Posted by James Buster on February 28, 2003 at 24:13:56:
Can the beneficiary even be attacked if the beneficiary doesn’t operate the property and isn’t the grantor of the land trust? I thought that, generally, beneficiaries are considered innocent bystanders in suits against trust assets. Their other assets are not at risk.
Example:
Owner deeds property to grantor trust (irrevocable?)
Owner sells beneficial interest to you (or your LLC)
Owner resigns as trustee and assigns your trustee as sucessor
Trustee master leases property to operating company
If the operating company is a manager-managed LLC or limited partnership, the beneficiary may be a passive member or limited partner.
I know there is a ton of material out there on land trusts, but it seems there is conflicting theories on who should be the trustee and who should be the beneficiary. Some say let an out of state person act as trustee so it is hard to serve them with a suit. Some say let your LLC act as trustee. But I thought your LLC or Corp. should be the beneficiary with the ability to direct the trustee as they wish. I dont know anyone who would act as trustee for me out of state so what is recommended? I would appreciate it if someone would clear all of this up. I know people do business differently but just wondering if there is a truly “best” method for handling the land trust. Thanks alot.
Posted by JHyre in Ohio on February 25, 2003 at 17:33:25:
The appropriate entity should be beneficiary (e.g. - LLC for buy and hold, etc.). Trustee can be another entity (though there are licensing issues) or an individual. Using out of state person makes suing harder…but making it too hard invites a lawsuit versus “John Doe” and a default judgment. Also, as plaintiff’s attorney, I’d sue any individual I’d met and the party to whom I’m writing the checks…generally not the trust!