A Florida land trust is a legal arrangement where property ownership is held by a trustee for the benefit of unnamed beneficiaries. It offers privacy in real estate ownership, as the beneficiaries’ names don’t appear in public records, and can simplify property management and transfer. This trust type is often used for investment properties or to avoid probate.
How Do Land Trusts Work?
Florida land trusts operate under section 689.071 of Florida law, also known as the Florida Land Trust Statute or the Florida Land Trust Act. In a land trust, the trustmaker appoints another person or company to serve as trustee to hold legal title to real property. The trustmaker will almost always be the beneficiary of the land trust.
The name of the trustee is public, but the names of the trustmaker and beneficiary are not.
The prospective real property owner can be both the trustmaker and the beneficiary. The trustmaker may name other beneficiaries to share the beneficial interest in the trust’s property.
A land trust may hold title to more than one property, and beneficiaries may hold different beneficial interests in each of the land trust properties. A land trust trustee may be an individual or a legal entity such as an LLC or corporation.
In legal terms, the land trust divides property ownership between the property’s legal ownership in the trustee’s name and the property’s beneficial ownership which is owned by the beneficiaries appointed by the land trust agreement. The beneficiary controls the use and sale of the property. The beneficiary receives all tax benefits and property appreciation. However, public records only show the trustee and trust as the property owner —trust beneficiaries are not disclosed.
The beneficiaries of a Florida land trust can still qualify for the homestead exemption, both for tax purposes and for protection from forced sale by a judgment creditor. A Florida homestead may be owned by a land trust.
Land Trust Benefits
A Florida land trust allows you to (1) make ownership private, (2) transfer property outside of public records, (3) avoid probate, and (4) avoid liens.
Make Ownership Private
The primary benefit of a land trust in Florida is to provide confidentiality over your ownership of real estate. The county public records will show only the name of the trustee of the land trust–not the name of the beneficiary.
An adverse party that searches the public record will not find properties that someone purchased through a land trust. If the economic owner names a different person or legal entity as the trustee, the trustmaker’s beneficial ownership interest in the land trust remains hidden from potential creditors and others interested in the trustmaker’s assets.
Owners of residential rental property may wish to conceal their ownership from tenants so that the tenants must deal with a property manager instead of bothering the owner. A buyer may want to hide their identity and their other real estate interests during real estate purchase negotiations. Sellers may demand more money if they know a prospective purchaser is wealthy, or that the purchaser is trying to assemble adjoining land for a particular purpose. Walt Disney purchased thousands of acres in land trusts to conceal his plans for Disney World.
Tip: In our experience, the most common reason our clients are interested in a land trust is to hide their names from the public records.
Transfer Ownership Privately
Typically, a person can transfer title to real estate only by publicly recorded deed or mortgage. Alternatively, a person may convey their stake in a land trust property by privately assigning, by sale or by gift, their beneficial interest in a land trust.
The public will not be able to discover the transaction and, in the case of a sale, will not know the transfer price or the buyer’s name.
Avoid Probate
Real estate owned by an individual must be administered through a probate proceeding after the owner’s death. A properly drafted Florida land trust transfers the same property immediately to successor beneficiaries named in a land trust agreement without the need for a probate court proceeding.
Avoid Liens
A creditor’s recorded judgment automatically becomes a lien on all real property titled in the debtor’s individual name (except your homestead). A beneficiary’s interest in a land trust is personal property, not real property.
Therefore, a judgment creditor will not acquire a judgment lien on the property owned in a land trust merely by recording the judgment in the county where the property is located. Florida Statutes provide protection of land trust property from judgments and liens recorded against individual beneficiaries.
Our attorneys prepare land trusts for clients throughout Florida.
We charge a flat fee for a consultation and preparation of your land trust. We can do everything done remotely by phone or Zoom.
A Land Trust Is Not Protected from Creditors
Land trusts are not reliable asset protection tools. Although a land trust hides ownership from public record, a judgment debtor is required to disclose to a judgment creditor under oath their beneficial interest in any trust agreement including the debtor’s beneficial interest in a land trust.
Also, a land trust is a self-settled trust because the trustmaker is also a beneficiary. There is a well-established policy in Florida law that a creditor may levy upon the debtor’s interest in any self-settled trust. There is nothing in a land trust agreement that can protect your beneficial interest from a judgment creditor.
A creditor has a variety of remedies to assert against a debtor’s personal property interest in a land trust. An IRS tax lien automatically attaches to your beneficial interest in a land trust regardless of whether the IRS knows of the trust.
Process to Using a Land Trust
Florida Statute 689.071 controls land trust agreements and land trust ownership. The statute covers important features of land trust agreements such as trustee powers, trustee liability, and beneficiary rights.
When a prospective purchaser of real property wants to own the property through a land trust, the first step is to make a written land trust agreement. A land trust agreement should appoint the prospective owner and trustmaker as the beneficiary. The trustmaker must appoint an independent person as trustee. The trustee may be an individual or legal entity. The purchaser should not name himself as both beneficiary and trustee. The dual appointment may merge the legal and beneficial ownership and collapse the trust.
The trustee’s name appears on the public ownership records. The trustee has no obligation to pay money towards the purchase or maintenance of the property, and the trustee has no right to benefit from the property. All property benefits are reserved for the person who is the trustmaker or beneficiary.
The beneficiary has the power to direct the land trust trustee to act on their behalf so that the trust beneficiaries effectively control the property. The land trust trustee is a fiduciary who is legally required to follow the beneficiary’s directions. The beneficiaries reserve the right to remove and replace any trustee. Once all parties execute the land trust agreement, the trust can purchase real property. Property is titled in the trustee’s name in his fiduciary capacity, such as “John Doe, Trustee.” The “trustee” designation alerts the public that the trustee owns the legal title on behalf of an underlying trust and that other persons hold the beneficial interest in the property. The trustee may be compensated as agreed by the parties and as expressed in the trust agreement.
The beneficiaries contribute money to the land trust, and the trustee uses the money to pay for the property. If the trustmakers are using purchase money financing, the trustmaker may have to guarantee the note, but only the trustee signs the mortgage. The trustee has no personal liability to pay a purchase money mortgage. All income and gain from the property investment are owed to the beneficiaries, less any cost and expense incurred by the trustee.
Disadvantages of a Land Trust
Before you decide on putting your property into a land trust in Florida, you should consider possible disadvantages.
First, in the case of a rental property where the tenant doesn’t pay, the individual beneficiary cannot handle the eviction. The trustee will likely have to pay an eviction attorney to bring an eviction action on behalf of the land trust.
Secondly, the trustee will have to be involved in all real estate transactions, whether that be a rental agreement, property listing, permit applications, contracts, and so on. The trustee is the legal and public owner. Most land trust agreements provide for payment to the trustee for actions on behalf of the trust. CPAs or attorneys acting as trustees will charge the trust and beneficiary at their professional hourly rates.
Some people mistakenly believe that a land trust provides personal asset protection. A land trust is a “self-settled” trust meaning that the person who establishes the trust is also the trust’s beneficiary. A beneficiary’s interest in a self-settled trust, even if made irrevocable, is not protected from creditors. Other legal entities, such as LLCs, provide better asset protection. Some property investors establish land trusts where the beneficiary is an LLC, with the investor having an ownership interest in the LLC.
Using an LLC as Trustee of a Land Trust
The trustee of a land trust can be an LLC. A Florida resident can use their own LLC as trustee of their land trust. That way, the Florida resident controls both the beneficial interest and the role as trustee.
The typical problem with using your own LLC as trustee is that, in Florida, the name of the manager and registered agent of the trustee is publically searchable. However, a resident can instead use an LLC formed in another state, such as Delaware or Wyoming, to serve as trustee. The name of the manager of LLCs in those states cannot be searched online.
In that way, the property owner enjoys the privacy benefits of the land trust while also being able to serve as trustee through their own LLC.
Getting a Loan in a Florida Land Trust
It is difficult to purchase property directly into a land trust. Many lenders do not understand the nature of Florida land trusts and will deny the loan.
In addition, even if the loan were approved, the mortgage on the property would still be in the names of the trustmakers, which is publically recorded.
Property can sometimes be subsequently transferred to a land trust after closing in a purchaser’s personal name.
Land Trust Costs
The cost of a land trust is $1,250. The fee includes:
- A brief discussion with an attorney to gather information and explain generally how the trust works.
- If needed, preparation of a quitclaim deed from a trustmaker to the trustee.
- A standard land trust agreement identifying the beneficiaries and provisions of the trust.
