How to Fund a Land Trust

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How to Fund a Land Trust

Land trusts are commonly used by property owners for privacy of ownership. The land trust document is not recorded; the only thing that will show up in a public record as the owner of record is the trustee in the name of the trust.

This privacy of ownership amounts to a kind of asset protection and can deter lawsuits from being filed against you by making it appear as if you have no assets to satisfy a judgment against you. If you appear to have no assets, you are far less likely to be sued.

Furthermore, each property is typically held in its own separate land trust. So, if a lawsuit is filed involving one property, the other properties owned by different land trusts will not be threatened.

What Can You Put in a Land trust?

Land trusts were conceived specifically to acquire, hold, manage, and ultimately dispose of real estate and related assets. Land trusts are commonly used to hold title to commercial real estate and undeveloped or cleared land.

Land trusts are most often used with large tracts of real estate for commercial or residential development, as well as, undeveloped land to be conserved for its natural resources, historical significance, or public recreational use in the future.

Funding a Land Trust

A land trust, like any other trust, is useless unless it is funded with your assets. Funding a trust basically means changing the title to an asset from your name to the name of the trust. Since, as mentioned above, land trusts are for holding real estate, this means changing the title to your real estate from your name to the name of your land trust.

Funding your land trust will involve two legal documents:

  1. The land trust agreement itself - This will specify the names of the Grantor, the trustee, and the beneficiary. But, again, the trust document is a private document and does not have to be filed in any public record.
  2. A Deed In Trust- A Deed In Trust is an instrument that transfers the ownership of real estate to the trustee of a land trust, who will hold title to the property in the name of the trust. It's also the physical document that represents the property’s title.

To fund the land trust, the land trust agreement must be drafted by an experienced attorney and signed by you and your designated trustee. After that, the land trust must be opened with nominal consideration.

Nominal consideration is the payment of a very small sum, such as $10, to satisfy the deed's consideration requirements. Nominal consideration is simply a contractual formality and a sign that you intend to achieve a certain legal goal, in this case, the creation of a land trust.

Once the land trust has been opened, you simply need to sign the Deed In Trust, which also needs to be prepared by an experienced attorney, to legally transfer title to your real estate from your name to the name of your land trust.

Finally, for the Deed In Trust to be legally enforceable, it must be filed with the county recorder's office for the county where the property is located.

Once this is done, the trust will technically own the real estate. But, since you enjoy the power of direction over the trustee of your land trust, you will still control the real estate.

Why Use a Land a Trust?

There are many good reasons to use a land to hold title to your real estate, most importantly:

Privacy

One of the biggest benefits of a land trust is privacy. The land trust document is not recorded; the only thing that will show up in a public record is the name of the trustee and the trust. If the trustee has a different last name than yours and, preferably, resides in another state or out of the jurisdiction of the courts where the property is located, you will get maximum protection.

What's more, it is common practice to use only the address of the underlying property as the name of the land trust. So, for example, instead of naming the land trust Joe Smith’s Land Trust, it will be named 5405 Main Street Land Trust,” which points to the property, but does not reveal that you are its owner.

Probate Avoidance

If the land trust is set up correctly, and the first beneficiary is a natural person, it can also enable the property it holds to avoid probate after you pass away.

To Separate Liabilities

A very large benefit of a land trust is that code violations and other liabilities only attach if the owner is the same. So, if you have a separate land trust for each property you own, then a code violation or liability levied against one property won't attach to the others.

Ease of Transferability

The beneficial interest in a land trust can be changed without it being recorded in any public record. An Assignment of Beneficial Interest Form, which is not required to be recorded anywhere, can be used to change the beneficiary from you to a corporate entity that you own, such as a corporation, limited liability company, or limited partnership.

Consult With An Experienced Wyoming Estate Planning Attorney

Though funding a land trust may seem relatively simple, small mistakes can cause you huge problems later on. It is therefore imperative that you enlist the service of an experienced estate planning attorney to ensure that your land trust is set up and funded properly.

To learn more about land trusts and how they can work for you, and for help setting one up, contact us to arrange a free, no-obligation consultation with an experienced Wyoming estate planning attorney.



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