Land Trust: What It Is and its Advantages
Real estate Trust is just one of many kinds of trusts. By legal definition, Trust is an arrangement wherein one party holds the property for the benefit of another. The owner of the property retains ownership of the subject of the Trust, but the trustee assumes ownership of the same for legal purposes.
What is the purpose of a trust agreement?
The purpose of all kinds of Trust is to protect the real owner from tax exposure or other legal proceedings. An example of a land trust would be a wealthy couple, in an attempt to protect their real properties from being taxed after they die, designates another person to hold the Trust for them.
The Trust significantly simplifies the passing of the subject of the Trust to the heirs or the new owners. A trust can be revocable or irrevocable. The former kind of Trust is one that can be dissolved at any time. The letter, on the other hand, is a kind of trust arrangement that cannot be rescinded or canceled.
Who are the parties in a trust agreement?
There are four essential parties to the trust agreement, and they are the following:
- Settlor or Grantor – real property owner
- Principal or Trust – refers to the asset or property subject of the Trust
- Trustee – The receiver of the Trust
- Beneficiary – The person or people who stand to benefit from the trust assets
For example, John and Jane Doe, along with three of their business partners, bought an apartment complex.
Later on, they unilaterally decided to transfer the apartment complex into a land trust. They designated a law firm as the trustee of the real estate trust. Since the original owners earn a substantial amount of income in the form of rentals from the property, they are also the beneficiaries of the said Trust.
What are the benefits of drawing a real estate trust agreement?
One of the main benefits of a real estate trust is secrecy and settlor’s privacy. Going back to the example above, the moment the title to the apartment complex is transferred to the Trust, John and Jane Doe, along with their business partners will no longer be disclosed as original owners without the issuance of a court order.
Consequently, if the original owners of property under the Trust remain anonymous, they can avoid the pains of litigation. If people believe that John and Jane Doe are incredibly wealthy, the couple can be targeted by frivolous lawsuits. However, if their names are not in any public real estate record, they can be less vulnerable to malicious attacks and unfounded lawsuits.
Another advantage offered by real estate trust is that the multiple property owners can’t be legally punished with a judgment issued against one of them.
For example, if Jane didn’t execute any trust but a creditor files a legal case against one of their business partners, the said creditor cannot attach a lien on the apartment complex’ title to answer for the debt of the said creditor. This action is not permitted by law since the debtor (sued business partner) already placed the property in the Trust.
Where can you ask for expert advice about matters related to real estate trust?
Royal Legal Solutions is here to answer all your questions related to real estate trust. Call them at (512) 757-3994 to schedule a free consultation.
If you’re confused, don’t worry! Royal Legal Solutions will ease your trust burdens away!