When Is a Land Trust Necessary?

Land trusts can benefit proprietors who want to maintain their privacy while retaining the advantages of land ownership.

Key takeaways:

  • A land trust is a legal agreement that grants a trustee authority over a property
  • Privacy is the primary benefit property owners receive
  • These documents are entirely customizable
  • An experienced real estate attorney will ensure your paperwork is in order

A land trust is a type of living trust that assists with property management during your lifetime. Simply put, the trustor, who is usually the property owner, grants the trustee the property’s title for the benefit of a beneficiary.

As a result, the land trust operates the property for the beneficiary, who typically receives all profits from the property. The main advantage of creating a land trust agreement is that it allows you to establish title without disclosing your ownership or the beneficiary’s identity.

These trusts are usually revocable, allowing the trustor to withdraw or change the terms of the agreement at any time, and are always associated with real estate assets such as physical property, mortgages, and property notes.

You may be wondering why you’d need a land trust, since they provide advantages under a very specific set of circumstances. Here’s a look at who could benefit from a land trust and why they’re valuable.

Who needs a land trust?

If you own a property you want to keep confidential in public records, you should look into drafting a Florida land trust agreement.

This practice is common for people who own multiple properties. These people don’t want their names showing up repeatedly in title searches because once the world knows they have these assets, they could become targets for lawsuits.

By keeping their properties in trust, they can avoid disclosing their ownership in these properties, maintain their anonymity, and stay out of the spotlight.

The same goes for buying property. In 1965, the land that is now Disney World Resort in Orlando was purchased using a title-holding land trust. The former owners had no idea Disney was purchasing the land, or they might have increased their asking price.

Wealthy individuals or real estate developers can stay anonymous while buying property in these situations, so sellers can’t take advantage of them. The result is a more reasonable asking price when bidding on land in your local area.

On a smaller scale, landlords can benefit from a land trust if they want a third party to care for a rental property on a day-to-day basis. This agreement puts the trustee in charge of maintenance and collecting rent while ensuring the beneficiary retains ultimate control of the property. 

Talk to an attorney to determine if a land trust agreement could benefit your unique situation.

Land trust benefits

It’s advisable to look at the benefits of completing a land trust agreement before having your attorney draft one.

First there’s the issue of privacy, as the landowner’s and beneficiary’s identities won’t be public record when a land trust is in place. 

Then there’s the ease of the transfer, as these documents are relatively simple and can assign a beneficial interest in the trust to a third party. This transfer is also private, so you don’t have to worry about an heir’s identity becoming a public record when transferring ownership.

Some liability protection goes along with land trust, too, albeit indirectly. While the document won’t shield the owner or beneficiary from lawsuits, their assets won’t be public record; therefore, contingent fee lawyers may not take cases involving them. If lawyers can’t see your net worth, they’re less likely to pursue lawsuits.

Of course, you could always establish an LLC, corporation, or limited partnership to serve as the beneficiary to provide additional asset protection. 

Assets held in trust can avoid the probate process if the property owner passes away and there’s a third-party beneficiary, streamlining the process and potentially keeping the issue out of the courts.

These agreements also allow landowners to separate their real estate holdings from their net worth, providing protection from creditors, liens, and judgments.

There are a number of ways land trusts can benefit you and your family, making them worth exploring if you own property in Florida.

Disadvantages of land trusts

Despite their benefits, there are a few drawbacks associated with land trusts you’ll want to know before you begin.

First, as we touched on before, a land trust doesn’t directly protect the property or the beneficiary from lawsuits. However, establishing an LLC or corporation as the beneficiary solves that problem.

Another issue is that while the property is in trust, you can’t obtain financing for it. Therefore, if you’re looking to take a loan against the property or if you require a mortgage, you’ll have to put the property into your personal name to apply for the credit and transfer it back into trust afterward.

It’s also worth noting that you’ll lose redemption rights on the property, so you won’t be able to reclaim it before or after a foreclosure and court orders can potentially unveil your ownership under certain circumstances.

Most of these disadvantages are minor, but they’re worth knowing anyway.

Where to get your land trust agreement

Of course, you’ll need a lawyer to draw up your land trust arrangement to ensure every aspect is completed correctly. Experienced attorneys don’t need much time to create one of these documents and will adapt the agreement to meet your individual needs.

PeytonBolin can provide you with a high-quality, custom land trust agreement in a matter of days. All we’ll need from you is the name of the land trust, the name of the trustee, the name of the beneficiary, and the property address to get started.

Once we have this information, we’ll develop a land trust agreement that keeps all owners and beneficiaries confidential in public records in Florida while the trust takes legal ownership of the property. 

Contact PeytonBolin today for more information on our land trust creation services in Florida or to inquire about our other real estate legal services.

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