How will this structure hold up? When a tenant in the duplex is injured on the property, they can sue the land trust for their damages. Some promoters claim the tenant will never know the owner of the land trust because such information is confidential. This is one of the greatest legal fallacies in history. If the tenant’s attorney can’t locate the land trust owner, all they have to do is publish notice of the lawsuit in the paper. It is very easy to do. And if the owner doesn’t respond to the lawsuit, the tenant can win by default. You’ve lost the case and they are foreclosing on the property. “Well,” says the land trust promoter as they close shop and move 1,000 miles away, “I guess that didn’t work.” The other privacy fallacy is that you want to receive the notice of a lawsuit. You want to promptly turn the claim over to your insurance company so they can defend you and, hopefully, settle the case. If you hand them the claim after a default is entered, in virtually all cases, they don’t have to cover you. You didn’t give them proper notice of the lawsuit. Your design flaw is not their problem. There is another design flaw in this structure. Let’s say the promoter acknowledges that an LLC needs to be in the mix because of its benefit of limiting liability. So, the beneficial owner (a required feature of land trusts and akin to a shareholder in a corporation or a member in an LLC) is listed as XYZ, LLC. When the tenant sues Land Trust #1, the liability flows to the beneficial owner, or XYZ, LLC. Now if XYZ, LLC were on the title to the property instead of the land trust, the liability would be contained within that one LLC. But in our flawed design structure, the liability
flows from the land trust into the LLC. What does the LLC own? Not only Land Trust #1 but also Land Trust #2 and Land Trust #3. So the tenant can also get what the LLC owns, which is equity in all three land trusts. “Well,” says the land trust promoter, preparing to move to Alaska, “that didn’t work either.” As is clear, the design of your asset protection plan really does matter. As you are building it, listen to your little voice, the one that is always there and always protective. If the proposed plan doesn’t make sense, if it doesn’t add up, think
again. Get another opinion. Your asset protection is too important to be left to unquestioned amateurs. •
Garrett Sutton is a corporate attorney, asset protection expert, and bestselling author who has sold more than 900,000 books to guide entrepreneurs
and investors. For more than 30 years, Sutton’s practice has assisted entrepreneurs and real estate investors in protecting their assets and maximizing their financial goals through sound management and asset protection strategies. The companies he founded, Corporate Direct and Sutton Law Center, have helped more than 10,000 clients protect their assets and incorporate their businesses.
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