What are Land Trusts?

  1. A Land trust is a vehicle for holding title to real property.
  2. Land Trusts are creatures of statute in Florida. See Florida Statute §689.071.

How are Land Trusts created?

Two things are required to form a Land Trust: 1) A deed in trust (Trustee’s Deed)- where the property is conveyed to the Trustee and 2) Trust Agreement- the agreement under which the Trustee acts.

Common Terminology in Land Trusts?

  1. Trust Agreement– the agreement entered into between the Trustee and the beneficiary which establishes the trust.
  2. The Trustee– is the party designated in the trust agreement to hold legal and equitable title to the land trust property.
  3. Beneficiary- the party designated in the trust agreement that has complete management of the property plus full power to direct the trustee with respect to title
  4. Power of direction– the right to control the trustee’s disposition of title to the trust power and the execution of trust documents affecting the trust property.
  5. Deed in Trust– The instrument which conveys title to the real property into the land trust.
  6. Trustee’s Deed-An instrument by which a land trustee conveys title to the trust real property to another party
  7. Beneficiary Agreements– other collateral agreements among beneficiaries which relate to the relationship among beneficiaries.

What are the advantages of creating a Land Trust?

    1. Homestead Protection
    2. Privacy: The interests of all beneficiaries are private unless disclosed by order of the court.
    3. Asset Protection: Judgments against land trust beneficiaries do not affect the legal title to the real property held in a land trust. Thus, the land held in trust can be freely sold, conveyed, or otherwise pledged without problems.
    4. Certainty: Interest in a land trust cannot be partitioned.
    5. Favorable Tax Treatment: The beneficial interest in a land trust is personal property. Use of land trust as a vehicle for holding title to real property permits the preservation of tax benefits under IRS. All of the tax advantages of individual ownership may be retained when a land trust is properly used to hold title to real property.
    6. Continuity: The death of a beneficiary does not terminate the trust and testamentary dispositions can be made in the trust agreement
    7. Ease of Management with Multiple Owners: The trust agreement establishes a management plan, can set forth buy-out provisions, and should anticipate and resolve potential disputes before they become a problem.
    8. Avoidance of Probate: Property held in a land trust is not subject to costly and time consuming probate. The beneficial interest in the land trust is personal property (so nonresidents can avoid ancillary administration also)
    9. Simplification of making gifts: the $14,000/year tax free gift exclusion becomes easier.
    10. Beneficiary retains full power of management of the property.
    11. Trustee receives full rights of ownership over the real property when the deed is properly drafted.