A land trust is a tool used for separating property ownership and offers a number of important benefits including asset protection and privacy. Generally, there are three parties involved in a trust arrangement: the beneficiary, the trustee and the grantor. Real estate holders have the advantage of property ownership without the usual complications or problems that are sometimes attached.
How a Trust Works
Land trusts have been in existence for many decades. In a typical scenario, the landowner transfers property title to another individual or bank as trustee. The property holder enters into an agreement with a trustee making the landowner the beneficiary. Basically, the trustee is given title rights in the land trust although the beneficiary or beneficiaries will receive income assets from said property. This arrangement also affords maximum privacy as only the titleholder is named publicly.
Trust Asset Control
The trustee will control all assets; however this is done with severe restrictions and limitations in most cases. Specifically, a trustee is generally given the capability to deed properties from a trust to other entities if explicitly designated to do so with written instructions. In fact, doing so without permission can be construed as fraud and embezzlement. A trustee is either a business entity or person and therefore should be deemed as trustworthy by beneficiaries.
Role of the Beneficiary
Beneficiaries will derive all benefit from trust assets. This will mean that any proceeds including rent collection or asset sales are ultimately directed to them. A beneficiary is made up of one or more individuals or a corporate entity, and can have varying percentages of ownership. Additionally, members can sell their interest in the trust at any time. This is considered as personal property instead of real property transference since the beneficiary only has a financial interest. The actual property will continue to be owned and run by the trust itself.
Advantages of Land Trusts
There are numerous benefits to holding title of land in a trust arrangement. One of the more obvious is avoiding potential probate. Because the agreement governs property ownership, such properties are not included in probate estate. The designated trustee or bank must closely follow the trust agreement and therefore there can’t be any heir contest. This means that the property passes to those the landowner has designated. Also, since beneficiaries are not disclosed in public records, this privacy level is often of immense value as all associated information is strictly a private matter.
