Land Trusts And Asset Protection Planning

I have lost count of the number of asset protection inquiries about land trust where the prospective clients believe that the land trust is an asset protection tool. Land trusts provide no asset protection benefits. A Florida land trust is a self-settled trust, meaning the debtor is the trustmaker and beneficiary. A living trust used for estate planning is another type of self-settled trust. In the case of a living trust the trustmaker/beneficiary is usually also the trustee. The trustmaker is never the beneficiary of a land trust.

A land trust is used to hide ownership of real property. People use land trusts for privacy and confidentiality. If you purchase property in the name of a land trust the recorded deed will list the name of the trustee (not you) and the property description. The deed and public record will not list the names of the trust beneficiary.

Privacy does not work in asset protection. Your judgment creditor will ask you to disclose under oath all of your legal or beneficial interests in real property. A debtor will have to disclose his beneficial interest in a land trust. Also, if the property owned by the land trust is investment property your federal tax return, discoverable by your judgment creditor, will likely reveal taxable losses or gains related to your ownership interests.

You can use a land trust to incorporate both privacy and asset protection.  For example, a married couple might draft a land trust which designates the beneficiary as the husband and wife, tenants by entireties. The beneficiary could be a partnership or multi-member LLC each of which have asset protection benefits. Your personal names will not show up on the public record as property owners/ You will need a trusted third party to be trustee of the land trust.

 

Last updated on May 22, 2020

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