This guide will take a look at land trusts, explore exactly what they are, and explain how a land trust can be utilized to purchase property. In addition, this guide will also take a look at the various benefits land trusts can provide. If you are an individual who is looking to purchase real estate properties, you should continue reading below to see if a land trust is the right move for you and your future investments.
What is a Land Trust?
The simplest land trust definition is: an agreement formed between a land owner and another party that gives the additional party control of the land but does not relinquish ownership from the land owner. In more detail, a land trust can either be defined as revocable or irrevocable.
Revocable land trusts are the most common form of land trusts and allow the trustor to modify, amend, or remove any element of the land trust while they are still alive and in control of the land. On the contrary, an irrevocable land trust is one that is set after it is established but normally will require the trustee to receive permission from the land owner to make changes to the land. Irrevocable land trusts are usually used when land is being gifted, donated, or inherited.
Both revocable and irrevocable land trusts are an agreement formed between a three part partnership. This agreement is formed between the grantor and the recipient, but is also mediated by a trustee. Behind paperwork and legal proceedings the grantor and recipient can be the same person. This type of agreement can provide several benefits.
The Various Benefits of a Land Trust
A land trust may be used during the purchase of real estate property for a variety of reasons. The most common benefits obtained through the use of a land trust are:
- Reduced taxes
- Ability to remain anonymous
- Liability protection
- Ability to keep sale price anonymous
- Prevents property restrictions
- Ease of property transfer
Land trusts are often used by high profile property investors because these agreements allow their name and previous real estate investment history to remain anonymous. This anonymity allows these investors to keep leverage over the land seller. In addition, benefits such as reduced taxes and ease of property transfer, make land trusts a great option for continued investment savings.
How Can a Land Trust Be Used to Purchase Property?
In general, you can establish a land trust on your own. It is as simple as drafting a document that states who is the trustee, grantor, and beneficiary to a given piece of land. However, if you make a mistake during the drafting process it could be costly and even irreversible. Therefore, it is always best to have a land trust drafted by a professional.
The most common way land trusts are used to purchase property is by having a grantor purchase a property and assign their own LLC as the beneficiary. The most important step in setting up a land trust is to choose the right trustee. You will want to find a trustee that has a history of financial integrity, knowledge of real estate law, real estate investment, and is familiar with tax codes for the state the property is located in.
Working with an experienced attorney is the best way to establish a safe, secure, and beneficial land trust.
Summary: Land Trusts
Land trusts are a great tool most real estate investors will want to utilize. Once a land trust is financed by putting land in a trust, it can be used to achieve several benefits. Commonly, land trusts are used to move property from a grantor to a beneficiary. However, this movement is greatly protected by the actions and knowledge of the trustee. If you are a high profile land investor, you should consider learning more about land trusts and how they can assist you.