Available in certain states, a land trust shares many similarities with family trusts. Both are technically revocable living trusts, meaning that you set them up before you die and you can tax the property out of them whenever you want. Land trusts are limited as to the type of property they own, while family trusts are limited as to the people that benefit from them.
Family Living Trust Basics
A family trust is a legal entity. Once you create it, you transfer your assets into it, so that the trust owns your property instead of you. You set up the trust by defining the "beneficiaries," which are people that will someday get things from it, and the "trustee," who is in control of the trust. Usually, you're the trustee, which means that you can do just about anything with the assets in the trust. What makes a living trust a family trust is naming only family members as beneficiaries.
Land Trust Basics
A land trust is also a living trust, but it can only own real estate or assets related to real estate. Most land trusts use a third party, such as a bank, as a trustee. The trustee is largely bound to do what the beneficiary, who is the actual owner of the land, tells it to do. This makes it different from a family trust, which is controlled by the trustee. Like a family trust, land trusts are also revocable, meaning that you can take your asset out of the trust at any time.
Land and family trusts have common benefits. Both can let you avoid probate, since the trust survives even after you die, and can transfer the property according to the instructions that you left. Both types of trust also give you the same flexibility as owning the property outright. You can still buy and sell within the trust as if it was an asset that you held in your own name.
Land Trust Benefits
Land trusts have additional benefits over family trusts. First, you can hide your identity with a land trust. If you don't want anyone to know that you own the property, you don't have to use your own name as the trust's name. Second, while a land trust won't completely protect an asset from creditors, both Florida and Illinois have provisions that give the land in the trust some protection if one of the trust members experiences legal issues.
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