Land trusts are useful tools for people who want to protect their real estate ownership/interest in several situations. For instance, if no creditor can attach a judgment or lien to a property titled within a trust.
In this article, you will discover all you need to know about land trusts in Florida.
Florida Land Trust – Explaining the Concept
In layman’s terms, a trust is a legal relationship in which a trustor/settlor transfers property to a reliable second party of his/her choice (trustee) to benefit a third party (beneficiary).
Essentially, trusts are versatile by nature. They can be structured and arranged in several manners according to the trustor’s interests. For instance, it is possible to structure a trust specifying how and when the settlor’s assets will pass to its beneficiaries.
A land trust in Florida can be utilized to “shield” the trustor’s assets against creditors. Also, this type of legal arrangement permits beneficiaries to avoid probate upon the settlor’s death, avoiding headaches and saving time in the court.
Both losing assets to a creditor and wasting time and money throughout a probate proceeding are unpleasant situations that can be avoided with the help of a well-structured land trust in Florida.
Undoubtedly, land trusts are valuable tools when it comes to estate planning and asset protection in Florida. US citizens and foreign residents can utilize it to own, transfer and manage real property.
Irrevocable Trusts vs Revocable Trusts
Even though it is possible to structure different types of trusts, there are two basic types of trusts used by people in Florida – revocable and irrevocable trusts.
A revocable trust (also known as a living trust) is a type of trust that permits the owner to change its terms at any time. It is possible to designate new beneficiaries, remove beneficiaries, or modify terms as to how assets contained in the trust are managed.
On the other hand, an irrevocable trust is a type of trust in which the terms cannot be changed once the agreement is signed. Except for exceedingly rare situations, irrevocable trusts cannot be modified regardless of the reason.
Typically, land trusts are revocable trusts. While assets contained in an irrevocable trust are exempt from taxes, the rigidity of its structure is not an advantage for most people.
Structuring a Land Trust in Florida – Explaining the Process
During the set-up of a land trust in Florida, the owner of real property conveys its title to a trustee. In such a case, the trustee holds both the legal and the equitable title to the property.
When creating a land trust in Florida, the real property deed will not identify any of the beneficiaries of the trust. Typically, property owners will need a basic trio of legal instruments to create a land trust, which are:
- a deed of trust;
- a trust agreement; and
- a memorandum of the trust agreement.
Deed of Trust
Firstly, the owner(s) of the real property that is being transferred to the land trust will issue a deed of trust to the trustee. Then, the document will be recorded in the official records of the county where the property is located.
A trust agreement is a document that identifies the beneficiaries of the land trust. Plus, it also specifies each beneficiary’s interests in the trust. Notice that the trust agreement is never recorded in the public records. Instead, it must be kept confidential.
Plus, this document identifies the person that has the authority to direct the trustee to:
- convey property;
- convey interests in the property;
- distribute the proceeds of a sale or financing;
- execute a mortgage; or
- execute any other administrative documents of the land trust.
Memorandum of the Trust Agreement
The memorandum of the trust agreement is the document that identifies the trustee, also detailing the type of powers he/she is granted to manage the property in the trust. The memorandum must be prepared and recorded in public records.
Structuring a Land Trust in Florida – Can I Do It on My Own?
Even though in some cases it is possible to set up a trust without a lawyer, this is not the recommended approach.
Plus, there are situations in which is virtually impossible to set up a trust in Florida without legal expertise, especially in cases where the settlor’s estate is too large/complex or when it is necessary to set up an irrevocable trust.