How to Sell Real Estate when Investing With a Land Trust

- Hi, Clint Coons here with Anderson Business Advisors

and in this video we're going to discuss

selling property held in the name of a land trust.

Okay if you've set up a land trust

and you have property that's titled

in the name of that trust,

the first thing you need to look at

is who is the trustee of that trust?

A lot of you that are working with me and my firm

to create your land trusts

may have me on your trust as a trustee

or if you're not using us you're using someone else

and you've got what we refer to as a nominee trustee.

You did this for anonymity purposes.

Now that works great when you're

trying to keep your information private,

but it'll work against you when you're going out there

and trying to sell your property.

Because what occurs is that

when you try to sell the property

the title company is going to look to the listed trustee

on that trust that appears on title

as the individual who will represent the trust

and must sign on behalf of that trust.

So as you can imagine, if you're using say Clint

as your nominee trustee and I've already resigned

technically I'm no longer the trustee.

And if you gave your resignation to the title company,

they'll just ignore it.

And I can tell you this is from first-hand knowledge.

I just actually sold a property in Hawaii that I own there,

that I put inside of a land trust

and I used a nominee trustee,

I mean everything that you watch on my videos

are the same strategies for the most part

that I use in my own investing.

And what I elected to do was try to sell the property

using my resignation or the trustee's resignation.

So I turned over to the title company

a copy of my nominee's trustee's resignation

appointing Clint as the trustee of the trust.

Now they received that document

but they wouldn't respect it.

They said "Well, we see that there's a resignation here

"but the only thing we're going to look at is what's on title

"and your nominee trustee still shows up on title."

So then I told them, well have you read my trust document?

Because if you notice in the trust document itself,

it states that the trustee is not authorized

to do anything when it comes to selling the property,

it's actually the beneficiary.

So I can sign on behalf of the trust as its beneficiary.

Again, title came back and they said

"Nope, we're only going to deal with the trustee

"and if your nominee trustee is listed on title

"then that is the person that has to sign

"but since you told us that the nominee trustee has resigned

"then in order for us to close we have to put you on title

"as the acting trustee of this trust."

So what I discovered, and this is something

that I've always told people

and it's an issue that I've seen with other individuals

who have tried to engage in selling property out of a trust

where the nominee trustee has resigned,

title will have a fit over this.

So what do you need to do then?

If you've set up a land trust

and you have a nominee trustee that has resigned

and you are the trustee then you need to update title

prior to selling the property.

I'd update it prior to listing the property for sale

to have yourself listed as the trustee.

Or if you want, you can appoint an LLC that you set up

to be your trustee just for closing purposes.

Let me just show you how that works.

So if we originally set up this trust here

and it had a nominee trustee,

I'll just call this NN for nominee trustee,

the nominee trustee say was Clint

and then I resigned and I appointed,

let's say the individual here is Fred.

Fred is the one who actually set up Fred as trustee.

So I did this after I created the trust.

So as soon as the trust was set up

and the property was deeded into it I resigned my position

and then Fred came on because he's the beneficiary,

it's his trust, he became the acting trustee

but this was not updated with the counter recorder

because we're desiring anonymity.

But now we're trying to sell it.

So when I resigned, and this is something

you want to make sure you always obtain

from the resigning trustee.

You want to get what's referred to as a Trustee's Deed.

A Trustee's Deed.

And what is that?

A Trustee's Deed is a recordable document

showing the change in trusteeship

from your nominee trustee Clint

down here to Fred as the what I've always called

the successor trustee.

So when you have this Trustee's Deed

you keep it in your records.

You don't do anything with it, you keep it in your records

until you're ready to do something with the property

such as sell the property or refinance the property.

Then you'll go down and you'll record this deed

and you'll put your information on now as the trustee

so you can move forward with that transaction.

Otherwise, it could gum up the works.

You want to do this ahead of time

because let's say what happened is

you entered into a purchase of sale agreement,

now we're past our due diligence period,

the buyer's ready to close in 15 days.

Title company comes back and says

oh we've got a problem, where's Clint?

Well Clint's not the one that's going to sign on it.

I am, he resigned.

That's going to require you to ask for an extension

so you can get that Trustee's Deed recorded

to put your name up there.

That's the first problem.

Second problem is in my experience

with working with a lot of title companies,

they just don't understand business entities.

And now you've just thrown a curveball at them

and their entire legal department

and whoever else is working there,

the officer that works with the title company,

they're going to go into meltdown mode.

So we want to make it nice, simple and neat for them.

So what you want to do is

record that Trustee's Deed appointing yourself.

Now another thing is if you don't want someone to know

that you're selling this property,

you want to maintain that anonymity shield,

look at this.

I resigned and I appointed Fred as the trustee.

Well Fred's the acting trustee now,

so there's nothing to stop Fred

from appointing someone else and resigning

'cause he has that power

and he's the beneficiary of this trust.

So the beneficiaries can elect someone new.

So what Fred could do is set up a Wyoming LLC down here

that gives him anonymity, or it could be Delaware.

And then what Fred will do is resign himself

and appoint the Wyoming LLC as the trustee.

And again you'll have to do a Trustee's Deed.

So what would happen in this instance

then the deed that gets recorded

would show the Wyoming Limited Liability Company

as the acting trustee of the trust.

You maintain the anonymity.

Now here's one thing you would have to keep in mind.

If you went through this process like this,

this deed from here to here was from Clint to Fred.

And if you want to avoid having Fred's name show up

when you record that deed,

you'll actually have to reappoint Clint as the trustee.

So Fred would resign, reappoint Clint as the trustee.

Clint would then need to resign,

issue a new Trustee Deed

to the Wyoming Limited Liability Company.

May be even simpler just to set it up at the outset

with the land trust itself have the LLC

as the successor trustee of the trust.

So when Clint resigns, he nominates the Wyoming LLC

as the successor trustee in the document.

So those are ways in which you can do this

in order to keep your name off title

when you're selling property.

The key here though is understanding title companies,

you got to keep it in a nice simple package for them.

Don't give them too much information

because the more information you provide them,

the more likely it is that you're going to mess them up.

One other thing I did want to leave you with.

Your title company's going to ask

for a copy of your trust agreement.

If you assigned the interest to an LLC

I wouldn't provide them with the assignment,

I would just send them a copy of the trust agreement

which shows your name as the beneficiary

because again they're going to get the assignment,

they're going to give it to the legal

and the legal's not going to understand the land trust.

And again, they're going to come back on you

and they're going to blow up this closing

that's going to take an extra 30 days to close

as you walk them through, or as I like to refer to it

educate them on the purposes of this trust.

My name's Clint Coons with Anderson Business Advisors

and in this video we discuss

how to sell property held in a land trust.

(light music)