Real Estate Trusts

Trust Explained (German Translation)

 

The Florida Land Trust

The Florida Land Trust is an amazing device which offers numerous benefits to property owners. The two reasons it is not used by every investor are that few know much about it and those who know about it do not know where to obtain trust services.

Trusts in general go back many hundreds of years and today they offer even more benefits than they did when they were invented. The Florida land trust is a statutory form of the “Illinois-type” land trust which has been used for over a hundred years.

The most important benefits of the land trust are privacy and avoidance of probate. With a land trust, no one needs to know what real estate you own either during your life nor at your death, and by avoiding probate you avoid thousands of dollars in attorney fees and months delay in distribution of your property to your heirs.

By using a land trust with somebody of your choice  as trustee, there will be no public record of your ownership of the real estate in the trust. The public records will list the you choose as trustee, and the tax bill will be sent to the trustee (who will forward it to you for payment). The property will be managed by you or by your agent. Income tax returns will be filed by you in the same way they would for property in your own name.

Some of the most popular benefits are, keeping the sales price secret, keeping liens and judgments off the property, avoiding a spouse’s forced share, and avoiding litigation.

The beneficiary of your trust can be you individually, a corporation, a limited liability company, a partnership or any other legal entity. If you are the beneficiary individually, you can name any other person or entity to immediately become successor beneficiary upon your death. If your company is the beneficiary, you can name a successor in your company papers.

Besides a beneficiary, you can have a director. For example, you can set up a trust in which your children are the beneficiaries (paying the taxes on income) but you are the director. As director you would make all the decisions regarding the property. If you loan someone money you can have them put their property in a land trust and make you the director. Then you could control the property until you were paid in full.

 

  1. PRIVACY AND ANONYMITY OF OWNERSHIP – Unlike a corporation or limited liability company there is no public record of beneficiaries. Title appears in the name of the Trustee and there are no requirements to register the trust.
  2. EASE OF BUYING FORECLOSURE OR SHORT SALE PROPERTIES – Many times banks will approve short sales or foreclosure purchases but prohibit the substitution of buyers on the subsequent transfer of title for a time certain. A Land Trust may keep the same Trustee, yet allow the beneficial interest to be sold without violating the bank approval.
  3. EASE OF AVOIDING JUDGEMENTS & LIENS ON THE PROPERTY – Land Trusts allow individuals with judgments or tax liens to buy and sell freely without having judgment liens attach to their property.
  4. EASE OF CONTROL BY MULTIPLE OWNERS – Rather than requiring multiple signatures, only the Trustee is required to sign contracts and related paperwork.
  5. EASE OF AVOIDING TWO SETS OF CLOSING COSTS – Documentary stamps as well as title insurance may be avoided whenever there is a simultaneous closing.
  6. EASE OF MANAGEMENT IN THE EVENT OF CONFLICT – Land Trust Agreements can provide buy out provisions in the event of death or conflict among property owners.
  7. EASE OF MAINTENANCE – Unlike corporations or Limited Liability Companies, land trusts do not have annual filing fees with the state. Additionally, they do not require a seperate tax I.D. or an additional tax return to be filed.
  8. EASE OF PROBATE AVOIDANCE – Unlike owning property in one’s individual name contingent beneficiaries are listed in the trust document similar to a beneficiary designation on an insurance policy thereby avoiding probate.
  9. EASE OF MANAGING THE DISABILITY OF TRUSTEE OR BENEFICIAL OWNER – Contingent Trustees may be listed in the event the Trustee becomes incapacitated mentally or physically thereby avoiding court proceedings.
  10. EASE OF CHANGING CONTINGENT BENEFICIARES – Since Land Trusts avoid probate they often serve as a Will substitute and can be amended at any time without having to change the deed.
  11. EASE AND SIMPLICATION OF MAKING GIFTS – Land Trusts, if desired, can be excellent estate planning tools to gift assets out of an estate to minimize or reduce estate tax without sacrificing or giving up cash.
  12. FAVORABLE TAX RATES – Unlike a “corporation” or a foreign corporation, beneficial owners of a land trust including foreign nationals are only taxed at the favorable individual capital gain rate which is presently 15%.
  13. HOMESTEAD QUALIFICATION – Previously, there was a debate of whether Florida Land Trusts qualify for the homestead exemption. However, Section 689.071 was recently amended to reflect that the principle residence of a beneficiary which is held in a Land Trust qualifies for the Homestead Tax Exemption. In short, a Florida Land Trust has great flexibility and depending upon the circumstances is most often the best method to purchase and title real estate in the State of Florida. source: Ronald S. Webster