If you’ve done any real estate research lately, you’ve likely come across information about land trust agreements. This type of deal is relatively new and is often underestimated. Opting to close the deal through incorporating a land trust agreement is a simple and inexpensive way to hand over ownership of real estate, especially if who owns the title is actually an issue for the buyer.
A land trust agreement is basically an arrangement between two parties where the ownership of the registered real estate property is held by the trustee and not the actual purchaser. Creating a land trust agreement involves signing a short-term trust agreement at the time the real estate is purchased which is made between the beneficiary/owner and the trustee/right holder. The beneficiary directs any action taken with respect to the property and the trustee complies with it. The beneficiary, i.e. the purchaser, maintains the use and operation of the property, and any income it generates. The trustee, on the other hand, which can be a lawyer, law firm, bank, trust company, or other investor holds the rights and acts according to the direction of the new owner.
As for who can take part in the agreement, there is actually no set limit. Anyone willing and able to enter into a contract with an investor, whether as a trustee or beneficiary, can do so. Also, the agreement does not have to be specifically between two individuals. Agreements can be with business partners, syndicates, as joint ventures or partnerships, or with other groups with a common interest to engage in potential deals.
So you may be wondering, what’s in it for the buyer and what does he get if the title of the property is not in his name, after sealing the deal. This is where this type of deal gets creative. In fact, if the right to the house or property is officially in the name of the guardian, the buyer as the beneficiary is the actual owner of the property. As the owner, all rights, conveniences, responsibilities, and obligations attached to a property ownership claim are subject to the beneficiary or beneficial owner. Although his interest in property is usually not disclosed, the assumption of all liability and accountability for all possible occurrences is stated and confirmed in the agreement.
So, in short, the beneficiary owns the property and acts as the owner of the record but the legal guardian who holds the title. Beneficiaries purchase and claim ownership of private property and retain full management and control over it. Becoming a beneficiary also offers the advantage of not having to deal with the legal responsibilities, characteristics and outcomes associated with the property.
The responsibilities of the trustee, in addition to lending their name to the title of the property, include handling all legal obligations, such as deed and mortgage performance. But even in this area, the guardian is not left to his own devices. He usually has to act under the direction and authority of the beneficiary, who ultimately controls the real estate.
The advantages of being a beneficiary of a piece of real estate are many. For example, because, they control ownership of the property, the beneficiaries have the right to sell, transfer, or pledge their interest in the property at their sole discretion. Also, if this is what they decide to do, this process tends to be easier to carry out than the more traditional and conventional methods, especially since they officially control ownership of the property. Deeds are usually not required to transfer interest in the property and are often done by assignment.
Another advantage is anonymity. A land trust agreement can be seen as a kind of vehicle that allows a person to hold rights to real estate that are exempt from probate. Since the ownership is not officially disclosed to the public, the owner is protected. At times, Beneficial Ownership may come under legal scrutiny, but in general, the basic identification information of the beneficiary is usually not questioned.
This type of agreement is especially attractive to those who wish to protect their privacy and identity with respect to the real estate in question. Since the actual ownership of the property is disguised, this is the optimal deal for real estate investors who may be the target of litigation who may have been sued in the past and wish to avoid a similar scenario occurring in the future.
Succession of ownership is another advantage. On behalf of the beneficiary, who receives ownership of the property, the financial status is not compromised if any negative circumstances arise. There is also a greater sense of security for the benefactors involved. The partner or benefactor also does not have the ability to leave the agreement, but ownership of the property is transferable. Another positive aspect is that there are no adverse tax consequences if ownership of the property is transferred to a revocable trust because the owner, or grantor, controls the property for tax purposes.
Owners are also protected on another level, especially if there is more than one beneficiary who can claim and control ownership. The ease of dual ownership is further magnified, given that all required documents must be signed, notarized and recorded by the trustee and not the beneficiaries involved, however many.
Also, in cases where death, divorce, disability, or other legal judgment and litigation can be an issue involving one owner and not the other, a land trust agreement protects all owners individually. For example, a possible valuation or lien may be placed on the financial holdings of one particular property owner, the financial situation of the other owners involved will not be affected.
In addition, because the title is still in the name of the trustee, the title is not affected even though the beneficiary is negatively dealing with claims and creditors. On the other hand, although a claim against a benefactor does not directly affect property ownership, the income generated from a benefactor’s property is potentially affected by legal proceedings that may occur.
Another possible negative situation is the possibility that the creditor may force the heir to sign an interest in his favor as a settlement of legal issues. For reasons as noted earlier, it is very important to ensure that both domestic irrevocable trusts and foreign asset protection trusts set up include sections that ensure that the rights of all beneficiaries involved are not compromised and creditors cannot gain power. ownership for the real estate property in question.
As with any treaty, it’s important to investigate the rules and regulations that apply in each state. While land trust agreements are legal and commonly used in states like Illinois and Florida, they are illegal in other states. There may also be applicable laws that may require that the administration of a land trust agreement be carried out by a commercial trustee, such as a bank or trust company. Seeking legal advice from an attorney regarding all the necessary documents and processes is also highly recommended.
