3 Benefits of a Land Trust
Used in conjunction with a Limited Liability Corporation, a Land Trust is one of the most protective vehicles in which to take title to Real Property. Any experienced real estate professional has heard of a trust and its benefits. The land trust is a simple and inexpensive solution for holding legal title to real estate, and is specifically designed and drafted to buy, hold, transfer or finance real estate in a confidential manner.
A land trust is essentially a private agreement created through the execution of two documents whereby one party (the ‘trustee’) agrees to hold title to property for the benefit of another party (the ‘beneficiary’). The first document, a Deed in Trust, is a document where real property is conveyed to the name of the Trustee. The second document is the actual Land Trust Agreement. This document allows the Trustee to direct and control the trust pursuant to the terms of the land trust agreement set forth by the Beneficiary.
There are many benefits to using a land trust. The land trust has a more desirable and advantageous ownership structure than some of the more familiar forms of real estate ownership. Some of these benefits include:
Under a land trust agreement, the identity of the legal owner is not disclosed to the public, or any other third party. When the land trust agreement is executed and the trustee deed recorded, the owner of the property is no longer recognized by the public. One of the easiest ways to determine if someone has assets is through public records. For a successful real estate investor this could paint a bulls-eye on their back. A land trust is a powerful privacy tool and ensures that search comes up empty.
Remember, a land trust agreement is for privacy. It is not a corporate entity, nor does it share the same liability protections that corporations or limited liability companies enjoy. If an accident occurs in a property, the beneficiary could be held liable. That is why it is best to use a corporate entity in conjunction with a land trust agreement.
EASE OF TRANSFERABILITY
The beneficiary of the land trust can be changed without recording a change in public records. The interests in a land trust are considered personal property, not real property. Transfer of interest in a trust can be done effortlessly with an ‘Assignment of Beneficial Interest.’ Only the trustee needs to sign and execute documents.
When investing in real estate, real estate owners must sign all necessary legal and closing documents each time real estate is acquired or sold. Deed taxes are often noted and recorded based on the sales price. This information is then published in the public records. This burden can be eliminated by acquiring and holding real estate in land trusts.
PROTECTION FROM TITLE CLAIMS AND LIENS
If an owner of real estate signs a warranty deed in their personal name, they could be subject to title claims if there is a problem with the property. For example, a lien filed without the property owner’s knowledge could result in liability to the owner, even if title insurance was purchased. A land trust will protect an owner personally against many types of title claims because the claim will be limited to the trust. The trust has no other assets, thus limiting one’s exposure to title claims.
Likewise, real estate titled in a trust is not subject to liens against the beneficiary of the trust. For example, if an individual is dealing with a seller in foreclosure, a judgment holder can file a claim against the property in the name of the seller. If the property is titled in a trust, personal judgments or liens of the seller will not attach to the property.
Land trusts are a very powerful tool for the savvy real estate investor. A land trust is a revocable, living trust used specifically for holding title to real estate. Each property is titled in a separate trust, affording maximum privacy and protection. These are just three of the many reasons land trusts are gaining popularity in the world of real estate investing.
Written By: Brian Bombinski – Acquisition/Sales agent with Altura Investment Realty
Brian can be reached at 407.625.0751