"Piercing" the Land Trust - Posted by LB Ed

Posted by Tony-VA on September 29, 2002 at 19:34:59:

Then the Trust has accomplised exactly what we intended has it not?

As pointed out by others, it should not be our intention to make the Trustee entirely unreachable but rather to simply make the process cumbersome and expensive. An out of state Trustee may be just what we need (although I am not certain all states will allow the Trustee to reside out of state, but I leave this for the lawyers to decide).

By employing a Trust in conjunction with other asset protection features, such as an LLC, Corp. etc. as the beneficiary, we stack our levels of protection in our favor.

My analogy of this tactic.

We have a bag of money that we hide a bush (Trust). The Trustee knows which bush and some people may be able to get the Trustee to tell them which bush. But that bush is now in another state.

Better yet, if we place the money in a vault (Corp or LLC), in that bush, we have made their job all the more difficult.

The Trust hides the Corp in the bushes, the corp protects our money.

The greater the resistence, the greater the deterrance. Yes, a determined thief can still burglarize but only through great effort. The question must come to the thief’s mind, “why not just pick up the money bags laying in plain view” from others who have neither a Trust nor Corp?


“Piercing” the Land Trust - Posted by LB Ed

Posted by LB Ed on September 27, 2002 at 04:31:35:

Perhaps someone could answer…

I realize the somewhat minimal protection provided by a land trust arrangement.

Some say that once the trustee is located and served, the game is over. I understanding there is some limited severing of liability between the beneficiary’s assets and the trust’s assets.

My question is, what would be required to obtain an order to the trustee to reveal the beneficiary?

Suppose Joe tripped on the sidewalk, and the trustee was an easily served corporation. What would the injured party serve on the trustee? Could he simply get an information supena from a judge in the trustee’s state? What would be required to depose the trustee and ask the question?

I want to know just how much trouble it would be to get at the beneficiary once the trustee is located.

Thanks for your help.

  • Long Beach Ed

Re: “Piercing” the Land Trust - Posted by John Merchant

Posted by John Merchant on September 27, 2002 at 09:53:05:

This is why the Banks’ Trust Depts. buy and maintain large liability insurance policies and insure all trust managed properties.

They’re not all that secure or confident that their Trusts are “bullet proof”…so in effect they’re buying the services of some of the best trial lawyers in the business…in the legal defense law firms who represent those insurance carriers, and who would be representing the Trust Depts and the beneficiaries’ interests if and when sued.

Re: “Piercing” the Land Trust - Posted by JHyre in Ohio

Posted by JHyre in Ohio on September 27, 2002 at 07:09:23:

I am by no means an expert on this topic. If I were faced with the matter, I’d sue the trustee and John Doe(s) beneficiary (-ies). I’d pay for the newspaper ads to serve notice on the John Does, and for personal service on the Trustee. I’d look at tax records to see who paid the property taxes, and sue and serve them…if need be, I’d petition the courts to get into banking records and trace tax payments AND where rental payments went to find someone to sue. I’d look for signatures on title insurance, apprasials, loans, everything I could think of. Anybody in that chain gets sued and served. ASAP, I’d depose the trustee and get the names of the beneficiaries. If I had any trouble with that, I’d petition to sue John Doe and go for default, using judges’ natural arrogance as an ally…“your honor, I just want my day in court. The people playing this shell game are interfering with the administration of justice and should not be permitted to avoid their legal duties or the jurisdiction of this court based on such chicanery. I have given notice to the world of my claims…the true owners have ignored the notice and have contempt for this court. I move for a default judgment (and would then execute on the property).” This would of course be a pain, and only worthwhile if real money were at issue…so the LT does have some deterrent effect by increasing the cost for me to play.

John Hyre

Re: “Piercing” the Land Trust - Posted by John Merchant

Posted by John Merchant on September 27, 2002 at 23:19:41:

Depositions, like all trial discovery these days, with the trend having been toward totally open disclosure and discovery, for about the last 20 years, are pretty generally allowed…so a litigant can pretty much depose anybody about anything.

Some notable exceptions though: Asset discovery is generally NOT allowed until a Judgment has been obtained, because the Defendant’s assets are not germane or relevant to any cause of action, such as a suit for damages…until the Judgment has been obtained and now the Plaintiff is entitled to know what the D owns and where.

And another area that may be full of armored protections is that area dealing with fiduciaries, such as trustees.

If I were representing the Trustee, I’d sure be in there arguing that this is an area of confidentiality, and that the trustee does not have the RIGHT to divulge anything about a private trust. And he cannot therefore be forced to do so.

Further, I’m thinking that many trustees might very well just tell the court: “Sorry your honor, but I don’t feel I have the ethical right to divulge anything, so I’m not saying another word!” And defy the court to either hold them in contempt, or enter a protective order that the trustee NOT have to give evidence either by depo or in open court.

I’ve gotta say I think this is the avenue I’d take if I were a trustee. And it’s sure the one I’d want any trustee of mine to take.

Excuse my ignorance, John… - Posted by LB Ed

Posted by LB Ed on September 27, 2002 at 14:24:36:

But what is necessary to depose the trustee?

Does a plaintiff get that right when he files a lawsuit, or does he have to find a judge in the state of the trustee to grant him the right to depose the trustee? Is it normally difficult to get a judge to do this?

Thanks for all the information, John. Think of all I saved on law school.


Thanks, John, as always (nt) - Posted by Ed

Posted by Ed on September 27, 2002 at 11:04:33:


Re: “Piercing” the Land Trust - Posted by JT-IN

Posted by JT-IN on September 28, 2002 at 19:05:11:


I totally agree with your viewpoint… “Mum is the word”, as to who the Beneficiary is.

I think it has something to do with the “Fiduciary Responsiblity of a Trustee”, not to divulge this info, unless ordered in court, or to be held in contempt. Personally, I don’t think that this would happen in discovery phase as to WHO IS the Beneficiary… What real impact does that have on anything as to liability… until it has been determined that there IS liability.

I could much better accept this line of questioning once liability has been established… then lets find out who is behind the Trust, or hold the Trustee liable. At that point of Trustee liability, you can bet the Trustee would want to divulge it then.

Interesting food for thought…


Re: Excuse my ignorance, John… - Posted by Roger Schirmbeck - Texas

Posted by Roger Schirmbeck - Texas on September 27, 2002 at 15:19:06:

Ed, The first step is the filing of the suit. This starts the discovery phase. Many states have liberal discovery rules. The idea is to allow a party to a suit to obtain all the relevent information easily. The thinking is if all information is disclosed the odds of settling are improved and the courts would not have to deal with the suit. In Texas you do not need the Court’s OK to start discovery. You would just notice the Trustee and he would appear to answer your questions.

Re: Excuse my ignorance, John… - Posted by JHyre in Ohio

Posted by JHyre in Ohio on September 27, 2002 at 14:43:23:

I’m no expert on discovery or trial practice. My understanding: Plaintiff would make a motion to depose. The motion should be granted, even if the trustee resists. Of course, you could informally ask the trustee who the beneficiaries are…the ones who want OUT of any lawsuit NOW might answer you!

John Hyre

Re: Excuse my ignorance, John… - Posted by Bud Branstetter

Posted by Bud Branstetter on September 28, 2002 at 21:37:31:


Where do you get your information that you just notice the trustee and he would appear?

The trustee, if they are not a dud would response with a petition to remove the trustee from the suit. Then they would have to depose to find the beneficiary.

Out of state Trustees - Posted by Tony-VA

Posted by Tony-VA on September 27, 2002 at 17:23:09:

There are reasons that it is recommended that the Trustee reside in another state.

For example, how easy is it for a court,say in TX, have to bring a Trustee in from say OH in order to get the deposition that will lead to the beneficiaries? What authority does that TX subpoena have upon the out of state Trustee?

Re: Excuse my ignorance, John… - Posted by Roger Schirmbeck -Texas

Posted by Roger Schirmbeck -Texas on September 29, 2002 at 08:25:26:

Bud, just a quick answer before I leave for vacation. I get my information from the Texas Supreme Court who adopted the Texas Rules of Civil Procedure.
You are correct the Trustee can always resign. However if the plaintiff cannot locate a party the court can ok notice by publication. If there was no answer a default judgment could occur.

Re: Out of state Trustees - Posted by Roger Schirmbeck - Texas

Posted by Roger Schirmbeck - Texas on September 27, 2002 at 20:39:07:

Tony, Texas Courts would not have direct jurisdiction over an out of state trustee. An out of state trustee would generally be preferable to slow down a suit.

Re: Out of state Trustees - Posted by JHyre in Ohio

Posted by JHyre in Ohio on September 27, 2002 at 18:14:42:

TX can call an OH trustee (Full Faith & Credit Clause of the Constitution), but the process is cumbersome, and hence pricey.

John Hyre

IMPORTANT & I AGREE - Posted by JHyre in Ohio

Posted by JHyre in Ohio on September 29, 2002 at 14:30:34:

This is exactly the point I was making above. It’s one thing to make finding a trustee difficult to discourage lawsuits. It’s quite another to make it “too difficult” to impossible - that could easily backfire and result in a default judgment against “John Doe”, property owner.

When informally questioned about beneficiaries ID, trustee can say “None of yer beeswax”. If questioned in discovery or by a judge, I’d answer the question…doing otherwise could easily backfire on the beneficiaries.

John Hyre