When you work to create a comprehensive estate plan with an estate planning lawyer, you may consider incorporating a land trust into your plan for various reasons. Creating a land trust can have benefits like privacy and avoiding probate. However, land trusts also have disadvantages that may make them unsuitable for your purposes. A Florida estate planning lawyer from Kramer Green can help you determine whether a land trust is the right structure to meet your needs.
Understanding the Florida Land Trust Act
The Florida Land Trust Act, Florida Statutes § 689.071, enables individuals to create a private agreement to hold legal title to property in someone else’s name. The land trust agreement prevents the public from knowing who owns the property. In a land trust, the property owner appoints a person or legal entity, as trustee to hold legal title to the real estate for the benefit of the beneficiary. Typically, but not always, the beneficiary is the person who created the land trust and originally owned the property. A land trust also may hold legal title to more than one parcel of real estate.
However, the person creating the land trust need not be the only land trust beneficiary. The trust creator can name other beneficiaries to share an interest in the property and can name successor beneficiaries. As a result, the shares of each beneficiary may differ.
Under the terms of most land trust agreements, the beneficiaries control how to use and sell the property. They also receive benefits from the property, such as income and tax advantages. The sole purpose of the trustee is to implement the decisions of the beneficiaries and to hold legal title to the property for public records. While the trustee may receive a fee for acting as a trustee, the trustee does not otherwise benefit from the land trust and has no obligation to contribute monetarily to the land trust.
Advantages of Land Trusts in Florida
The major advantage of land trusts in Florida is privacy. No public records disclose the identity of the land trust beneficiaries. As a result, creditors interested in the assets of the person who created the land trust will not find records indicating that the person owns any interest in the land trust. Beneficiaries of land trusts also can convey their interests in those trusts by private assignment, whether through a sale or gift, without public disclosure. Outside a land trust, a real estate interest must transfer via deed or mortgage, which are publicly recorded and available documents. However, a land trust allows the transfer of interests in the property without public knowledge.
Land trusts also allow the successor beneficiaries to inherit the real estate contained in them outside of probate proceedings. A properly drafted land trust automatically transfers each interest in the land trust to named successor beneficiaries with no need for probate court proceedings. This process allows inheritance to occur without the time and expenses involved in the probate of the decedent’s estate.
Under Florida law, a creditor with a judgment against an individual automatically becomes a lien on all real property titled in that individual’s name. However, a beneficiary’s interest in a land trust is personal property, not real property. Therefore, the structure of a land trust prevents a judgment against a beneficiary from attaching a judgment lien against the property in a land trust.
Disadvantages of Land Trusts in Florida
The biggest disadvantage of a land trust is that it does not provide as great a degree of personal asset protection as some other legal entities, such as an LLC. A beneficiary’s interest in a self-settled trust, such as a land trust, is not protected from creditors. Even though the land trust hides ownership from public record, a judgment debtor still must disclose all assets under oath to judgment creditors, including their beneficial interests in land trusts. A creditor has various options to levy upon the debtor’s personal property interest in a land or a self-settled trust.
Another disadvantage to land trusts is that they can be expensive to operate and maintain. The trustee, who is often a professional such as an accountant or lawyer, must be involved in all real estate transactions, including rental agreements, contracts, sales negotiations, etc. Likewise, suppose legal action is necessary, such as the eviction of a tenant on the real estate. In that case, it is up to the trustee, not the beneficiary, to file and prosecute the suit. Land trust agreements typically provide for the trustee to be paid, and these professionals charge their normal professional hourly rates, which can add up over time.
Contact Kramer Green for Assistance with Your Estate Planning Matter
The Florida estate planning attorneys of Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. are ready to help you and your family through every step of creating the estate plan that best suits the needs of you and your family. We know how to most effectively and efficiently draft the documents necessary to avoid the time and expense involved in probate proceedings.
Our objective is to guide you through the complex legal matters that estate planning can involve. In addition, we want to help you lessen the burden on the surviving loved ones you will leave behind. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal estate planning issues with our attorneys.