When you own property, it becomes a part of your assets. Your name is publicly recorded as the owner. This creates a certain amount of liability and risk for your ownership. Many owners look for ways to limit their risk. A land trust can be the solution you are looking for. This guide to understanding land trusts will help you decide if it is the right legal tool for your situation.
What Is a Land Trust?
A land trust is a legal tool that creates a layer of separation between the owner and the land. You still retain control and the right to benefit from the land. However, you are not the direct owner on paper. Administratively, ownership is in the hands of the trustee. Land trusts are governed by Section 689 of the Florida Statutes.
Parties of a Land Trust
Three parties are required to form a land trust and remain legally in effect.
Grantor
The gantor is the person who bought and owns the real estate. They initiate the land trust formation and transfer the property into it.
Trustee
The trustee is the individual or entity that manages the trust. They are the legal holder of the property and will perform managerial duties in accordance with the trust formation documents. A trustee has a duty to act in the beneficiary’s best interest.
Beneficiary
The beneficiary is the individual who enjoys the benefits of the real estate and trust. They can collect income and make decisions about the property. Often, the grantor becomes the beneficiary through the formation of the trust.
Benefits of a Florida Land Trust
Using a land trust when owning real estate in Florida has two significant benefits. The first is that it gives you an extra layer of asset protection. If you are in a lawsuit, you can protect your real estate assets by having them in a trust. Second, you can give yourself increased privacy. The trustee and land trust get listed in public records, not your name. As the beneficiary, your name does not appear in public records. However, there are exceptions to this if you make a homestead exemption claim. Speaking with a real estate attorney can provide valuable insight.
Potential Drawbacks of a Land Trust
Before you decide to set up a land trust, consider the potential drawbacks. You could have financial limitations when paying for the establishment of the trust. There could be tax implications that you are not prepared for. There is also a loss of direct control when you have a trust. You still have control, but you need to work with the trustee to take action. Finally, the laws are always changing. A land trust may work for you now but may not be the best choice in the future.
Establishing a Land Trust
If you want to establish a land trust, your first step is to decide who the trustee and beneficiary will be. An individual, partnership, or group of individuals can create the land trust. Entities can also create land trusts, including limited liability companies (LLC), limited liability limited partnerships (LLLP), limited partnerships (LP), and corporations (Inc.).
A land trust includes several documents: a Land Trust Agreement, a Land Trust deed, and sometimes a beneficiary agreement. Generally, it is best practice to create a separate land trust for each property. That way, each property has insular protection.
Once you identify each party, have an attorney prepare the necessary documents. All that is left is to sign them.
A Guide to Understanding Land Trusts
This quick guide to understanding land trusts should help you better understand this real estate legal tool. Depending on your situation, it might be the right solution for protecting yourself and your assets when owning real estate. Speaking with a real estate lawyer can provide additional insight. They can also offer targeted legal advice pertinent to your specific situation.
Schedule a consultation today and speak with our experienced lawyers about setting up a land trust for your real estate.
