The Truth About Land Trusts

First, What is a "land trust?" A land trust, "is simply an agreement in which property is transferred from one person (called a grantor) to a trust in care of another (the trustee) who holds it for the benefit of a person or entity (the beneficiary)" (Kohler, 2007, p 48).

Mark Kohler (2007) in his book, Lawyers Are Liars, illustrates four myths regarding land trusts. He says

land trust gurus actually spread four lies which state that a land trust:

1) Hides the true owner of a property
2) Provides "bulletproof" asset protection
3) Avoids the due-on-sale clauses in loan documents, and
4) Saves taxes (p 47).

In some circumstances, like to avoid probate, privacy of ownership and ease of transferability, land trusts make sense, but don't assume or believe that if you use a land trust that you will be creating a system for asset protection.

Some individuals have given land trusts a bad rap because they have been used improperly. I would not recommend writing your own land trust agreement. If you are considering using a land trust, it would be best to consult a real estate attorney.

"In a situation where you are not trying to get around a due-on-sale clause and need to sell a piece of property in a creative manner, a land trust could be a great fit" (Kohler, 2007, p 61). However, make sure you consult an attorney who understands land trusts before you begin using a land trust.


Reference
Kohler, M. (2007). Lawyers Are Liars: The Truth About Protecting Our Assets!. Phoenix: Life's Plan Publishing LLC.