: “For ESTATE PLANNING PURPOSES.”  (They usually shut up after that and work with you)

Q: “What’s a Land Trust? I’ve never seen that before.” (usually from an attorney)
A: “Sure. It’s basically a GRANTOR REVOCABLE TRUST” (They usually shut up after that)

Q: “Don’t we have to create a TIN (Taxpayer Identification Number)?”
A: “No. It’s a pass-through entity, so that’s not necessary”

Q: “I think we need to record that Trust Declaration, ok?”
A: “No. That’s not happening. Everything you need to know is on that Warranty Deed to Trustee. So use that, or I think I need to use another attorney.”

    So there you have it! You now have the beginnings of what to do and how to do it. From here, it’s just a matter of practice and repetition,

    Now get busy. And remember, if you need help, just ask!

Put this to good use!

—-Tony Pearl

 

    For further research, here are some videos I’ve gathered for you that Ron created that will help you out:

How to Take Title Using Land Trusts, Part 1:

Part 2, Q&A:

Land Trusts Made Simple: