In this article, I will share the benefits of a land trust, what it is, its disadvantages, and how to set it up legally to protect your real estate assets from any legal disputes. As you know, the maximum legal disputes fought in court are directly related to real estate.
If you get yourself ready before those disputes occur you can save your asset from being stuck in that legal case for years. It will help you maintain your monthly revenue from those properties and avoid losses in the long run.
Table of Contents
- Why Use a Land Trust?
- What is a Land Trust?
- Benefits of a Land Trust
- Disadvantages of a Land Trust
- How to Set Up a Land Trust?
- Please Note
Why Use a Land Trust?
Here is the following reason why you should be using a land trust.
- It helps to keep your investment property separate from your personal or other assets.
- It gives you protection from liabilities, creditors, and judgments.
- It can give you complete privacy, as assets in a land trust are owned by a trust and listed in their name in public records, not in your name.
- The biggest benefit of a land trust is it allows you to buy or sell land and properties without disclosing the sales price to the public.
- Your children can better inherit the asset after you have passed away.
The benefits of a land trust are massive, and these are just the basics of what a land trust can do for you. Read on, and you will learn the hidden advantages of having a land trust. But first, we need to know what land trust is exactly and how it works.
What is a Land Trust?
You may have heard that many ultra-rich people use a trust to maintain their assets and transfer them legally to their kids without disclosing anything. A land trust is a legal tool or a company that people use to protect their real estate assets and maintain privacy.
They allow the property owners to transfer their legal ownership and title of investments to a trustee. Then the trust holds the legal title for the owner and the trust beneficiaries. The beneficiary can be a single person or many, depending on the trust you are building.
The biggest benefit is that it can make you differ completely anonymous. You do not have to file your trust with any state or government agency. If you want, you can never disclose your personal information. There will be no pressure on you from anyone. It is one of the best asset protection strategies.
Benefits of a Land Trust
Now let’s talk about the full benefits of a land trust so you can understand it better. Here the title of the property will be held anonymously by one party, while other parties will benefit from all income from that property. Here are the top benefits.
1) Protection from Lawsuits
Real estate involves lawsuits, and it’s quite common. If you ever get stuck in a legal dispute, you will have to spend a good amount of money on your ownership and identifying beneficiaries. But the trust will protect all the beneficiaries by creating a layer between the owner of the property and the one benefiting from that property. Simply you will remain safe as long you hold that asset in trust.
2) Advantages in Tax Filings
Like an LLC (limited liability company), a land trust is not required you to file a tax return or obtain a federal tax ID number. Instead, the member is the taxpayer can file tax returns as a normal person as you did before you purchased that asset.
3) It Makes the Transfer of Interest Easy
Here you can change the beneficiaries at any time you want to another individual, an LLC company, or any corporate company. While doing all that, you dont have to report to the Secretary of State that you are doing it, which make the transfer of asset super easy.
4) It Helps in Probate
Probate is a legal process to transfer real estate assets to their heirs, which must be allowed by the court. You do not need to follow this legal process if a real estate asset is left to heirs through a trust. Land trusts make the transfer of assets to heirs simple and can even prevent expensive cases of probate in court.
5) Protection from Liens
If you have taken a debt from anyone a lien will protect you. It is a legal entity that temporarily transfers ownership of an asset to a third party until a debt is paid off. If you hold that debt property in trust, you don’t have to worry about it. Under a land trust, any real estate assets are not subject to a lien that will protect you and other beneficiaries. Is not it cool?
Disadvantages of a Land Trust
But don’t jump off after knowing all the benefits of a land trust. There are some disadvantages also. You may think it can give you 100 percent protection from any liabilities. Unfortunately, that is not the case. Complete protection is a magical world, and there will be loopholes that will take your sleep away. Here are the two major disadvantages of a land trust.
1) Tax Payments Disputes
If you think you can avoid paying your real estate taxes via this trust then know that will not happen. The government does not allow building trust just to secure yourself. They also have some benefits over it. You have to pay your property taxes. But you can reduce them. You as a beneficiary must report income on your tax returns. So don’t think you can avoid your taxes. It’s legal, and you have to pay on time.
2) Legal Loopholes Problems
Some loopholes will be there, and people are ready to use them for suing you in court. If you ever get stuck in a legal fight and court orders to disclose all the private details, you have to do it. It will create more issues for you as all the identities will get disclosed. The trust is built to protect you, but that does not mean you can do whatever you want. Law does not allow that.
How to Set Up a Land Trust?
Setting up a land trust is just creating a normal trust by selecting some trustees and beneficiaries and determining which assets will be stored in the trust. The beneficiary can be an individual, an LLC (limited liability company), a corporation, or a limited partnership. LLC is the best for protecting your assets. It will give you additional security.
This article is not a piece of legal advice, and I am not a lawyer. It’s only for educational purposes. Please consult with a certified lawyer to better understand this land trust and how to use them. I strongly suggest you not do it without hiring a real estate attorney.
So these are the benefits of a land trust and why you need them with a few disadvantages. Plus how to build trust. Once again, it’s a legal entity, and you should be careful when dealing with it. Hire an expert and make yourself safe. Yes, it will maintain your privacy and protect your assets, but that does not mean you are above the law. Follow the law, and you will have no problem in the future.