Florida Land Trust
A Florida land trust is a private agreement among different people to operate, manage, and hold legal title to Florida real property. A land trust is a written legal agreement under which you, as the trust maker, appoints someone else as trustee to hold legal title to a parcel of real estate property for your benefit. You also are a land trust beneficiary, and as such you control the use and sale of the property. You receive all the tax benefits and property appreciation. However, public records show only the trustee and trust as the owner of the property—trust beneficiaries are not disclosed. Your name is not made public. Florida land trusts operate under the Florida Land Trust Act, also known as §689.071 of the Florida Statutes.
Land Trust Benefits
Here are some key benefits of a Florida land trust:
- Privacy: If an adverse party searches the public record to discover property you own, they will not find properties that you purchased through a land trust. Your beneficial ownership interest in land trust property remains hidden from potential creditors and others interested in your wealth or your investments. Investors in residential rental property may wish to conceal their ownership from tenants so that the tenants must direct contacts to your appointed property manager or the land trust trustee. Also, there are good business reasons why a buyer may wish to hide their identify in real estate purchase negotiations. Sellers may demand more money if they know the prospective purchaser is wealthy or that the purchaser is trying to assemble adjoining land for a particular purpose. Perhaps the most famous example was when Walt Disney purchased thousands of acres in land trusts to conceal the intended purpose of the property.
- Private Transfers of Ownership: If you own property in your own name you can transfer title only by publicly recorded deedor mortgage. You may sell your interest in a land trust property by privately assigning your beneficial interest in the trust. A third party will not be able to discover the transaction or look up the transfer price and the buyer’s name.
- Probate Avoidance: Real estate you own in your own name must be administered in court through a probateproceeding at your death. A properly drafted Florida land trust transfers the same property immediately to your successor beneficiaries named in a land trust agreement without the need for a legal probate court proceeding.
- Lien Avoidance: A creditor’s recorded judgment automatically becomes a lien on all real property titled in your name (except your homestead). Your beneficial interest in a land trust is personal property, not real property. Therefore, a judgment creditor will not acquire a judgment lien on the property merely by recording the judgment in the county where the property is located.
- Partnership Alternative: When two or more parties want to invest together in a real property they need a written agreement to express their business arrangement. Typically, the investors form a partnership, write a partnership agreement, and file a partnership certificate with the State of Florida. Alternatively, real estate investors’ business arrangements can be expressed by the terms of a land trust agreement that sets forth the obligations and benefits assigned to different land trust beneficiaries. Limited partnershipsmust be filed with the State of Florida and must pay significant filing fees. Land trusts are not filed with the state and pay no fees.
- Asset Protection: Land trust have no asset protection benefits in the event a creditor obtains a civil judgment against you. You will be required to disclose to a judgment creditor under oath your interest in any trust agreement including your beneficial interest in a land trust that has title to real property. Also, a land trust is a self-settled trust because the trust maker is also a beneficiary. Self-settled trust property is considered your personal property. There are no legal clauses or provisions in a land trust agreement that can protect your beneficial interest from a judgment creditor. An IRS tax lien automatically attaches to your beneficial interest in a land trust regardless of whether the IRS knows of the trust.
For more information on Florida Land Trusts, please contact: Daniel M. Copeland, Attorney at Law, P.A., at 904-482-0616 or submit a contact form.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.