Understanding Types, Setup Process, and Benefits
A land trust is a legal entity that holds title to real estate, providing a way to manage and protect property ownership. It's a type of trust that allows individuals or entities to transfer ownership of property to a trustee, while maintaining control over the property's use and management.
The purpose of a land trust is to provide a secure and private way to own and manage real estate, while also offering benefits such as reduced liability and tax advantages. By understanding how land trusts work, individuals and businesses can make informed decisions about their property ownership and management strategies.
Types of Land Trusts
Title-Holding
Asset protection, estate planning, privacy. Used by individuals & investors.
Conservation
Preserve wetlands, forests, habitats. Used by nonprofits & government.
Community
Support affordable housing. Used by nonprofits & local orgs.
| Trust Type | Purpose | Used By | Common Assets Held |
|---|---|---|---|
| Title-Holding | Asset protection, estate planning, privacy | Individuals, investors, families | Residential or commercial property |
| Conservation | Preserve natural resources and open land | Nonprofits, government agencies, landowners | Wetlands, forests, habitats, farmland |
| Community | Support affordable housing and community development | Nonprofits, local governments, community orgs | Single-family homes, multifamily units, vacant lots |
How It Works
Roles of the Grantor, Trustee, and Beneficiary
Grantor
Creates the trust and transfers the property.
Trustee
Holds legal title and manages the asset.
Beneficiary
Receives all benefits of the property.
5-Step Setup Process
- Determine the purpose of the trust: Identify the reason for creating the land trust, such as estate planning, asset protection, or conservation.
- Choose a trustee: Select a trustworthy individual or entity to serve as the trustee.
- Draft the trust agreement: Create a written agreement that outlines the terms of the trust, including the roles and responsibilities of the grantor, trustee, and beneficiary.
- Transfer ownership: Transfer ownership of the property to the trustee.
- File documents: File the trust agreement and other necessary documents with the relevant government agencies.
Benefits of Using a Land Trust
- ✓Privacy and Anonymity: public records show the trustee’s name, not the owner’s.
- ✓Avoid Probate: direct transfer to beneficiary after death.
- ✓Enhanced Liability Protection: trustee management reduces owner exposure.
- ✓Separation of Assets: keeps real estate investments distinct from other holdings.
- ✓Asset Protection: shields property from certain creditors.
- ✓Tax Benefits: potential reductions or increased deductions.
- ✓Flexibility: supports conservation, development, or rental income goals.
Setting Up a Land Trust
Identifying Trustees
Select a trustworthy and reliable individual or entity to serve as the trustee.
Determining Which Assets to Hold in the Trust
Real estate, cash, stocks, bonds, or other assets can be included.
Choosing a Beneficiary
Consider their needs and goals, and ensure they understand their role.
Creating the Trust Document
Include purpose, assets, trustee duties, beneficiary rights, and any special terms. Have an attorney draft it.
Turn Knowledge into Action
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