Your privacy is important. This is where a land trust can come into play. A land trust protects your privacy and also helps to avoid probate during legal proceedings when an owner passes away.
The terms of a land trust are unique. It’s a legal form of ownership that takes authority for a specific property. A land trust is set up by the property owner and the terms are determined by the owner as well.
Land trusts are simple, they operate under the guise of a revocable trust and should not be confused with an irrevocable asset protection trust. While asset protection is not a direct benefit of a land trust, it does make it more challenging for people to pursue you or the land.
Essentially, a land trust is a private agreement. In this agreement, one party (the trustee) agrees to hold the title to the property for the benefit of the beneficiary or beneficiaries. The trustee does not necessarily have an interest but their primary responsibility is to do what the trust deed instructs to be done. There is no other required function.
There are two different types of land trusts, which we will talk about shortly. These trusts are typically revocable, which means that they can be completely revoked or altered through the appropriate processes.
There are some specific benefits to a land trust and some areas in which a land trust might specifically protect you.
First and foremost, a land trust will protect your privacy and make it more challenging for people to find your land or you specifically. Not everyone needs to know your personal business and typically land ownership is a matter of public record.
In the case of a land trust, the ownership is transferred to the trust and keeps your name out of it, providing a sense of privacy that simply can’t be provided through any other means.
This setup can protect you from liens as well as lawsuits and judgments.
There are both advantages and disadvantages to using a land trust. They do not work for every situation but they can be a great way to keep your property and assets out of the public eye and gives you some anonymity that simply can’t be rivaled with any other legal setup. While an LLC might protect your assets, it doesn’t protect your privacy.
Privacy is perhaps one of the most relevant advantages of a land trust. Let’s break it down and dig into both the advantages and the disadvantages.
Here is a list of the primary benefits of using land trusts.
We mentioned before that privacy is one of the major benefits of a land trust. If you think about it, you can easily jump on your computer or a smartphone and search property records by names or addresses. These search engines are available through most states and counties and the title holder of a property is considered to be public information.
When property is placed into a land trust, the trust is the listed owner of the property. The beneficiaries and related parties are kept private and that information is only known to the trustee and yourself, or whoever else you may share it with. Public records will not display your name as the owner.
Land trusts that are titled in the name of a trust will most likely never be subject to liens that may be issued against eh beneficiary of the trust. This means that a land trust will provide the benefit of protecting the property from liens.
There is no absolute way to protect yourself from lawsuits or protect every asset. However, a land trust can make it far more challenging for lawsuits or creditors to find your assets or property and also make it far more expensive for them to pursue a judgement against the property within a land trust.
If a land trust is anonymous and not obvious, this can be an added layer of protection between lawsuits, creditors, and potential judgments between them and your property.
A land trust is not required to file taxes. In fact, these trusts are not even legally required to have a federal tax ID number in most cases. The beneficiaries are essentially responsible for any tax liability as it operates on a pass-through basis.
You remain the beneficial owner for all intents and purposes but the ownership is disguised within the trust.
Working within the trust is simple. You can set it up one way and since it is revocable, adjustments can be made as needed. If the beneficiaries need to be adjusted, you can complete an assignment of beneficial interest and update the beneficiaries of the trust. This is a simple process and no transfer of a deed is required for this change.
Many people misunderstand the purpose of a land trust and believe that it will wholly protect the land from all liability. This is a common misconception and it simply isn’t true. This is not an asset protection trust.
It does provide privacy and will make any attempts to come after property with creditors, lawsuits, and judgments far more challenging and costly for those parties but it does not necessarily guarantee protection.
Finally, land trusts are still required to file an IRS Form 1041. While these operate on a pass-through like setup, it does not necessarily exempt the trust from ever owing taxes.
There are two primary types of land trusts. These are the conservation land trust and a title holding land trust. Here’s a brief overview of each kind.
A conservation land trust will require the owner to give up some of their rights as far as the use and development of the land are concerned. These trusts are typically designed to protect wildlife or cultural and historical sites. It can also be a great option for preserving natural resources.
The goal is typically to protect the land or conserve the land from commercial development or other activities that could disrupt the nature of the land.
The title holding trust does not strip any rights from the owner. It allows them to maintain all of their property rights and to continue to direct the actions related to the land. The difference between a title holding trust and individual ownership is simply that the owner can anonymously direct what happens.
A land trust could be a great solution for many scenarios. There are also instances in which a land trust is not the appropriate solution. We mentioned previously that a land trust provides privacy and this is one of the major benefits.
Land trusts provide a layer of asset protection and benefits that come with the privacy of interest through the trust. These are private documents that hold title to real property within the bounds of the trust.