It’s astounding to contemplate the multitude of ways in which you can hold title to commercial real estate (and even your house!). On the commercial real estate side, it is presumed that you will not hold title to your property in your personal name. There are a great number of reasons why this is so. Most centrally you are likely concerned with several factors such as liability, asset protection, and taxes. Another reason you might look at certain formations or entities is privacy.
I visited a group on LinkedIn the other day that focuses on asset protection. I’m sure you would not be surprised to learn that the majority of the participants in this group are attorneys. After all, attorneys and the CPAs are the professionals that one who has interest in wealth management and preservation would turn to for direction and advice. It might surprise you to learn, however, that when a layperson asked a question regarding real estate and privacy, there was not just one succinct answer put forward by this very knowledge group of professionals. There was a varied and at points, contentious discussion about how to go about making the created entity stand up to interrogating eyes.
Why is privacy in your real estate something that should be considered, you ask? Thinking about that for just a minute, let’s explore some ideas:
- What if your family has a sizable number of valuable assets? You might prefer to not give the purveyors of public records the tools to estimate your total familial wealth.
- As an owner of commercial real estate, you may more naturally become a target for lawsuits. As you likely know, we live in an extremely litigious society. You may want to make finding out just who you are more challenging for those who love to sue.
- Let’s say you decide to purchase a 210-unit apartment complex; you may not want each of your 210 tenants knowing that you own the building. What if they decide that, since you’ve made yourself so accessible, they can give you a call to talk to you weekly about what is really wrong with your complex? It could be painful.
There is more than one way to skin a cat, or so they say. This is true with entity selection for privacy purposes. The immediate answers offered by the attorneys in that forum discussion was to create a LLC, or state-specific LLC. Not that this is the only solution or even the best solution, but it wasn’t for days that the suggestion to form a land trust was made. Land trusts may not be suitable for tax strategizing or particularly helpful for liability protection, but it might be just the ticket for creating privacy around the owners of real estate. One of the great things about land trusts is that they can be done without much fuss. Once documentation has been drafted by your attorney that suits your personal situation, and consultations with your attorney suggest feasibility, future executions of land trust documents may even be done without attorney involvement. Not only that but public recording of certain land trust documents need not be completed.
There are many websites that have fabulous education and guidance surrounding land trusts that are worth your time and effort to investigate. In the end, land trusts may be one elegantly simple solution to protecting privacy in your real estate transactions.
CREtirement 