While Land Trusts are not the only strategy for creating privacy with regard to the ownership of Real Estate, it is important to understand all of the advantages and disadvantages of owning Real Estate in a Land Trust as oppose to individually, in a Revocable Trust and/or in a Business Entity such as an Limited Liability Company.
Advantages:
- ENHANCED PRIVACY: Land Trusts provide enhanced privacy in the ownership of Real Estate because the Beneficial Owners who retain a Beneficial Interest (a “Beneficial Interest”, pursuant to the Land Trust Act, means any interest, vested or contingent and regardless of how small or minimal such interest may be) in a Land Trust are not disclosed in the Public Records.
- ABILITY TO IMPROVE REAL ESTATE PURCHASE AND SALE NEGOTIATIONS: The inability of the Public to know who the Beneficial Owner of a Land Trust is allows for the facilitation of an arm’s length purchase and sale transaction. For example, if a prospective buyer knows an individual is well off, they may not offer as high of a price for a particular Real Estate because the prospective Buyer may believe that the Seller does not need the money. With a Land Trust, the Buyer and Seller are on a more fair playing field as the Buyer and/or Seller, as the case may be, do not know who the other individual is. The same may occur where an individual is purchasing Real Estate in their Land Trust. The Seller in this instance may not accept a lower offer if they are aware that the Buyer is high net worth or said Purchase is Strategic for a bigger plan/development.
- PROBATE AVOIDANCE: Similar to your typical Revocable Trust, any Real Estate held in a Land Trust avoids the burden and expense of Probate Administration.
- CREDITOR LIEN AVOIDANCE: Any Beneficial Interest pursuant to a Land Trust is considered personal property and is not subject to the Liens of Creditors (at least in the State of Florida).
Disadvantages:
- NO ASSET PROTECTION:While an individual who has a Beneficial Interest in a Land Trust is considered to own personal property and is not subject to the Liens of Creditors (at least in Florida), such Beneficial Owner is still subject to Civil Judgements and IRS Federal and Local Tax Liens.
- ADDITIONAL TAX RETURN FILING REQUIREMENTS IMPOSED ON THE LAND TRUST UPON THE DEATH OF THE BENEFICIAL OWNER: When the Beneficial Owner of the Real Estate held in a Land Trust passes, the IRS requires the Trustee of the Land Trust to obtain an Employer Identification Number (if not already obtained) and to file Tax Form 1041 each year. This may be burdensome in some cases.
- REDUCED PRIVACY UPON ADDING HOMESTEAD TO REAL ESTATE HELD IN A LAND TRUST: While Land Trusts provide enhanced privacy in the ownership of Real Estate generally, when an individual decides to claim a Homestead Exemption on Real Estate held by the Land Trust, the Exemption Holder’s name is usually still displayed on the Property Appraiser’s website in the County where the Real Estate is located. There are a limited number of exceptions where such personal ownership information may be redacted, however, the circumstances are limited. For example, the owner must either be a current/past Public Defender or Prosecutor; a Registered Guardian; Government Employee in some cases; a Victim of Violent Crime; Law Enforcement Professional; as well as several other situations as determined by the Florida Statutes.
Contact The Presser Law Firm, P.A. for a complimentary consultation to learn more about Land Trusts, Asset Protection, Business Law, and Estate Planning.
The Presser Law Firm, P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(561) 953-1050 or e-mail Info@AssetProtectionAttorneys.com
www.AssetProtectionAttorneys.com