Land Trust Alternative In Tennessee
In its usual "ahead of the curve" fashion, Tennessee does not recognize land trusts. Are there viable alternatives available to investors in Tennessee?
In its usual "ahead of the curve" fashion, Tennessee does not recognize land trusts. Are there viable alternatives available to investors in Tennessee?
llc?
What do you mean not recognzed?
If I own RE in TN do you mean that I cannot legally deed same to my trust, be it either inter vivos or testamentary?
If so, please provide me a legal citation or two confirming this.
New to the game and getting my "ducks in a row" before venturing further, but I have seen on various websites and have been told by a lawyer friend (albeit an insurance lawyer) that land or title trusts are not recognized in Tennessee or Louisiana. As an example, see the following link (from which the verbiage below was copied):
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"Freedom from judgment lien attachment to the property. In a properly constructed land trust in states wherein land trust are viable (all but Tennessee and Louisiana), judgment liens of any kind against beneficiaries do not attach to the land (even including IRS and State Welfare liens). "
As for an LLC, they are both franchise and excise taxed in Tennessee. The exemptions from such are quite specific and seem geared toward farming and dealing in the selling of mortgage-backed securities.
You can exempt the LLC from these taxes, IF you are willing to be personally liable for the LLC. Kind of defeats the purpose.
Further investigation has revealed the following (courtesy of Bill Gatten's website):
"Then, an Agreement for Use and Possession between the trustee and the new co-beneficiary is created, whereupon the IRS, and most states (Tennessee and Louisiana not withstanding), characterize the resident beneficiary as an owner of an "IRC §163 Qualified Property," even though the real estate has itself been converted by the land trust to personalty. [See IRC §163(h)4(D) pertinent to real property held in estates and certain trusts, in which ownership is characterized as personal property] "
Sounds like the problem in Tennessee is with the assignment of the trust to the new beneficiary (i.e. the investor). ANY comments welcome!
Got the following in an e-mail reply from Bill Gatten:
.... "Its not that land trusts don't "work" in Tn., it's just that Tennessee, in its failure to adopt the Uniform Doctrine of Equable Conversion, does not see the transfer to a trustee as being any more than a name change on title. In other words, a trustor and a co-beneficiary tenant would still be seen by the state as an owner of the RE. This means that a co-tenant leasing the property would not be subject to simple eviction (i.e., forcing a foreclosure action in order to to evict, dispossess and regain possession). Further, since there is no conversion of the realty to personalty in Tn., there are no protections other than those that apply to ordinary real estate ownership. It is also likely that a land trust would not provide much asset protection if it were to be discovered by a judgment creditor. This is due to the loss of the benefit of non-partionability of personalty by judgment creditors (and the inability to place a charging order on a co-owned property)..
If your intent is simply to hide your ownership from prying eyes, the land trust works as well in Tn. as it does anywhere else." ....
I would appreciate any comments.
I understand the only real point of a land trust is to be a "cloaking device". If you are looking for asset protection you should consider setting up a LLC and name it as the beneficiary of the land trust.
A land trust alone usually only makes it harder for people to discover who the true owner is - this will prevent nuisance lawsuits and someone looking for a deep pocket.
I don't know about TN law, but this is my understanding of the general effect of a land trust.
Try an attorney that truely knows TN law and you will be ok. Ask them if they deal with RE investments and go from there. They will know what and where to take you from there. Good news is many the attorneys in TN aren't versed in Land Trusts. Your benifit...
Sire
All ... Thanks for the info.
Called a lawyer today who deals in real estate proceedings. He says the same thing. Land trusts will work for privacy issues in Tennessee. He works with land trusts frequently. For asset protection, he recommended good insurance but also possibly a LLC. The LLC route would only be explored after I've acquired several properties.