Land Trust – Privacy and Asset Protection for Real Estate Investing
Land Trust has been for a long time a preferred way of handling ownership of real estate by many investors. Basically the recorded title is held by a trustee, but all the rights and benefits of ownership are exercised by the beneficiary (owner), while maintaining his/her privacy and anonymity.
The beneficiary of a land trust treats his/her interest in the property from real estate as personal property. Since the beneficial interest is considered to be personal property, it is treated in much the same manner as a car or other tangible asset, therefore making it so much simpler to sell, borrow against or transfer than a parcel of real estate.
What are the main benefits of forming a Land Trust?
1. Privacy – this is one of the main reasons many investors like to create a land trust for their investment portfolio: the owner’s identity is not public. Also sale price of the property can be kept off the public records and property taxes can be lower, since the purchase price is kept private.
2. Inheritance – the owner of the land trust retains control of the real estate property during his/her lifetime, and after death, the desired succession in ownership becomes effective without the expenses and delays of going through probate. The surviving partners can keep working and managing the parcel without interruption.
3. Protection – a judgment against one of the beneficiaries does not become a lien upon the real estate parcel held in a land trust. Liability on financing can be limited to only the assets of the land trust.
4. Transfer – since the beneficial interest is considered as personal property, it can be used as collateral for a loan the same as personal property (i.e. car, stocks, etc.) without the lengthy paperwork and restrictions as transfer of a real estate title and getting a mortgage. Furthermore, part of the interest can be transferred by a simple assignment, not a deed.
How Do You Create a Land Trust?
It is actually very simple. Anyone can create a land trust by completing a short trust agreement after the purchase of a piece of property. In this agreement the beneficiary (the owner on title,) elects a trustee to hold title to the real estate parcel, and specifies who has the authority to manage, control and other restrictions, including who has the right of succession upon death of the beneficiary.
Disclaimer: This information is not intended as legal advice and it is for general informational purpose. For legal advice please consult an attorney.
If you like this article, don’t forget to check out this SPECIAL WEBINAR on Land Trust with Randy Hughes “Mr Land Trust” and me.