All trusts represent a legal agreement between the person who forms the trust, called a grantor, the person who manages the trust, the trustee, and the person who benefits from the trust, the beneficiary. When the grantor transfers property to the trust, title to the property is effectively split into two parts: legal title and equitable title. Legal title rests with the trust under the control of the trustee, and equitable title, or the benefit that come from the property, resting with the beneficiary.
In a trust, the grantor, trustee, and beneficiary can be different people or legal entities, but they can also, and this is the interesting part, be the same person. A trust's ability to divide up title and assign different roles, responsibilities, and benefits are what makes trusts a powerful estate planning and asset management tool.
Land trusts are a very powerful asset protection tool for those who own real estate. A land trust, unlike a state-regulated corporation, LLC, or limited partnership, is not registered with the state. This means that the owner of a land trust can remain anonymous and limit the liability to which he or she is exposed. Using a land trust to hold title to your real estate can help you enjoy anonymity, privacy, and liability protection.
Land trusts are a specific type of living trust formed to accomplish certain goals related to the ownership of land.
A living trust is formed by you when you are still alive. The person who places assets into the living trust is called the grantor or the trust settlor. When writing the trust document, the grantor names a trustee who is responsible for managing the trust property according to the instructions in the trust documents. The benefit of the trust property, such as income from investments, goes to the beneficiary. In most living trusts, the grantor names him or herself as the trustee as well as the beneficiary of the trust. After the grantor of the trust dies, a number of things happen:
A land trust is type of living trust, but it can only hold real estate and real estate related assets. For example, a land trust can hold rental properties, primary residences, land, mineral interests, mortgages, and notes. Typically, the grantor will also be the trustee and beneficiary, but the trustee and beneficiary may also be entities, such as LLCs or trusts, that are owned and controlled by the grantor. With a land trust, the property owner can retain the rights to the property held by the trust while owning the property anonymously, maintaining privacy, and separating the property from other personal assets.
There are multiple benefits of the land trust. The most important benefits is the ability to hold a property anonymously. The property is listed in the trust's name, not the grantor's name, in the public records. The trustee's name will often be listed in the property records, but with the right structure, it is possible to make the trustee an anonymous LLC, and thereby provide complete privacy for the owner. While ultimate beneficial ownership of the property in a land trust will not change, the trust and LLCs can help to decrease the potential for lawsuits and support your ability to engage in property negotiations. In addition, Like a living trust, a land trust helps in avoiding probate court. Property held in a land trust would no longer need to go through probate upon your death.
To learn more about how land trusts can enhance your privacy and protect you assets from lawsuits and creditors, schedule a consultation with our experienced Colorado estate planning attorneys through the contact link on our website.