What is a Land Trust

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What is a Land Trust


Land trusts are an effective tool for managing privacy and avoiding probate. They are the most simple tool that helps you to manage privacy and require no upkeep. Although land trusts are often confused with an irrevocable asset protection trust, they are different. Land trusts are revocable and do not provide asset protection directly. Instead, a land trust can make it harder for creditors to pursue you because it is private, and typically formed out of state.

How Does it Work?


When you enter into a land trust you are going into a private agreement. It is between two parties, the trustee and the beneficiary. The trustee agrees to hold title to a property for the benefit of another party known as the beneficiary. There is then no other function other to do than exactly as the trust deed instructs. Land trusts are always revocable.

How Does a Land Trust Protect You?


Land trusts allow for a privately owned property. Whether you have family, friends, or creditors who are looking to obtain information on what you own, a land trust prevents that. Additionally, if you own property in your name then it comes with other implications as well. Instead, you can move your property into an LLC, enjoy liability protection, and potentially lower taxes.

For example, someone who owns various properties in their name may fear being sued. Whether it is for business or personal reasons. By assigning the beneficiary of your trust as an LLC that you own, you can not only avoid the due on sale clause but also have the property moved out of your name for liability protections.

Advantages & Disadvantages of Land Trusts


The only downside of a land trust is that you must pay to start one. The expense alone may be a few hundred, to a few thousand dollars. Despite this, there are many advantages of a land trust. The first is privacy. This provides you privacy from the rest of the world knowing your assets. Because you can set your beneficiary of the land trust as an LLC that you own, it provides liability protection as well.

Another advantage of a land trust is avoiding the due on sale clause. The due on sale clause is a provision in a mortgage contract that requires the mortgage to be repaid completely after the sale or conveyance of a property. This is also referred to as an acceleration clause.

Different Types of Land Trusts


Title Holding Trust

This form of trust allows the property owner to anonymously maintain all rights. Rather than allow someone else to maintain the property and direct the actions, they can continue to do so themselves. Although you may live in New Mexico, it is referred to as an “Illinois land trust”.

Conservation Land Trust

Different from a title holding trust, conservation land trusts require you to give up some of the rights over your land for other use. This might be for development or conservation, but you remain the legal owner.

Why Put Land in a Trust?

Land trusts can provide asset protection benefits along with giving you privacy. Not only can you avoid the acceleration of your mortgage, but you can allow choosing to set your own LLC as a beneficiary. Overall you are afforded various land trust benefits and can retain ownership of your own property with liability protection.

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