By Larry Baldwin, Founder and Executive Director, Heritage Living Trust
The Land Trust has been around for ages but they aren't well known because most attorneys know very little about them. They are the neatest thing to ever come along for holding Real Estate and provide a myriad of protection benefits for property owners. Heritage does them and you should be telling your clients about them.
These simple title holding trusts were originally started in Illinois, so they are often called Illinois Land Trusts. The purpose of a Land Trust is to allow one to have the legal title to his property held by another person or trustee while retaining all of the rights and privileges of property ownership (the beneficial interest). The trustee acts only upon the beneficiaries’ direction. The property owner still retains all rights, such as the right to possession, to collect rent, mortgage the property, homestead exemption, and any other benefit he now has.
Avoid Probate, Save Taxes
Property held in a Land Trust can be designated for transfer of ownership whenever you desire. Your spouse, children or other successors can bypass costly and time consuming Probate proceedings and can sell or refinance the property without delay. Probates often take years to settle. With a Land Trust your heirs could sell immediately and avoid making payments on the property they inherit but don't wish to keep.
Protect Your Credit Report
Public recordings related to your property will show up on your personal credit report, thereby lowering your credit score and access to credit. If you hold title to property in a Land Trust, any liens relating to your property will not report to your personal credit report. This allows you time to work out the problem more favorably, since it does not appear on your reports.
Insulate Your Property From Liens & Judgments
Liens, judgments, lis pendens and claims by city and county government, usually attach to property held by a person in his or her name, or as a co-owner with others. This can make the property more difficult to sell or refinance. Where the same property is held in a Land Trust, legal matters affecting the beneficiaries do not pass through to the subject property.
About Partners and Tenants In Common
Properties with more than one owner, benefit greatly from a Land Trust. First, it isolates each owner from any liens, judgments or other public record filings from being attached to the property. It also allows for partners to readily and easily sell or transfer their interest to another investor. ! They can also gift the property to a family member whenever they wish without tax or reassessment. With Land Trust ownership, it is possible to sell property for cash and avoid the reporting of the sale to governmental agencies, thereby entirely postponing or avoiding tax consequences. By having only one trustee acting for all of the owners, there is no need for all of the owners to sign necessary papers, documents and contracts, which may become necessary from time to time. This saves time and confusion when there are several owners.
Many cities and counties charge hefty transfer taxes when someone sells property to another person. They often reassess the property taxes and those taxes may be increased considerably. In California, it is possible that the property taxes could increase by several times. In a Land Trust, it is possible to privately transfer the beneficial interest (the actual ownership) in the trust without so reporting to any governmental agency. This is because a person's interest as a beneficiary of a Land Trust is considered personal property under the law. This can be extremely beneficial when buying out a partner or spouses interest in a property, or if you wish to deed the property as a gift to children or grandchildren.
Legal ownership of all property is listed with the county recorder's office in all counties. That means your ownership information is available to anyone who wants it. That is why property owners are constantly solicited by mortgage brokers to apply for new loans. If you form a Land Trust, your interest in the property remains confidential. We believe that matters of real estate ownership should be private. You don't let everyone know your bank account number or balances. Why let the entire world know the equivalent of your real estate holdings? A Land Trust offers a way to maintain privacy regarding real estate ownership.
If you have an interest in knowing more about Land Trusts, contact us or give us a call at (877) 265-1856. We will be happy to connect you to an agent to discuss their advantages further.
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