Florida Land Trusts are simple to create and are an excellent planning tool for residents and non residents alike. In fact, I submit they are the best solution for foreign buyers. One reason they are seldom used is that few people are familiar with Florida Land Trusts including Realtors, title companies and ironically many attorneys.
Most states do not have a land trust statue. In fact, only Florida and Illinois are the exception. Initially, land trusts limited trustees of a land trust to banks or specifically licensed trust companies. Subsequently, the Florida legislature, expanded this role to individuals, corporations, partnerships and Limited Liability Companies. Furthermore, anyone can be the beneficiary and owner of the land trust.
There are well over a dozen benefits to hold property in a land trust. The top twelve at a glance, include but are not limited to:
1. PRIVACY AND ANONYMITY OF OWNERSHIP – Unlike a corporation or limited liability company there is no public record of beneficiaries. Title appears in the name of the Trustee and there are no requirements to register the trust.
2. EASE OF BUYING FORECLOSURE OR SHORT SALE PROPERTIES – Many times banks will approve short sales or foreclosure purchases but prohibit the substitution of buyers on the subsequent transfer of title for a time certain. A Land Trust may keep the same Trustee, yet allow the beneficial interest to be sold without violating the bank approval.
3. EASE OF AVOIDING JUDGEMENTS & LIENS ON THE PROPERTY – Land Trusts allow individuals with judgments or tax liens to buy and sell freely without having judgment liens attach to their property.
4. EASE OF CONTROL BY MULTIPLE OWNERS – Rather than requiring multiple signatures, only the Trustee is required to sign contracts and related paperwork.
5. EASE OF AVOIDING TWO SETS OF CLOSING COSTS – Documentary stamps as well as title insurance may be avoided whenever there is a simultaneous closing.
6. EASE OF MANAGEMENT IN THE EVENT OF CONFLICT – Land Trust Agreements can provide buy out provisions in the event of death or conflict among property owners.
7. EASE OF MAINTENANCE – Unlike corporations or Limited Liability Companies, land trusts do not have annual filing fees with the state. Additionally, they do not require a seperate tax I.D. or an additional tax return to be filed.
8. EASE OF PROBATE AVOIDANCE – Unlike owning property in one’s individual name contingent beneficiaries are listed in the trust document similar to a beneficiary designation on an insurance policy thereby avoiding probate.
9. EASE OF MANAGING THE DISABILITY OF TRUSTEE OR BENEFICIAL OWNER – Contingent Trustees may be listed in the event the Trustee becomes incapacitated mentally or physically thereby avoiding court proceedings.
10. EASE OF CHANGING CONTINGENT BENEFICIARES – Since Land Trusts avoid probate they often serve as a Will substitute and can be amended at any time without having to change the deed.
11. EASE AND SIMPLICATION OF MAKING GIFTS – Land Trusts, if desired, can be excellent estate planning tools to gift assets out of an estate to minimize or reduce estate tax without sacrificing or giving up cash.
12. FAVORABLE TAX RATES – Unlike a “corporation” or a foreign corporation, beneficial owners of a land trust including foreign nationals are only taxed at the favorable individual capital gain rate which is presently 15%.
The only caveat to creating a Florida Land Trust is if the Trust is owned by a Florida Resident that wishes to homestead the property. Unlike a typical “Revocable” or “Living Trust” property appraisers often view the beneficial interest as being a “Personal Property Interest” rather than “Real Property Interest”. As a result, the Land Trust may not qualify for the homestead exemption depending on the county where the property is located.
In short, depending upon circumstances, when buying or flipping a foreclosed or short sale property or dealing with a foreign buyer, a Florida Land Trust has great flexibility that it often is the best method to purchase and title real estate in the State of Florida. For an initial set up and design fee of $500.00 it may be the best investment a buyer can make