It is incredulous, the amount of merit-less lawsuits that are being brought against people, simply based on the depth of their pockets. If a person has any assets that are visible to the general public, unscrupulous attorneys consider them fair game. A prudent investor should take all legal and legitimate measures available to protect his or her hard earned assets.

With regard to real estate, that protection can come in the form of a land trust. A land trust is an arrangement whereby one person (the trustee) holds both legal and equitable title to real estate and holds it for the benefit of another party (the beneficiary). The beneficiary has no interest in the real property as such. What the beneficiary has is an interest in the trust. The statute provides that this interest can be designated as personal property in the deed, and in most land trusts it is so designated.

This is different from most trusts because usually the trustee holds legal title to the property and the beneficiary holds equitable title to the property. But the land trust transforms the equitable interest in the land into an interest in personal property. This transformation has many legal ramifications as I will explain later.

The beneficiary of a land trust can be a person, corporation, partnership, limited liability company, other legal entity or a combination of these.

Certain conditions must be met for a Florida Land Trust for it to be legitimate and binding. The specific characteristics of a Florida Land Trust are that it fulfills the requirement of Florida Statute 689.071. Those requirements are:

Once these requirements have been fulfilled, the trust is entitled to the benefits of the land trust statute.

The Trustee’s only duty in a Florida Land Trust is to hold the title to the property and to sign documents affecting the title when directed to do so by the beneficiary or the terms of the trust. The terms of the trust usually contain the duty to convey the property to the beneficiary(s) at the termination of the trust (if not conveyed earlier).

The beneficiary retains all other rights and duties regarding the property. Accordingly, the beneficiary(s) collects rents, pays taxes, obtains insurance and otherwise manages the property. If properly designated in the deed, the interest of the beneficiary is no longer an interest in real property; rather it is transformed into personal property.

The two documents necessary for a Florida Land Trust are a Trustee’s Deed which contains the proper language and the Trust Agreement. If there are two or more beneficiaries (other than husband and wife), then there should also be an agreement between the beneficiaries spelling out their legal relationship. Trust certificates can also be used for evidence of ownership. The IRS requires that it be given notice of the fiduciary relationship.

There are many benefits of titling real property in the name of a Florida Land Trust.

1. Privacy is perhaps the biggest. There is no public record of the owners of a land trust. The Trustee is listed as the owner and only he or she knows the identity of the beneficiary(s). Those checking County Records will find no record of the beneficiaries of a land trust. This privacy insulates owners from the annoyances of ownership and keeps their wealth from public view. By placing property in a land trust one’s ownership can be hidden. It should be noted however, that a land trust is not absolute protection from disclosure. It is a barrier that will hide your ownership from public view. But as with other types of wealth, a court can order disclosure of ownership. A land trust will protect MOST people MOST of the time. And it will also give you the time and freedom to deal with your property in the event court action is taken against you.

2. Another great benefit of utilizing a land trust is that it can allow property to pass to whomever one chooses without any court proceedings. The trust names contingent beneficiaries and upon death they immediately become the owners of the trust. This avoids both the cost and delay of probate proceedings.

3. In Florida a spouse may obtain a portion of a person’s estate even if a will gives it to other persons. This called the forced share or the elective share. When a person with children remarries, this can defeat his or her legitimate goal of leaving property to his children. When property is owned in a land trust, and a contingent beneficiary is properly designated, it is not part of the estate and not subject to the forced share.

4. When property is held in a land trust, judgments and lies against the individual beneficiaries do not attach to the land. Therefore, a beneficiary may freely sell his interest even with numerous certified judgments against his own name in the public records. Use of a land trust allows persons who already have judgments filed against them to buy and sell property without having the judgments attach to the property. Of course, if asked under oath what assets he owns, a person must disclose the ownership of beneficial interests in land trusts under penalty of perjury. The land trust will not completely shield a debtor from a determined creditor, but it should slow down the process of collecting a debt and might cause an inexperienced attorney to give up in frustration.

5. There are many other benefits of utilizing a Florida Land Trust, but shielding the property owner from frivolous and merit-less lawsuits has to rank near the top. We have become an extremely litigious society. Even a frivolous suit may be worth filing if the defendant has numerous properties which can be tied up in litigation or seized. But if it looks like a person has no assets, it may be difficult for a disgruntle person to find a lawyer to take even a meritorious case.

Now that you have been made aware of the benefits, let me provide you with an overview of how a land trust is set up. A land trust can be formed in two ways:

By putting his own property into a trust, a person loses the advantage of secrecy, because there will be a permanent record of the transaction. A less obvious method is to convey the property to a straw man and then have the straw man place it in a trust.

The better procedure is to buy the property directly into trust. A seller can convey to a trust himself as beneficiary and then assign the trust to the buyer – or – the seller can convey directly to the buyer’s trust. When entering into the contract for sale and purchase, one can add “or assigns” to the purchaser’s designation and later declare that the contract has been assigned to the Trustee. When QUADREAL INVESTMENT GROUP, INC. purchases a property, we have a clause in the addendum that states that “the seller agrees the buyer may take title to the subject property in the name of a to-be established Florida Land Trust.”

The basic concept behind a trust is that you are giving your property to someone you can trust. Choose the Trustee wisely. As a practical matter, it is not easy for a Trustee to cheat a beneficiary. Even if a Trustee could sell the property without the knowledge, direction and consent of the beneficiary, it would represent a criminal act of fraud.

A trust may be given any number or name. We always use either the street number or street name or a combination of both.

The deed is the most important document in a land trust since it creates the trust arrangement. In drafting the deed, the following are important:

There are many other clauses that aid in the operation of the Trust and eliminate problems which may arise. When designating a person who will be beneficiary after the death of the original beneficiary, it is important that the successor not be given a present vested interest. It must be made clear that the successor beneficiary has no interest in the trust until after the death of the original beneficiary.

After leaning now of the benefits of a land trust, there must be pitfalls or drawbacks… or everyone would take title to property in the name of a land trust. Actually, the biggest reason that people do not take title to property in the name of a land trust is that they simply do not know about them. But there are other problems and drawbacks you should be aware of.