REAL ESTATE TRUST PURPOSE
Clients choose a real estate trust for privacy, asset protection and sometimes taxes. Which of these matters to you will determine the type of trust you need. Note, real estate trusts are also often referred to as personal property or land trusts. We offer both revocable and irrevocable trusts.
Real estate transactions and titles are public record. Many counties put their databases online for everyone to see. Owning property via an anonymous trust keeps your information from prying eyes.
Utilizing an irrevocable trust removes the title from your name and places the property beyond the reach of creditors. They cannot take what you do not own.
A trust allows you to shift income to low or no tax jurisdictions. Why pay more in state taxes when you don't have to?
Discover whether a revocable or irrevoable trust is for you below.
A revocable trust is the simplest form of trust available. They may be used for anonymously owning assets and for bypassing probate. They are also referred to as a Revocable Living Trust (RLT) and are a common estate planning tool.
As the name implies, the trust may be revoked at anytime by you. Thus dissolving the trust and returning the asset to your name. Since the trust can easily be revoked it does not provide asset protection. A judge may order you to dissolve the trust and distribute assets to creditors in case of a judgement.
This trust may be used for not only your home, but also car and other titleable property. For this reason they are sometimes referred to as a personal property trust.
An irrevocable trust cannot be dissolved by court order. It is a more complex document which provides asset protection and tax benefits, in addition to privacy. You may be a beneficiary and act as trustee.
These benefits extend to not just real estate. You may place checking, savings and brokerage accounts into the trust, along with businesses and other assets, e.g. crypto currencies and collectibles.
TRUST VS. COMPANY
A trust and an anonymous company may both be used for titling property. While a company is less expensive, there are some potential drawbacks to keep in mind.
First, while a company may own a personal home there are no asset protection benefits. This is because the company must have a legitimate business purpose to provide limited liability. Simply owning a home is not a business. Thus, you would not be protected if someone slipped and fell on your property. A rental property would receive asset protection given it is a legitimate business.
Second, many lenders will not provide a mortgage to a home inside of a company - even with a personal guarantee. You may purchase the home in your name and quit claim it. However, this would leave a trace with your name formerly being associated with the property and transferring the title in this way can accelerate the mortgage or "due on sale" clause. Not every bank will care enough to pursue you, but there is a chance they will notice and take action.
Placing your home into a trust does not accelerate the loan due to the Garn-St Germain Act. Further, an irrevocable trust provides asset protection regardless of whether you have a legitimate business, i.e. a rental property.
Privacy is a right, but you have to right for it.