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Land Trust

A Land Trust is a simple, inexpensive method for handling the ownership of real estate that was created to provide various benefits to property owners. Whether you own a single family home or multiple parcels of real estate, have a mortgage on your property or not, you can take advantage of holding your property in trust.

The benefits of a land trust include:

Privacy

In today’s information age, anyone with an internet connection can look up your ownership of real estate. Privacy is extremely important to most people who don’t want others knowing what they own. For example, if you own several properties within a city that has strict code enforcement, you could end up being hauled into court for too many violations, even minor ones. Having your real estate titled in land trusts makes it difficult for city code enforcement to find who the owner is, since the trust agreement is not public record for everyone to see.

Protection from liens

Real estate titled in a trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into trust, the personal judgments or liens of the seller will not attach to the property.

Discouraging Litigation

Let’s face it, people tend to only sue others who appear to have money. Attorneys who work on contingency are only likely to take cases which they can not only win, but collect, since their fee is based on collection. If your properties are hard to find, you will appear “broke” and less worth suing. Even if a potential plaintiff thinks you have assets, the difficult prospect of finding and attaching these assets will discourage litigation against you.

Investors

Many investors buy their properties through land trusts so that their name does not appear in the public records. The land trust also allows the property to immediately pass to the owner’s heirs at the moment of death, rather than go through a time-consuming probate process.



Some of the other advantages of land trusts for individuals are:


  • Sales price of the property can be kept off the public records.
  • Property taxes are lower if the purchase price is kept private.
  • Judgments or liens (such as IRS liens) against an individual’s name are not a lien against their land trust property.
  • Partners can more easily continue a project if one dies or is divorced.
  • Interests can be transferred quickly without recording a deed.
  • Liability of financing can be contained to the trust.

How Does a Land Trust Operate?

A land trust may be created by anyone capable of entering into a contract: an individual; husband & wife; partnerships; or a corporation. The process begins when you execute a land trust agreement that establishes the control and beneficial interest of the land trust.



The beneficiary retains complete control of the real estate. You may end the trust whenever desired and may add additional property to the trust at any time. How you deal with the proper does not change once a trust is created. The trustee acts on behalf of you to execute deeds and mortgages and deals with the property only if directed in writing by the beneficiary.


When title to real estate is held in a land trust, the interest of the beneficiary, under terms of the trust agreement, is personal property. Since the beneficiary’s interest is personal property, he or she may transfer it by assigning that interest without the formality of executing and acknowledging a deed; the wife or husband need not join in such assignment for the purpose of releasing the spouse’s homestead rights.

How Do You Create a Land Trust?

You create a land trust by signing a short trust agreement at the time the real estate is purchased or after it has been acquired. Under the agreement, you, the owner (called the beneficiary), direct a corporate fiduciary to hold title to the real estate for you, and you direct and instruct the corporate fiduciary as to the persons who will have the authority to manage and control, whether and when it should be sold and to whom, and who will become the owner upon your death.



Whether you own a single family home, multiple parcels of real estate, have a mortgage on your property or not, you can take advantage of holding your property in trust.

Understanding Land Trusts – Attorney Ernest B. Fenton

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