Why I Avoid Using an LLC As a Land Trust's Trustee

By: Mr Land Trust

Many of my students have asked me the question: "Can I use my LLC as the Trustee of my Land Trust?" While it might seem convenient, in my view it creates more problems than it solves. Worse, it can be a fatal flaw in your Land Trust.

Here are a few reasons I avoid using an LLC as a Land Trust Trustee.

article continues after advertisement

Privacy Vanishes: The Public LLC Problem

One of the primary benefits of a Land Trust is anonymity. You shield yourself from frivolous lawsuits and unwanted attention by keeping your name out of public records.

That veil of secrecy is torn away if your LLC is registered in a state that publicly discloses member information and serves as the Trustee. Anyone can search the state's business records and discover your connection to the property, defeating the purpose of the Land Trust. This is especially true in states with transparent LLC registries.

The Self-Dealing Dilemma: Contractual Limitations

In most jurisdictions, you cannot legally contract with yourself. This is because the legal concept of a contract requires two distinct parties. When your LLC, which is solely owned and controlled by you, acts as the Trustee, and you are the sole member of your LLC Beneficiary or the sole individual Beneficiary, you essentially create a situation where you're contracting with yourself. This can lead to legal complications and challenges to the validity of your Land Trust. This obstacle creates a situation where the authority of the Trustee can be called into question.

Operating Agreement Exposure: Authority Challenges

At some point, your Trustee will likely need to demonstrate their authority to sign documents, whether for a sale, refinancing, or other transaction. If your LLC is the Trustee, expect to be asked for your LLC's Operating Agreement. This document reveals the members, managers, and internal workings of your company, again compromising your privacy and potentially exposing sensitive business information. This is an unnecessary and avoidable disclosure.

article continues after advertisement

Side-stepping Another Potential Pitfall

Beyond privacy and contractual issues, when you avoid using an LLC as a Land Trust Trustee, you automatically avoid creating issues with title companies unfamiliar with this arrangement.

Why an Individual Trustee is Superior

Now, let's explore the advantages of using an individual as your Trustee. First and foremost, you can choose someone you trust, like a family member, business associate, attorney, accountant or friend. They might even agree to serve for a nominal fee or for free, saving you significant costs.

Secondly, you can use creative naming strategies to allow one individual to serve as the Trustee for multiple Land Trusts, further simplifying your management. This method creates a layer of professional and organized anonymity that is difficult to replicate with an LLC.

An individual trustee offers flexibility, privacy, and simplicity. They are less likely to raise red flags during transactions and provide a more straightforward approach to managing your Land Trusts. And they can be available to act without regard to standard business hours

In Conclusion

While using your LLC as a Land Trust Trustee might seem like a shortcut, it's a path riddled with potential problems. Protecting your privacy, maintaining contractual integrity, and avoiding unnecessary disclosures are paramount. When you opt for an individual Trustee and leverage creative naming strategies, you ensure your Land Trust remains a powerful tool for asset protection and privacy.

Mr Land Trust, Randy Hughes

I encourage you to learn more about the benefits of using a Trust to hold title to your real estate investments by going to my FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone, unlike most other businesses in America today!)