“I want to put my house in a trust” is often the direction we are given in our residential closings, sometimes the day before the closing (the timing of the request is another subject for another blog).
A “trust” is basically just an agreement which establishes the terms of how trust assets are to be owned, managed and distributed. They are used for a variety of purposes, but most often we are asked about them when people need their estate plans upgraded.
Revocable Living Trusts may be familiar to many, and if you or a party to a real estate transaction have done more complete estate planning, you may be instructed to “fully fund” your trust. There are many good reasons for a fully funded trust (e.g., avoidance of probate, more efficient handling during incapacity, control of assets after death), but we want to have a discussion before transferring residential homestead property into a trust. It may not be the best choice.
Another trust request we are receiving regularly is for a “land trust”. It is a similar concept and related to the revocable trusts used for estate planning, but usually limited to real estate only. When we talk to people about land trusts, we like to know the purpose they are trying to achieve. Sometimes there are other methods of accomplishing those goals, or an estate planning revocable trust is what they really are referring to.
Many people want ownership of their real estate in a land trust to get some level of anonymity in the public records. This is done by naming a third party trustee of the land trust that is different than the beneficial owner(s) (only the trustee name would appear in the public records of recorded deeds). There are of course other ways to achieve anonymity, which is again why we like to discuss these issues with buyers before they take title.
But they also want to preserve homestead property tax exemptions (if the property actually is their homestead). Unfortunately, to get homestead property tax exemption benefits in Florida, the identity of the occupant of the property must be disclosed to the local property appraiser and tax assessor. So this would result in disclosure of at least the occupant(s) in public databases. Unfortunately anonymity and homestead do not go hand in hand.
There may be other complications with homestead held in a land trust such as how and whether other beneficiaries can inherit the property in a manner that is different than as may be required by Florida Statutes and the Florida Constitution. Also, there might be complications and increased costs for insurance, and possibly mortgage loan issues, if a land trust is used versus just owning in your individual name.
When you are faced with a request to have title held in “a trust”, that is time to have closing parties consult with an experienced real estate and/or estate planning attorney.
Berlin Patten Ebling, PLLC
Article Authored by Chis Caswell, Esq. email@example.com
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