Land vs. Living Trust
A Colorado trust is an agreement between those who create the trust and those who will benefit from it. These parties are, respectively, referred to as the grantor and beneficiaries. The trustee is in charge of ensuring the agreement is lived up to. Both land trusts and living trusts have these parties and are revocable.
Land trusts are a specific type of living trust formed to accomplish certain goals related to the ownership of land and can only hold real estate related assets.
What is a Living Trust?
A living trust is formed by you when you are still alive. The person who places assets into the living trust is called the grantor or the trust settlor. When writing the trust document, the grantor names a trustee who is responsible for managing the trust property according to the instructions in the trust documents. The benefit of the trust property, such as income from investments, goes to the beneficiary. In most living trusts, the grantor names him or herself as the trustee as well as the beneficiary of the trust. After the grantor of the trust dies, a number of things happen:
- The trust becomes irrevocable;
- A successor trustee takes over management of the trust;
- The beneficiaries are changed to those you designate; and
- Distributions of trust assets will be made to beneficiaries either in a lump sum or over time.
A land trust is type of living trust, but it can only hold real estate and real estate related assets. For example, a land trust can hold rental properties, primary residences, land, mineral interests, mortgages, and notes. Typically, the grantor will also be the trustee and beneficiary, but the trustee and beneficiary may also be entities, such as LLCs or trusts, that are owned and controlled by the grantor. With a land trust, the property owner can retain the rights to the property held by the trust while owning the property anonymously, maintaining privacy, and separating the property from other personal assets.
There are multiple benefits of the land trust. The most important benefits is the ability to hold a property anonymously. The property is listed in the trust's name, not the grantor's name, in the public records. The trustee's name will often be listed in the property records, but with the right structure, it is possible to make the trustee an anonymous LLC, and thereby provide complete privacy for the owner. While ultimate beneficial ownership of the property in a land trust will not change, the trust and LLCs can help to decrease the potential for lawsuits and support your ability to engage in property negotiations. In addition, Like a living trust, a land trust helps in avoiding probate court. Property held in a land trust would no longer need to go through probate upon your death.