Land trusts give an investor a wide array of potentially useful tools. One of those tools is selling property in a land trust, or selling the beneficial interest (as opposed to selling or transferring the deed itself).
The beneficial interest in a land trust is considered personal property as opposed to real property, like the land itself. If the buyer were to default on their payments, the beneficiary would have more flexibility in terms of their options.
If you are interested in pursuing this method, it’s best to set up a land trust and either establish your own company or your personal lawyer as the trustee. The documents can be kept in escrow until the contract is paid in full. This keeps both parties honest and makes the transfer of the property as smooth as possible.
The advantage of the land trust is that it allows the beneficial interest to become “assignable”. This operates in a very similar to way to how a stock in a corporation is assignable. A beneficiary of a trust can be changed without needing to change the title of a property. For those interested in selling a property, this can be a useful tool.
The reason why this is possible is because the beneficial interest is not considered in the same category as the property itself. The beneficial interest is considered personal property, while the property itself is considered private property. In addition, beneficial interests can be used as collateral in a loan.
This also adds a layer of privacy to the transaction. The buyer isn’t purchasing a property from you, they’re purchasing the property from a trust. While land trusts can have their drawbacks, there are a number of solid reasons why investors favor using them in certain circumstances.
For those that are simply interested in selling the property from the trust, a land trust still provides more privacy and protects assets in ways that property held outside of a land trust can’t. Land trusts still offer more privacy, protections against liens, and they make it more difficult for an individual to find your property if they’re trying to determine your assets in a lawsuit. Since most litigation attorneys work on contingency, they’re unlikely to go after a defendant who does not appear to hold any serious assets.
Selling the beneficial interest in a land trust is simply one more tool an investor should look into.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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