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Pros and Cons of Land Trust

A land trust is the ideal legal ownership of property that protect and hold real estate. It is one of the strategies for creating privacy regarding land ownership. A land trust is a trust that allows management of the property. Land trust terms are different and are tailored to meet individual needs. However, like all other forms of Trust, Land Trust has disadvantages and advantages.

Pros of Land Trust

Below are some of the advantages of Land Trust:

1. Enhanced property privacy. The Land Trust promote4 privacy in the ownership of Real Estate. The owners of the land who retain a Beneficial Interest are not discussed or disclosed in public. Beneficial Interest is used to refer to any interest vested from the land. The Land Trust Act protects the owners from disclosing their privacy to public records. The Land Trust record is not recorded and is not publicly searchable.

2. Easy formation process. The process of creating the Land Trust Act is simple and straightforward. Only two vital documents are needed in the process: the Land Trust Agreement and a Deed to the Trustee. The land trusts are similar in all countries and states, although terms and regulations differ.

3. Property protection. The Land Trust Act ensures the property records are unavailable in the public records, which promotes the asset’s anonymity. The owner can enjoy double benefits if the Land Trust is combined with limited Liability Entity. The Land Trust Act promotes the privacy of the asset, whereas, on the other side, the Limited Liability Entity provides compartmentalization benefits. However, this benefit can only be for Land trusts owned by Limited Liability companies.

4. Easy the process of transferring property. With the Land Trust agreement, one can easily transfer property ownership. If the beneficiary and grantor are present, the transfer can avoid taxes that would be incurred. The Act cuts down the procedures that are involved while transferring the ownership of the property.

5. Eases the process of probate. Probate is the official way of proving the will of the deceased when parcelling out the asset to the heirs. During the process of probate, to minimize the risks of conflicts, several documents are needed to transfer the ownership of the property. With the Land Trust document, the process of probate is eased. The Land Trust agreements ensure the land is transferred smoothly to the named beneficiaries.

6. Reduction of the tax burden. With a Real Estate trust, you are in a position to enjoy numerous tax benefits. Tax usually depends on the use of the property. The Land Trust enhances the property’s privacy, which has a role in reducing the tax burden. Secondly, Land Trust can protect heirs from excess tax burden depending on what they do with the property.

7. Protection from Liens. When an investor owner fails to pay the debt, the ownership of the property is transferred to a third party. Therefore, Liens are legal documents that are used to transfer the ownership of the land to a third party Property under Land Trust policy and are not subject to liens.

8. Judgements. The Land Trust is vital where there are judgments involving the property of one of the beneficiaries. The Trust protects the property against Liens. In addition, the Trust protects the land against partition proceedings. This applies when there are several beneficiaries and one wishes to liquidate their Interest.

Cons of Land Trust

Below are some of the disadvantages of Land Trust:

1. No redemption rights. Under property policy, redemption right allows property owners to reclaim their land before foreclosure. Property owners should pay an agreed amount of money to reclaim the property. This is a disadvantage to many property-owners as they have to pay the total debt plus other costs.

2. No access to secondary loans. The properties under the Land Trust agreement are protected against Liens. In the secondary loan market, if the property owner defaults on paying the debt, the property is sold off to a third party. Therefore, due to the protection against Liens, properties under Land Trust are disqualified from a secondary loan.

3. Tax issues. Most people enter Land Trust agreements believing they will avoid the tax burdens. However, this is not the case as the property owners must report their income annually or monthly.

4. Misconceptions about protections. There are several myths and misconceptions about protection and Land Trust. Most people believe that Land Trust agreements protect the beneficiary against all liability and cases associated with the property. However, that is not the case. The Court of law has authority over the Land Trust. Thus, it can take away property ownership in civil complaints.

5. Cost of Land trust. The Cost of setting up the agreement is relatively higher. An upfront fee and legal guidance are crucial to arrive at Trust. The agreement’s Cost may vary depending on the country, type of Trust and the location and number of the property.

6. Lack of control of the property. Under the Land Trust policy, Trust legally owns the control powers of the land. The land owner has limited control over their property. Therefore, if you wish to administer controls on your property, the Land Trust agreement is not an ideal option for you.

7. Relative obscurity. The Land Trust is legally recognized in a few countries. Thus, the policy is not applicable in all states worldwide. Some countries are unfamiliar with this policy, and thus the property owner has to undergo several steps before issuing the policy. In addition, countries with no Land trust legislation are likely to be less equipped to handle such issues.

8. Complications in transferring properties. Transferring a property under Trust takes more time than when the property is not under any trust. The transfer processing time is increased. Procedures for transferring property under Trust may be tiresome and time-consuming.

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