How Can I Trust My Land Trust Trustee?

I am often asked by my students about property that they already own (with title in their personal name) and how best to transfer this property into a Land Trust. There are many reasons to transfer property currently held in your personal name into a Land Trust.

Let us assume that you are already convinced of the benefits to taking the property out of your name and putting it into a Land Trust. You want to name an individual as your Trustee but do not have 100% confidence in that person. The best way to protect yourself against Trustee fraud (and personal creditors) is to sell the property on a contract (at 100 % Loan-to-Value) to your new Land Trust Trustee. You could draft a no down payment (or little down payment) contract with no payments or interest for a period of say…ten years. This would allow you to not have to declare the property “sold” in the eyes of the IRS (no money received in the contract), but still receive the benefits of the law in case of an attack on the trust.

Furthermore, if your Trustee tried to commit fraud and sell the property without the beneficiary's direction, the contract would have to be paid in full to clear title and you would at least get all your equity out of the property!