What Is A Land Trust?

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Topics: Asset Protection

In so many words, a Land Trust is a legal arrangement whereby title to a property is held by an entity called a Trustee and all the benefits, rights, and powers of ownership are retained by a person called a Beneficiary.  The rights and duties of these are spelled out in a duly notarized and signed document called the Trust Agreement.

 Think of a Land Trust as if it were a politically, economically, and socially powerful ally to whom you have entrusted all your real estate holdings.  Only real property can be placed into a Land Trust, so all your personal property must be handled in some other way.  Your Land Trust is really a legal document called the Trust Agreement.  You can design this to serve your individual purposes.  It limits the power of the Trustee who is the person or corporation you’ve selected to oversee the Trust itself.

 Under Section 689.071 of the Florida Statutes and most of the various laws in other states, only a properly executed Declaration of Trust and a Deed or other form of conveyance such as an Agreement for Deed showing you as Grantor and the Trustee as Grantee need be executed to place a property into a Land Trust.  It is prudent to record the deed in the Public Records to put 3rd parties on notice that the Grantor no longer owns the property.

 In addition, I routinely include in the Deed or conveyance all provisions of the Land Trust Agreement itself, omitting only the identities of the Beneficiaries.  This way, in the event of the need for proof of authorization for the powers and actions of any of the participants, the Deed can serve rather than having to show the Trust and lose all the privacy it affords the Beneficiaries. The Trust Agreement which describes the terms and conditions of the Land Trust normally need not be recorded. (Despite all the foregoing, it’s not uncommon for Banks, Title Companies etc. to require that the original Declaration of Trust be presented for their inspection.)

 WHO MAY FORM A TRUST?

 Remember, a Land Trust is merely a piece of paper!  Anyone who is competent to enter into a contract can draw up a Land Trust; and anyone can be named to become a Beneficiary.  This includes individuals, partnerships, corporations, other Trusts, a joint venture, professional associations, societies, etc.  The Trust Agreement incorporates the terms of the way in which the property may be held as well as the general agreement as to whom the power of direction will go.

 Usually the Beneficiaries make all the decisions.  In the event there are several Beneficiaries, their proportionate ownership interests can be reflected in the Land Trust Agreement as a percentage of ownership.  For example: “John Doe will have an undivided 40% interest and Jane Doe an undivided 60% interest in Trust Property.”  Alternatively, they may be issued individual shares representing their proportionate shares of ownership of the Trust.

 Provided that the Trust Agreement doesn’t preclude it, John Doe could then convey his interest to another via an Assignment of Beneficial Interest to another.  Or, if not prohibited by a Credit Thrift clause in the Trust Agreement, he could pledge his share of the Trust as collateral for a loan. Conversely, upon his and Jane’s direction, the Trustee could sell or pledge the corpus of the Trust, or any of the individual properties for the purposes of raising cash if needed.

Learn more about Land Trust with Jack Miller’s Fundamentals of Land Trusts ebook.

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