LAND TRUSTS…STILL A GOOD IDEA? BILL WALSTON
Let me explain.
Makes contracts assignable.
A land trust is simply a revocable contract between
The ownership of a land trust (called the
two or more parties. It’s been in use for centuries.
“beneficial interest”) is assignable, similar to the
way stock in a corporation is assignable. Once
The first party is the owner of the property; the
property is title in trust, the beneficiary of the trust
grantor, in trust speak. He grants, or transfers title
can be changed without changing title to the
to the property to the trustee using a document
property. This can be very advantageous in the
called a Deed in Trust, or simply a Trust Deed. He
case of a real estate contract that is non-
then becomes the beneficiary, along with any co-
assignable, such as in the case of a bank-owned
owners.
or HUD property. Instead of making your offer in
your own name, make the offer in the name of a
The trust agreement designates the arrangement
land trust, then assign your interest in the land
between
trust to a third party.
the
trustee,
the
grantor,
and
the
beneficiary. As with any trust, the trustee holds legal
title to all trust property. However, in a land trust, the
named beneficiaries retain use of the property and
any income it generates. In addition, the trustee can
Avoids the due-on-sale clause of a
mortgage.
act only when it receives written instructions from
the beneficiaries, who maintain complete control at
Land trusts are not subject to the due-on-sale
all times. You can convey property you own in your
clause
name into the trust, but it is better to have the seller
transferred into a land trust is not considered to
convey it directly to the trustee. This avoids having
be “sold, transferred, traded, gifted or otherwise
real estate records ever showing that you owned
disposed of” under most state laws. Thus, the
the property.
transfer of the property into a land trust will not
in
mortgage
contracts.
trigger the due-on-sale clause.
So, let’s look at the benefits of having the land trust
as one of our investing strategies…
Preserves Privacy.
Land trusts preserve the anonymity of the real
property owner because the owners’ name never
appears on the public records of the property. Only
the trustee’s name will appear. The trustee cannot
disclose the name of the beneficiary without a court
order.
Property