Previously in this series we have covered finding houses that could be bought even cheaper than the current low prices for houses and the things you can do before you buy to reduce the risk.

And today we are going to cover how the Crusades, a famous gangster and Mickey Mouse have paved the way for you to have added safety, privacy and protection after you buy the house.

Actually the history of the legal loophole you can use to protect yourself from certain liabilities of the house after you buy it comes from the era of the Crusades to the Holy Land.

Medieval Kings decreed that land holders would provide assets, including their own military service, for the battles in the Holy Land. Some enterprising Middle Ages draft dodgers went to the attorneys to figure a way out of serving a tour of duty in the defense of Christendom.

The lawyers came up with an answer which didn’t require moving to Canada. They would create an entity called a “trust.” The land owner would then put his land in the trust and appoint the attorney as the “trustee.” The trustee would then be the mouthpiece for the trust, allowed by law to make all decisions for the trust for the benefit of the “beneficial owner,” which happened to be the landowner.

Hundreds of years later a Chicago gangster anticipating the United States G Men were going to confiscate his real estate holdings hired one of the most prestigious Land Title firms to come to basically the same solution used in the middle ages. Lobbying the state legislature in Springfield, produced what has been called the Illinois Land Trust early last century.

In the middle of the last century, the Florida legislature was presented with a persuasive argument to tailor the Illinois Land Trust for use in the Sunshine State and millions of acres around Kissimmee were then purchased by land trusts.

If it had ever been common knowledge that one entity was behind the early purchases, the prices asked by subsequent sellers would have turned Goofy. But several, seemingly unrelated buyers, cloaked by land trusts were able to assemble the land on which is now Disney World.

But since it is the law in Florida, (and most of the rest of the country) the provisions that protected Disney are now available for anyone who owns real property. And a real estate investor who owns one house has available the same protection afforded for Disney, and a large percentage of the wealthiest people in the country.

Simply overstated, a land trust turns real property into personal property. What you own as the beneficial owner is a mirror image of the real assets you owned before the creation of the trust and your name does not appear on the public records.

The name of a trustee who you have picked appears on the public records. And the Florida law prohibits the trustee from revealing the identity of the beneficial owner. You should be careful selecting the person who will be your trustee.
While the law says the trustee will do what the beneficial owner tells him to do. Get a trustee who you know and trust and be very specific as to what he will charge you.

The documents required to create a trust are legal documents and as such need to be prepared by an attorney. Florida law allows a person to prepare legal documents if he is doing so for himself and there are a number of places you can find the forms to do it yourself.

While I am a big believer in knowing how to do things yourself, I am an even bigger believer in making sure they are done right. Lawyers who specialize in drafting land trusts know the most recent court rulings and it is worth the $500 or so it costs (shop around, it is negotiable) to have the documents prepared by a pro.

Worth it in terms of the protection it produces for you and worth it in the sense that if the pro does it you know it is done right.

The first question that usually comes up is does a land trust protect me from paying taxes? This law was passed by the folks who want to collect the taxes. At least some of the taxes go to the state. All state transfer taxes are due and the IRS didn’t fall off the back of a truck of Mid Crop Oranges barreling down State Route 60.

But, just about everything else you can think of does apply. Just imagine if you could do business while you were invisible. I do not recommend it as a means of hiding from tenants, but some do use it that way.

We mentioned that your contract to purchase a house should be assignable. I would suggest assigning the contract to the land trust your attorney has created for the purchase of this house. Again, as with a home inspection, do not have the documents prepared until you KNOW you are buying the house.

In the next installment we are going to look at owner financing for the house (or houses) you have bought. And since you have a land trust now to protect you, guess who I think should sign the mortgage for your new rental income property?