GOOD FIT FOR REAL ESTATE INVESTORS
If you are a real estate investor a land trust may be beneficial for you for several reasons. A land trust helps your business and serves as an estate planning tool. First, it helps you keep your real estate investments from becoming public knowledge. If you are the beneficiary of a land trust, your name is not listed as the landowner on the deed, instead the land trust trustee’s name along with certain identifying information are listed on the deed. If you are a celebrity or just reclusive in general this may suit you. Certainly the full extent of your worth and a list or accounting of your assets is potentially something that a seller may want to know when negotiating the sale of certain real estate.
In addition, a land trust helps to potentially shield you from liability connected with the land. For example, if you own a commercial building where a slip and fall occur, the victim of that slip and fall will seek to sue the owner of the building. More specifically, they will sue the trust, which will only be able to satisfy the judgment out of the assets contained in the trust. If you have only one real estate asset in the trust, liability is limited. There will be insurance which will satisfy the judgment, if the judgment is in excess of the insurance coverage, the victim likely can only go after asset. For these reasons alone, real estate investors should find land trusts as a good investment vehicle.
PART OF AN ESTATE PLAN
The benefits, however, do not stop there. Like with any business you likely want it continue and for the wealth and income to continue indefinitely. Provided the real estate asset itself is sufficient to continue producing income, you can use it as a vehicle for passing wealth on to your heirs, thus avoiding probate, which can be an expensive endeavor. The beneficiaries of a trust can change with little tax implications, depending on many variables and factors. In other words, the mere change of beneficiaries is not a taxable event.
Since the property will remain with the trust, there are less administrative costs associated with the property; for example, there is no need for title insurance each time the beneficiary changes, since the property remains with the trust. In addition, if you hold the property in trust, you can rest assured that your heir and only your heir recieves the benefits of the land trust. It does not become marital property subject to equitable distribution, since your heir never owned the property. Indeed even federal tax liens, which in many ways are the most difficult types of lien to extinguish, does not attach to the real estate held in the trust agreement, since the beneficiary does not hold title.
PART OF A LARGER ESTATE PLAN
Oftentimes these land trusts are part of a larger estate plan with various other parts to them. The land trust is indeed very flexible for estate planning purposes. It allows for two or more beneficiaries, it may allow for certain decision making rights to only one beneficiary rather than another, it may grant a life estate in one beneficiary but with income to go to another beneficiary. The possibilities are, in many ways, only limited by your imagination.