The answer to the question of whether or not a Land Trust protects the assets (presumably, Real Estate) from personal judgment creditors or other risks depends largely on how the Land Trust is structured.  Certainly, a Land Trust can protect assets, if properly structured. 


Why Most Land Trusts Don’t Protect Assets 

That being said, in our experience, most Land Trusts are not actually structured in such a manner that the Land Trust can actually protect the assets held by the Land Trust.  The reason, for this is that the Trustor (aka: “Grantor” or “Settlor”) retains too much control of the Land Trust and/or the Land Trust is not formed in a jurisdiction that enables real protection. 

If you look closely at what most Land Trust promoters are really saying is that the Land Trust will help provide anonymity – thus making it hard for a personal judgment creditor to find the Land Trust or the assets held by the Trust.  Certainly, anonymity can play a legitimate role in deterrence from execution by a judgment creditor (and it may help keep you from becoming a defendant in a lawsuit, because you look like you’re not a good target because you don’t have enough assets to recover against even if the Plaintiff were to win their case against you).  But anonymity, in and of itself does not protect assets held by the Trust.  If a judgment creditor were to find the Land Trust and it is not actually structured so as to provide any real protection, it will probably not afford you any protection at the end of the day. 


Structuring the Land Trust So That It Will Protect Assets 

A Land Trust certainly can be structured so as to provide asset protection.  In most jurisdictions, what would really enable that is: (1) making the Land Trust irrevocable; (2) appointing a 3rd party Trustee, instead of yourself; and (3) you give up other important controls of the Trust and the assets.  (This is essentially the traditional Irrevocable Trust scenario).  However, this situation is usually quite unattractive to ordinary individuals who hate to relinquish control. 

The best way to have a Land Trust that will actually protect the assets of the Trust from personal judgment creditors and other risks is to use an Asset Protection Trust as a Land Trust. 


Using an Asset Protection Trust as a Land Trust

An Asset Protection Trust that is created in a jurisdiction that allow for a Self-Settled Spendthrift Trust may offer the best approach to the Land Trust.  Self-Settled Spendthrift Trusts are generally designed so as to enable the Settlor (the person that creates the Trust) to maintain maximum control in the Trust while still enabling the Trust assets to be protected from future personal judgment creditors. 

The Nevada Spendthrift Trust (a/k/a: "Nevada Asset Protection Trust" or "Nevada Wealth Preservation Trust" or "Nevada Domestic Asset Protection Trust" ) is particularly attractive and is probably the best asset protection tool available in the United States. The Nevada Spendthrift Trust offers unparalleled protection while allowing the individual to retain maximum control. More specifically: 

-    Nevada law allows any individual to create a valid trust whereby he or she is a Trustee (i.e. in control of the assets and has the transactional authority for the trust), he or she is the Beneficiary (i.e. entitled to receive the benefit of trust assets) and the assets are still protected from creditors while in trust; 

-    You need not be a Nevada resident to take advantage of the Nevada Spendthrift Trust Act [requires either that: (1) the trustor/creator of the Trust be a Nevada resident; or (2) the primary assets of the Trust be Nevada based or controlled property; or (3) that a Trustee of the Trust that has the primary administrative function is a Nevada Resident, Nevada Trust Company or Nevada Bank; 

-    Any type of asset (real property, personal property, cash, stocks, bonds, mutual funds, investment accounts, savings accounts, jewelry, valuable collections, family heirlooms, etc.) in any location can be protected by the Nevada Spendthrift Act; 

-    The Nevada Spendthrift Trust Act provides protection from an individual’s own potential judgment creditors (subject to fraudulent transfer restraints).

In addition to the ordinary asset protection concerns of protecting personal assets from personal judgment creditors, the Nevada Spendthrift Trust provides the following added benefits: 

a. Protecting the assets in the event of a future bankruptcy (subject to time limits and fraud constraints – the trust is anticipated and addressed in the most recent bankruptcy law amendments); 

b. Shielding assets in the event of a future marriage; 

c. Estate Planning/Probate Avoidance; and 

d. Ability to have Anonymity/identity concealment (a better alternative than nominees in control of an LLC or Corporation)

A Nevada Asset Protection Trust can be used to hold one or more real estate properties – in the same manner that an LLC, Corporation or an individual can own and hold real estate properties. 

In order to limit exposure (remember whatever an entity owns is fair game if the entity itself winds up getting sued in the course of doing business – such as a lawsuit from a renter or an injured guest), multiple Nevada Asset Protection Trusts may be used to hold separate properties.  Ideally, a separate Trust would be set up to hold each separate real estate property to have maximum protection and limitation of exposure. 

In this manner, the Asset Protection Trust would effectively be a Land Trust.  But this type of Land Trust will be designed to provide protection of the real estate in the Trust – rather than just hiding the property from potential judgment creditors or other adversaries. 


For more information on Nevada Asset Protection Trusts, Click Here 



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