Investing in land is one the best decisions any investor could make because the opportunities are endless. Investing in land will not only provide your family with financial security, but it’s an investment that will only increase over time. One way to protect your investment is by creating a land trust. It is a legal title in which the trustee conveys the ownership to the beneficiaries, giving them the written authorization of the entire property or land. This gives the beneficiary complete control, which just like a will, is designed to not only protect your assets, but the trustee retains the ability to alter, change or terminate the trust at any given time. When you decide to invest in land, it’s important that you understand all of the ins and outs.
Benefits of Creating a Land Trust
Privacy of Ownership
A land trust provides the beneficiary complete privacy, which gives the beneficiary the option to disclose their personal holdings. If you’re a wealthy person or someone who comes from an affluent family, you may want to keep your finances private. Holding a land trust title gives you the ability to dispose of real estate while keeping the landowner’s identity completely confidential. This is especially useful if you’re a property owner leasing land. This way the tenant always goes through the property manager without ever bothering the actual landlord.
Creating a land trust protects your property from probate. Often times when a relative passes away, the estate goes into probate, unless the property is being held in a title holding trust or land trust, which upon your death will either go to your beneficiary or their successor. Entering a trust also protects against ancillary probate, which often happens if the real estate you own is located in a different state other than the one you live in. Ancillary probate can also be avoided by creating a land trust because a land trust is considered to be personal property.
Transfer Beneficial Interest
Converting your beneficial interest in the trust doesn’t require some sort of lengthy court proceeding. It only requires a simple written agreement and the signature of the trustee. This can be especially useful if, let’s say, you have a large commercial property owned by 15 to 20 different investors, and they decide to sell the land. The trustee is the only signature required to finalize the sale. Also, if the beneficiary decides to sell or gift the property, they’re able to do so without having a public record of the transaction.
Prevents Land Partition
A land partition can be a very dreadful and lengthy legal process. This is when an owner is required to sell their property in order to liquidate their assets. If the land is protected by a trust, it will never be subject to partition proceedings. It also gives the beneficiary the right to transfer all of their interests to whomever they wish.
Protects Against Liens and Other Judgments
If you have a lien or if a judgment has been ruled against you, the beneficiary, it will not affect the land trust because as a beneficiary, you own an interest in the land trust, which is considered personal property.
Safe to Lease
You can also lease the land to families for farming or ranching. This can generate hundreds of thousands of dollars, without ever having to give up the rights to the actual property.
Oftentimes, the trust will name more than one successor or beneficiary. Upon the death of the beneficiary, their successor will become the primary beneficiary. This will give the children, or grandchildren, complete control of the property immediately after the beneficiary’s death
Oftentimes, a land trust or title holding trust will have multiple beneficiaries. Here’s an example: five children inherit their father’s estate, but in order to sell the property, it can be transferred into a land trust. Then only the trustee can make the decision to sell the property.
A land trust is a much more cost-effective option than going through the process of real estate ownership, which can end up costing thousands of dollars in legal fees and court costs. With a land trust, there are no filing fees, preparation fees, and no state filing fees. The only thing you have to worry about is paying the annual trustee fee.