How do Florida Land Trusts Work?

​The Florida land trust is a unique relationship between the trustee and beneficiary that protects the identity of the property’s true owner. When used properly, the land trust provides privacy of ownership, ease of management, isolation of liabilities, and easier transferability of ownership. Contact us today to discuss how the land trust could work for you.

Setting up a Land Trust.

A land trust is created when the beneficiary or beneficiaries decide to purchase a property or make a mortgage loan to someone. They choose someone to act as their trustee. The trustee will hold the legal title to the property, meaning that the trustee’s name is the one that will appear on the deed and in the public records. The trustee will also hold equitable title to the property, meaning that the trustee has the complete authority — as far as third parties know — to lease, sell, encumber and convey the real property without anyone else’s involvement. The beneficiaries enter into an agreement (the trust agreement) with the trustee. The trust agreement spells out exactly what the trustee is permitted to do with the property, and when and how he can do those things. It is a very important document that gives the trustee extremely powerful authority to do anything with the property. Therefore, it is imperative to choose a trustworthy trustee. The parties then direct that the real estate or the mortgage shall be taken in the name of the trustee, and special statutory language is included in the deed or mortgage to give public notice of the trustee’s authority over the property. The trustee executes all purchase and sales contracts, leases, permit applications, notices of commencement and termination, and any other document related to the management and disposition of the property so long as the trust exists. The beneficiaries’ names are never made public except in rare circumstances that usually require a court order.

Documents Involved

  1. The Trust
  2. A Deed

Parties Involved

  1. The Grantor/Settlor
  2. The Trustee
  3. The Beneficiary

Our Setup Cost


Pros & Cons of Land Trusts

We can hold Florida real property in a Florida land trust. So if it’s land in Florida, we can handle it for you. We recommend having each property in its own separate trust rather than placing all your properties in the same trust (i.e. putting all your eggs in the same basket).

The land trust provides confidentiality of ownership since the only owner’s name that appears on the public records is the name of the trustee. It also provides segregation of liability by separating the ownership of the property from the current owner as well as that owner’s other properties and their liabilities. Think of it as putting one egg (piece of property) in one basket (trust). If one basket falls, only that egg breaks. It also separates the property away from you, so that – when someone searches the public records to see what real property you own – your name will not appear on the records; only the trustee’s name appears. Therefore, if someone should feel the need to sue you for a breach of contract, negligence, or other cause of action, their asset search prior to litigation will make it appear that you have no assets from which to satisfy a judgment, making you look like a less valuable target. The Florida LLC can’t provide this anonymity of ownership, because your name typically appears on the Division of Corporation’s website as either a manager or member of the company. The LLC also typically costs more to establish and maintain than a land trust.

Before moving property from your individual name and into a trust (or an LLC), however, we always point out the “downfalls” of putting property into an entity or trust:

  1. You can no longer prosecute evictions pro se (without an attorney). You can file it with the owner’s (trustee’s) written authorization, but if the tenant responds, or a hearing is required for any reason, you must engage an attorney to appear in court on the owner’s behalf.
  2. You will have to obtain a new hazard insurance policy, since the insured’s name is changed. You will no longer be able to obtain liability insurance coverage that is coupled with hazard insurance coverage. If you want separate liability coverage, you would need to purchase a more expensive separate premises liability policy.
  3. If the properties are moving from one owner to multiple LLC’s, directly or as beneficiaries within the trusts, there is a chance that this could increase the annual tax return preparation fees substantially, depending on how it is structured. You would want to discuss it with your tax adviser before doing so.
  4. With the land trust, you will lose day-to-day control over the management of the property. You will no longer sign the listing agreements, leases, permit applications, or contracts for work to be conducted on the property. All of that will be signed instead by the trustee. This means that all documents regarding the property must be sent to the trustee with written direction as to what to do with them before they can be executed and returned to the recipient. Also, this could lead to a trust issue with potential tenants who are reluctant to enter into a lease and pay rents to a person whose name does not appear on the public records of the property;.
  5. If the property is subject to a mortgage, the transfer to an LLC would require the payment of “assumption” documentary taxes. Transfer to a land trust typically will not trigger this tax payment.
  6. If the property is subject to a mortgage, the property’s transfer to a land trust or an LLC will trigger the “due on sale” clause of the mortgage. This means that, once the lender discovers that the property is no longer in their borrower’s name, they have the right to first demand that you put it back into your name, and – if you refuse or fail to do so within 30 days – they may then accelerate your loan and require that you pay off the entire amount secured at that time by the mortgage. If you fail to do so, they can then foreclose the mortgage.
  7. Moving property into a land trust or even an LLC in one of the “secret” jurisdictions like Nevada, New Mexico, Wyoming, or Delaware, is not a foolproof way to maintain your confidentiality to the extent that the IRS is concerned. The Service must be alerted to your ownership in the property, whether that is through a Form 56 filed with the Service upon formation of the trust, or filing your subsequent person tax returns where income, losses, and expenses of the property are reported.
  8. Moving your homestead property into a land trust is NOT advised. To be able to take advantage of the homestead exemption for real property taxes, one must hold at least an equitable interest in the property for their life. However, a land trust conveys all equitable and legal title to the third party trustee. In that case, the person living in the home no longer has an equitable interest in the property and will therefore lose the right to the homestead tax exemptions. While you may retain a life estate in the property, with the remainder going to the land trust, this will retain the homestead tax exemption; but there will be not anonymity since the life tenant’s name will still appear on tax records. Further, the Florida homestead protections against judgment creditors are powerful, so we don’t recommend putting those protections in jeopardy by placing the property into a land trust.

We always point these issues out to clients when they’re thinking of moving properties into trusts or LLC’s. Most still do it, because the segregation of liabilities or anonymity of ownership (in the case of land trusts) is more important to them than these issues.

Protect Your Assets

Land Trust for Real Estate

Asset protection is very important to most active real estate investors. An important component in any good asset protection plan for a real estate investor is the Florida Land Trust. Such trusts are authorized by the Florida Land Trust Statute found in section 689.071, coupled with section 689.073 of the Florida Statutes. Under this statute, if specific language is included in the deed that conveys the property into the trustee, and there is a proper trust, then there is no reason anyone should ever have reason to review the trust agreement itself. If third parties have no reason to review the trust agreement, then they will not know the identity of the beneficiaries (the owners) of the trust itself. This means that a real estate investor can use an unrelated third party to act as a trustee of the property, and only the trustee’s name will appear on public records. When an asset search is conducted, the real estate investor will appear to own nothing. Further, by placing each property into its own separate trust, the real estate investor can effectively isolate each property from the judgments and other liabilities associated with the investor’s other properties, including code enforcement liens.

Top 6 Mistakes in Forming and Using Florida Land Trusts

  1. Using an entity owned by the beneficiary, or the beneficiary himself, to act as trustee of the land trust. This defeats the privacy usually provided by the land trust
  2. Using a “friend” or employee to act as land trustee “Trustworthy” friends and employees sometimes steal the trust property or strip the equity out of it with mortgages unknown to the beneficiary.
  3. Improperly naming the trust as the buyer or seller in a real estate purchase and sale contract. With REO properties, this is especially troublesome when it comes time to close.
  4. Putting multiple properties into the same land trust. This defeats the purpose of using the land trust structure to isolate one property’s liabilities from another.
  5. Providing copies of the land trust or even recording the land trust document so that third parties discover the identity of the beneficiaries.
  6. Waiting until it is too late to move the property into a land trust. Many real estate investors wait until they have a potential lawsuit pending before they look at using a land trust for asset protection via privacy. At that point, it is too late.​