FLORIDA LAND TRUST

The Florida Land Trust  is a statutory creation in Florida, using the “Illinois” Land Trust model, which has been in use for over a century. This Florida land trust  benefits property owners in many ways, however, expertise in the legal operation of this kind of trust is necessary to ensure that an owner or investor using such a trust is protected.

The greatest benefits to be derived from the creation of a land trust are that it provides privacy and avoids probate. It also limits liability of one property to that property, and does not subject other properties to code enforcement liens or other liens that may arise from the other properties you may own in different trusts. For privacy, during an owner’s life, and even at an owner’s death, that person’s real property holdings will not be a matter of public record, as would normally be the case. Nor are transfer transactions, purchase or sales prices, available for public scrutiny. For estate planning purposes, at the owner’s death, there is a both a cost savings and time savings advantage related to probate costs and distributions of assets in having certain real property in a land trust.

Creating a land trust and placing property into it is easy.  The property owner executes a land trust agreement for a specific property and naming any entity or person as Trustee. In that agreement, the owner chooses and names a beneficiary or beneficiaries of the trust (the beneficiary may be the owner). The owner may also want to designate a Successor Trustee. This Trust Agreement is not recorded in the public record. The owner also executes a deed transferring the property into the name of the trustee. This deed is recorded at the appropriate county registry thus making the trustee the owner of record as well as the holder of all equitable title in the property.

At this point, the trustee takes all action with the property, including buying, selling, leasing, mortgaging, subdividing, licensing, etc. However, the trustee acts only upon written direction of the beneficiaries or – if designated in the land trust document – the holder of the power of direction tells the trustee what to do with the property and when. The trustee will forward important documents it receives to the beneficiaries from time to time, and usually charges an annual fee to remain as trustee.

ADVANTAGES OF LAND TRUSTS

• Privacy Advantages
  • Ownership of a property is not shown on the public record.
  • Financial information related to buying or selling property is not disclosed.
  • By selling your beneficial interest in the Trust rather than conveying the property by deed, transfer of the property is private.
  • Property in the Trust is protected against judgments or liens.

• Management Advantages
  
  
  1. Better control, particularly when several partners own a property.
  2. Easier management of rental properties when dealing with tenants as simply an agent of the Trust, rather than the landlord.
  3. Avoids the danger that one partner may force the other partner to sell or partition the property.
  4. Beneficiary agreements can be used to spell out in detail the beneficiaries’ rights and responsibilities in the management of the property.
     
     
• Financial Advantages

• Mortgages in the Trust’s name do not affect your financial statement adversely.
• Requirements of some lenders regarding the length of time a property must be owned are not a factor.
  
  
• Liability Protection
  • Liens against the trustee of the trust attach only to that trust property.
  • Liens against the beneficiary do not attach to the trust property.
  • Liens against the beneficiaries’ other properties do not attach to the property held in trust.

DISADVANTAGES OF LAND TRUSTS

Loss of control: The previous owner, if a third-party beneficiary is used, must go through the third party to have all leases, contracts, permit applications, and other documents related to the party signed by the trustee.

Insurance issues: In Florida, most homeowners insurance companies will not provide liability coverage in a policy of insurance on a property held in a land trust or any other entity. This would require the trust to obtain a separate business premises liability policy for such protections.