While land trusts are popular among real estate investors and may make sense for residential buyers and property owners under certain circumstances, they are neither (i) the only option available, nor (ii) necessarily the best option for protecting your investment, your assets, or your family. Before deciding to establish a land trust, you should explore all of the options available and make sure you understand both the benefits and the limitations involved with this unique type of ownership vehicle.
Land Trusts 101
Land trusts provide a way for property owners and investors to transfer ownership of real estate out of their name while still maintaining control over the property. It is also possible to directly purchase real estate in the name of a land trust. Land trusts are formed by preparing and signing a series of documents that establish the trust, specify the rights and responsibilities of the beneficiary and the trustee, and provide for the trust to hold title to the property. As with a corporation or limited liability company, the beneficiary owns an interest in the land trust, and then the land trust owns the real property.
Possible Reasons to Use a Land Trust
There are a number of reasons why someone might choose to establish a land trust to hold title to their real estate. Two of the most common reasons are:
- Privacy. When a land trust is set up properly, it can preserve the privacy of the one who created it. As long as you are seeking to protect your identity for lawful purposes, you can generally use a land trust to avoid having your name appear in the public real estate records.
- Avoiding Probate. Some people choose to establish land trusts as part of their estate plan in order to avoid probate. Probate is the process by which the courts divide a person’s assets after death. Probate can be both expensive and time-consuming, and as a result many people choose to design their estate plans, at least in part, around avoiding the probate process.
Common Misconceptions about Land Trusts
Importantly, land trusts have certain limitations as well. For example, while many people think they can use the anonymity of a land trust to avoid liability if someone gets hurt on the property, the courts in Washington may look past the trust and still hold the beneficiary financially responsible. Similarly, while some people try to use a land trust in order to prevent their real estate from being used to satisfy a judgment, the courts will often set aside transfers made to land trusts for this purpose under the Fraudulent Transfer Act.
Talk to an Experienced Real Estate Lawyer at Blado Kiger Bolan, P.S.
If you are thinking about establishing a land trust, we encourage you to sit down with one of our attorneys for an initial consultation. To speak with an attorney, call our Tacoma, WA law offices at (253) 272-2997 or send us an email today.