What is a Land Trust?

Different types of trusts can be created to help manage your assets. A land trust is a type of revocable trust that not only protects your property from probate upon your death, but is an effective tool used to establish and maintain anonymity and privacy in relation to your real estate holdings. Understanding what a land trust is, what it is typically used for, and how it may be beneficial to you, will help in determining if this is the right kind of trust to integrate into your estate plan.

The Main Purpose of a Land Trust

A land trust is a type of legal entity that holds and manages real estate for a property owner. It is similar to a living trust in that it is typically revocable and includes the same parties. A land trust will have a grantor – the person creating the trust, a trustee – the person managing and controlling the trust assets, and beneficiaries – the people who benefit from the income and property held in the trust.

Land trusts are primarily used to establish anonymity to help protect from future lawsuits, judgments, creditors, and other potential liabilities. Land trusts are also useful in keeping real estate investment properties separate from your other assets. Additionally, as with other types of trusts, land trusts allow you to bypass probate upon your death.

Establishing Anonymity on Title with a Land Trust

If you own a property that is not placed in trust, then likely on your deed, title to your property will appear in your name, individually. However, if you place your property in a land trust, your property will appear on title as the “XYZ Land Trust.” This is an important first step in creating a layer of protection against litigants, creditors, and lien holders. 

Land trusts are immensely effective in preventing people from being able to easily ascertain the property you own and the extent of your net worth. By being unable to relate your name with the property, it makes it more difficult, and less likely, for people to initiate litigation against you and use your property as part of satisfaction of a judgment. If a potential litigant or creditor does not see that you own significant assets or property, then the odds of them filing a lawsuit against you are greatly reduced.

As mentioned above, once your property is transferred to a land trust, your name will no longer appear on title. You can increase this protection by naming either the trustee and/or the beneficiaries of the land trust as an LLC. By doing this, your property will not attach to certain liabilities the same as it would if it were held individually or in a living trust.

Avoiding Probate with a Land Trust

In addition to creating anonymity, land trusts also prevent your property from going through probate upon your death. In a land trust, you designate a trustee who will administer the property held in the trust. You also name beneficiaries who will benefit from the property and receive any rental income the property produces. Thus, upon your death, if your property is placed in a land trust, the property will be administered by the trustee and the trustee will distribute the property directly to the beneficiaries designated under your land trust. This ensures your property passes exactly how you would like it to without court intervention and the costs related thereto.

Types of Assets Held in a Land Trust

Land trusts are only meant to hold real estate. Unlike living trusts, you should not place personal property, bank accounts, or other financial assets in a land trust. Additionally, it may be prudent to place separate properties in individual land trusts. This is especially beneficial if a lawsuit does become associated with a certain piece of real estate. By having separate land trusts, other properties titled to different land trusts will not be considered as part of that litigation.

Requirements to Create a Land Trust

The first step in setting up a land trust is determining which property you would like to place in the trust. For instance, it is typically not advisable to place your primary residence in a land trust for tax planning purposes. Therefore, it would make more sense to place your investment and income-producing properties in a land trust.  

You will then need to decide who will be the trustee of the land trust and who you will designate as beneficiaries. As discussed, it may be beneficial to create multiple LLC’s for this purpose.

After your plan is firmly established, you will need to create the actual trust document which sets forth the terms for which your property is to be held and managed under the trust. You will also need to assign your property to the trust by creating separate transfer documents. Finally, you will need to make sure you record a new deed naming the land trust as the legal title owner.

Consulting an Attorney to Help with Your Land Trust

Since there are many steps and considerations involved in creating a land trust, it is best to consult with a qualified estate planning attorney. An attorney experienced in creating land trusts will draft the land trust so that it is valid and will ensure supplementary documents are executed properly and other important details aren’t overlooked.

At Aliav Law we have created land trusts for many of our clients. We take pride in protecting your property and giving you and your family peace of mind for the future. Call our office today if you’re interested in taking the first step in establishing anonymity and protection for your real estate by creating a land trust.