Florida land trusts are an effective estate planning and asset protection tool that is used to provide privacy and also avoid the probate process. It can also aid for purposes of owning, transferring, and managing real property.
What is so beneficial about land trusts is that they are simple and do not have additional maintenance. Irrevocable asset protection trusts are often confused with land trusts. They are not similar in any way. Although land trusts are a form of trust, they are revocable, which means they do not provide legal protection. They do, however, make it harder for people or creditors to pursue your assets.
How Does a Land Trust Work in Florida?
Land trusts adhere to a private agreement. This agreement involves a trustee or beneficiary agreeing to hold the property for the grantor. The trustee often has no other function than to do exactly what is instructed in the land trust deed.
How Does a Land Trust Protect You?
There are a few main ways that a land trust can protect its owner. The first is that it allows you to properly own property. You will not need to notify family friends or creditors regarding what you own. This also means that creditors cannot pursue you in the event of a lawsuit.
If you do own personal property you can also move the property into an LLC. This also gives you the opportunity to potentially low your tax responsibility. If you on more than one property then you may transfer the property to a land trust and make your LLC the beneficiary. This will also allow you to avoid additional taxes such as the due on sale clause.
Advantages & Disadvantages of Florida Land Trusts
There are various land trust benefits, but one of the most essential is privacy. You will be able to keep your personal assets private from creditors, family, or friends. Another benefit to creating a land trust is liability protection. This can be afforded if you set the beneficiary of your land trust as an LLC.
In the state of Florida, the due on sale clause is a provision on a loan or promissory note. This allows lenders to demand the rest of your mortgage be paid if the property is sold or transferred. By forming a land trust, you can avoid the due on sale clause.
Other benefits of a Florida land trust include:
- Easy assignment of land without formalities of a deed.
- Specify successor beneficiaries should the original owner die, this can avoid the probate process.
- Beneficial interests in a land trust can be owned by more than one owner.
- Florida law states that a personal residence of a land trust beneficiary is entitled to homestead exemption benefits.
- Co-owners of beneficial interests in land trusts are not affected by judgments, bankruptcies, and other matters.
The main downside to forming a land trust is the cost of formation. Typically this will be at minimum a few hundred dollars but can go up to a few thousand depending on how many assets you have and how complicated the process is.
Different Types of Land Trusts in Florida
Title Holding Trust
Forming a land trust as a title holding trust allows the property owner to anonymously maintain all rights over the property. This means that although the land trust is in the care of the beneficiary, as the owner, you can still direct the actions of the land trust. These trusts are often called “Illinois land trusts.”
Conservation Land Trust
Forming as a conservation land trust requires the property owner to give up some rights. This might mean that your land can be used for development or another purpose. Although you are not legally the owner, one day you will retain the rights to your property once again.
Why Do You Put Land in a Trust?
Land trusts can provide asset protection benefits by providing you with privacy. They also avoid the due on sale clause or accelerating a mortgage, while allowing a beneficiary to be an LLC for limited liability protection. Land trusts are revocable trusts, which means that creating one is not a huge risk. Maintaining privacy, liability protection, and avoiding the due on sale clause can save you in the long run. Forming a land trust is a great idea for owners of property that also own an LLC.