Episode Transcript
[00:00:00] Speaker A: I don't know how to open a bank account for the land trust. What do I do? Stick around for the answers. I'm Joe Siegel, your real estate asset protection attorney here in Orlando, Florida. And we've got the answers when it comes to bank accounts and land trusts.
So everybody's always asking us about opening the bank account for the land trust, and they want us to sign documents as the trustee of the land trust. Not needed. Absolutely not needed. There is no reason for a land trust to open a separate bank account in the name of the trust.
99.9% of the time, very few times that it would be applicable. And I'll get to those in a minute. But for the most part, the bank account is the beneficiary's bank account.
And that is, it's on its tax ID number. Everything is handled through the beneficiary's account number. And this comes up because, well, who gets the rent? Because the trustee signed the lease. So shouldn't the trustee get the rent? No, we do not handle money like that on a month to month basis, day to day, weekly basis. We don't do that as trustee, as a third party trustee. The money instead goes straight to the beneficiary on the lease, from the tenant to the beneficiary. Inside the lease, there's usually a line or a paragraph that says, all rent shall be paid to, and it's the beneficiary's name. Now, a lot of our clients go, but doesn't that kill the anonymity provided by the land trust? Yes, absolutely. And for that reason, we typically recommend that you set up a separate company as an operating company, sort of like a property management company. But it's not a property management company per se, it's an operating company. It's operating your real estate. So this company out here receives the rent. So its name and its address and its phone number, everything appears inside the lease as the property operator. And it receives the rents every month it receives the rents. It then distributes the rent left over to the beneficiary after it has paid maintenance and paid mortgages and paid utility bills. Anything else it has to pay related to that property. And then whatever's left over, it distributes by transferring, usually online, right over to the beneficiary account.
Now, I told you I'd tell you about when it's good to have a bank account for a land trust, and that's when, typically, you have unrelated members of the beneficiaries under the land trust, you have unrelated beneficiaries under the land trust. So when you have unrelated beneficiaries under land trust, this is typically a business deal. You have business partners. It may be two LLCs, it may be a person and an LLC. It may be several people and several LLCs. In that case, you're really operating as a partnership. And although it is inside of a land trust, the property is inside of a land trust. You are operating as a general partnership. It's just the general partnership's name is not right out there blaring to the world, hey, we are a general partnership doing business for this property. So the trust still owns the property. It signs the leases, it signs permit applications, notices of commencement, construction contracts, leases, everything else that goes along with the property. But the partnership would go and get its own tax ID number. And it's a partnership and the partnership name happens to be the name of the trust. And while we're the trustee of it, the beneficiaries are the ones acting as the general partnership doing business as this land trust name. So it would go and it could open a bank account with that new tax ID number for the general partnership. It is not opening a bank account as a trust, it is opening a bank account as a partnership. And banks should have no problem with that. If the banks ever have problems with that, we're happy to talk with them. We deal with that all the time. When it pops up, it's no problem. We're happy to do that. Again, we're trustee of thousands of properties. We wrote the book on land trusts in florida. It's called landtrustbook.com go there if you'd like to get a copy. We helped write the last two major revisions to the Florida land trust statute. We were there and we deal with land trust day in, day out, as well as questions just like this. Should I open a bank account for the land trust? And how is the rent paid? And to who? So if you got any other questions, go to our website, mylandtrusty.com, drop us an email helloandtrustee.com or give us a call.
[00:04:20] Speaker B: Thanks for listening to this edition of Trust this. If you got something out of it, please press like and subscribe and give us a five star review to help us reach others who can benefit from this series. Until next time, keep aspiring to a better life.
