What Is a Personal Property Trust?
A personal property trust is a revocable trust similar in nature to a land trust. The purpose of the personal property trust is to protect the owner’s identity anytime an asset has a title. This could apply to any number of assets: boats, cars, mobile homes, and more. Anytime you have to register your asset and list it in a public record, the personal property trust can be a good idea if you favor privacy. It may be used in lieu of, or in addition to, an anonymous LLC.
This is also why the personal property trust is considered to be essentially the same as a land trust. Both trusts are revocable living trusts in which the trustee acts at the direction of the trustor. So, you essentially maintain full control of your assets. Additionally, there is no gift or income tax applied when you place assets in the trust. The main purpose of each trust is to essentially keep the name of the asset owner private.
Personal Property Trust Benefits
Personal property trusts are a common choice for investors, especially those in real estate.
There are a few key benefits of the personal property trust that make it appealing to investors prone to personal liability.
Privacy. By placing your assets in a personal property trust, you can keep your name off of public record listings. The assets will be registered in the name of the trust instead.
Cost Efficient. Utilizing a personal property trust can help protect you from lawsuits. It can also help you avoid the complex and costly probate process when it comes to passing along assets to your trust’s beneficiaries.
Flexibility. There are a number of different assets that you can place in a personal property trust: real estate, automobiles, financial accounts, stocks, and more. Even once you have placed your asset in the trust you still retain control over it. You also hold the ability to add or remove assets from the trust as you see fit.
When to Consider a Personal Property Trust
As mentioned earlier, there are a number of different assets that you can place in a personal property trust. Here are a few different scenarios in which you might consider utilizing a personal property trust to your benefit.
Mortgage. A common use of the personal property trust is to hold your mortgage, as this asset can be found through a public records search. Additionally, you might even consider using a separate trust for each mortgage if you have more than one. This would allow you to maintain a low profile and ensure your personal information is kept private.
Automobile. Any asset registered with the Department of Motor Vehicles tends to be public information, which makes your personal information available for public search. However, you do have the option of holding your car or mobile home titles in your trust’s name, which will list its PO box or business address for privacy.
Purchase Option. Purchase options are typically recorded in public records to inform other potential buyers that you have first chance at a given property. In this case, if you use a trust, the name of the trust will be listed as the optionee rather than your own name. This can be a useful tool when you would like to use anonymity to your benefit, whether for purchasing reasons or dealing with creditors.
LLC Interest. If you have an LLC, keep in mind that the members of your company are listed for the public record. You might want to consider forming an LLC using your personal property trust as the member and you as the trust’s beneficiary.
Trust Stacking. The process known as trust stacking allows you to combine your personal property trust with a land trust to create a greater level of privacy. This allows you to form a self-settled personal property trust in which you are both grantor and beneficiary. The personal property trust then forms a self-settled land trust in which you are both grantor and beneficiary. This trust stacking technique is especially helpful in states that require public disclosure of trust grantors.