In Florida, land trusts are presently a creature of statute rather than case law. In 1963, the Florida Legislature created s. 689.071, F.S., which statutorily recognized the Florida Land Trust. Section 689.071(1), F.S., provides that the land trustee receives legal and equitable title to the real property. The deed must be recorded and must give to the trustee full power and authority either to protect, conserve and to sell or to lease, or to encumber or otherwise to manage and dispose of the real property described in the deed. The trustee can only deal with the property within the power and authority granted in the recorded deed.
Section 689.071(2), F.S., states that any grantee, mortgagee, lessee, transferee, assignee, or person obtaining satisfactions or releases from a trustee holding title to real property in trust under a recorded trust deed that meets the requirements of s. 689.071, F.S., does not have to inquire into the identification or status of any named or unnamed beneficiary, their heirs or assigns or to the authority of the trustee to act within the powers granted in the recorded deed, nor is there any requirement to inquire into the provisions of an unrecorded trust document whether such document is referenced in the deed or not.
Section 689.071(3), F.S., provides that all persons dealing with the trustee under any recorded instrument that has been prepared in accordance with the section takes free and clear of the claims of all named or unnamed beneficiaries of the trust and of any unrecorded declarations or agreements collateral to the trust, whether they are referred to in the agreement or not. This subsection further provides that anyone claiming under the beneficiaries, including claims arising out of any dower[1] or curtesy[2] interest of the spouse of a beneficiary, does not have a claim against the grantee if all of the provisions of this section have been met.[3]
Section 689.071(4), F.S., states that in all cases where the recorded instrument contains a provision declaring the interest of the beneficiary to be personal property only, that provision shall be controlling for all purposes where such determination becomes an issue under the laws or in the courts of Florida. This provision makes it possible for a beneficiary to convey his or her interest in the real property by assignment of beneficial interest rather than by the execution and recording of a deed.
Courts have held that the statutory land trust is not an ordinary inter vivos trust that is administered under Florida’s trust administration laws in ch. 737, F.S.[4] Florida courts have held that a grantee from a land trustee need not look beyond the trustee's deed in trust to determine his or her powers.[5] Courts have held that s. 689.071, F.S., is a codification of land trust case law and is an adoption of the Illinois land trust.[6]
[1] “Dower” is a common law concept that entitles a widow to a life-estate in a third of any real property of her deceased husband for her support and the support of her children, if any. BLACK’S LAW DICTIONARY (8th ed. 1999).
[2] “Curtesy” is a common law concept that entitles a widower to a life-estate in any real property of his deceased wife for his support, assuming that a child was born alive to the couple. BLACK’S LAW DICTIONARY (8th ed. 1999).
[3] Section 732.111, F.S., created in 1974 by s. 1 of ch. 74-106, L.O.F., abolished dower and curtesy in Florida.
[4] Taylor v. Richmond's New Approach Association, Inc., 351 So.2d 1094 (Fla. 2d DCA 1977).
[5] Gramer v. Roman, 174 So.2d 443 (Fla. 1965).
[6] Ferraro v. Parker, 229 So.2d 621 (Fla. 2d DCA 1969).
Friday, February 1, 2008
Situations Where a Land Trust May Be Beneficial
A land trust may be useful in situations where multiple owners hold title to real property. In such cases, the potential exists for judgments, divorce, death, bankruptcy or incompetency of a single beneficiary to cloud the title to all or a part of the real property. The use of the land trust prevents the possibility of clouds on the title in these situations.
Where real estate projects are spread across multiple investors, the use of a land trust can reduce delays where signatures must be obtained from remote locations and can facilitate the many conveyances necessary in subdivisions and condominiums.
A key feature of the land trust is that interests of beneficiaries may not be disclosed without a court order. There are situations where purchasers of real estate may wish not to publicize their ownership of that real property. The land trust permits such individuals to keep their names from the public record.
Judgments against the beneficiaries do not affect the legal title to the real property held in a land trust. The title to the real property held in a land trust can be conveyed free and clear of any judgment liens against a beneficiary. Judgments can, however, be enforced against an individual’s beneficial interest in a land trust.
The beneficial interest in the land trust is personal property. Non-residents of Florida, by placing title to their real estate in a land trust, may be able to avoid ancillary probate administration in the event of death.
Use of the land trust as a vehicle for holding title to real property permits the preservation of tax benefits under the Internal Revenue Code. All of the tax advantages of individual ownership may be retained when a land trust is properly used to hold title to real property. The deduction for expenses flows directly through the beneficial owners, assuming that all of the criteria to prevent the land trust from becoming an entity taxable as a corporation are met.
Where real estate projects are spread across multiple investors, the use of a land trust can reduce delays where signatures must be obtained from remote locations and can facilitate the many conveyances necessary in subdivisions and condominiums.
A key feature of the land trust is that interests of beneficiaries may not be disclosed without a court order. There are situations where purchasers of real estate may wish not to publicize their ownership of that real property. The land trust permits such individuals to keep their names from the public record.
Judgments against the beneficiaries do not affect the legal title to the real property held in a land trust. The title to the real property held in a land trust can be conveyed free and clear of any judgment liens against a beneficiary. Judgments can, however, be enforced against an individual’s beneficial interest in a land trust.
The beneficial interest in the land trust is personal property. Non-residents of Florida, by placing title to their real estate in a land trust, may be able to avoid ancillary probate administration in the event of death.
Use of the land trust as a vehicle for holding title to real property permits the preservation of tax benefits under the Internal Revenue Code. All of the tax advantages of individual ownership may be retained when a land trust is properly used to hold title to real property. The deduction for expenses flows directly through the beneficial owners, assuming that all of the criteria to prevent the land trust from becoming an entity taxable as a corporation are met.
What is a Land Trust?
The use of a Land Trust allows a person to buy a piece of property, conceal the fact that they own the property, limit themselves from most liability associated with the property, yet retain almost all the rights of ownership including, legally claiming Homestead exemption if the property is a primary residence. A land trust is an arrangement whereby one person or entity (the trustee) holds both legal and equitable title to real estate and holds it for the benefit of another party (the beneficiary).
The essential purpose of a land trust is to provide a flexible and practical method for the acquisition, financing, and disposition of real property. The land trust is a modified form of a conventional trust agreement; however, it is limited to an arrangement where the trustee holds title to the real property but all the active managerial and administrative powers are reserved to the beneficiaries. In a land trust, the trustee receives the legal title to the real property, but the usual attributes of real estate fee ownership are retained by the beneficiary. The beneficiary retains only a personal property interest.
Illinois appears to have been the first state to recognize the land trust, and for that reason, the land trust is often referred to as the "Illinois Land Trust."[1]
The land trust has been equated to the Massachusetts business trust from which the land trust undoubtedly evolved.[2] However, unlike a Massachusetts business trust, a land trust is generally viewed as a vehicle for holding title to real property rather than as an operating business entity. The land trust is created through the use of two instruments:
1) a deed in trust, where the real property is conveyed to the trustee, and
2) a trust agreement under which the trustee acts.
Land trusts have been found to have several advantages:
· Interests in land trusts cannot be partitioned, and transferring beneficial interests is relatively easy.
· Interests of beneficiaries cannot be disclosed without a court order.
· Judgments against the beneficiaries do not affect legal title of the real property.
· The beneficial interest in the land trust is personal property. Since it is personal property, nonresidents of Florida can avoid ancillary administration.
· The death of a beneficiary does not terminate the trust, and testamentary dispositions can be made in the trust agreement.
The trustee to a land trust is the party designated in the trust agreement to hold legal and equitable title to the land trust property. The beneficiary is the party designated in the trust agreement as having the power to direct the trustee with regard to the trust property, as well as, the control of the management, operation, rental and sale of the trust property and the right to the earnings and proceeds of the trust property. The power of direction is the right to control the trustee's disposition of title to the real property and the execution of trust documents.
[1] Hart v. Seymour, 147 Ill. 598 (Ill. 1893).
[2] Schumann-Henk v. Folson, 159 N.E. 250 (Ill. 1927).
The essential purpose of a land trust is to provide a flexible and practical method for the acquisition, financing, and disposition of real property. The land trust is a modified form of a conventional trust agreement; however, it is limited to an arrangement where the trustee holds title to the real property but all the active managerial and administrative powers are reserved to the beneficiaries. In a land trust, the trustee receives the legal title to the real property, but the usual attributes of real estate fee ownership are retained by the beneficiary. The beneficiary retains only a personal property interest.
Illinois appears to have been the first state to recognize the land trust, and for that reason, the land trust is often referred to as the "Illinois Land Trust."[1]
The land trust has been equated to the Massachusetts business trust from which the land trust undoubtedly evolved.[2] However, unlike a Massachusetts business trust, a land trust is generally viewed as a vehicle for holding title to real property rather than as an operating business entity. The land trust is created through the use of two instruments:
1) a deed in trust, where the real property is conveyed to the trustee, and
2) a trust agreement under which the trustee acts.
Land trusts have been found to have several advantages:
· Interests in land trusts cannot be partitioned, and transferring beneficial interests is relatively easy.
· Interests of beneficiaries cannot be disclosed without a court order.
· Judgments against the beneficiaries do not affect legal title of the real property.
· The beneficial interest in the land trust is personal property. Since it is personal property, nonresidents of Florida can avoid ancillary administration.
· The death of a beneficiary does not terminate the trust, and testamentary dispositions can be made in the trust agreement.
The trustee to a land trust is the party designated in the trust agreement to hold legal and equitable title to the land trust property. The beneficiary is the party designated in the trust agreement as having the power to direct the trustee with regard to the trust property, as well as, the control of the management, operation, rental and sale of the trust property and the right to the earnings and proceeds of the trust property. The power of direction is the right to control the trustee's disposition of title to the real property and the execution of trust documents.
[1] Hart v. Seymour, 147 Ill. 598 (Ill. 1893).
[2] Schumann-Henk v. Folson, 159 N.E. 250 (Ill. 1927).
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