The ABCs of Land Trusts

by David Gerlitz on July 19, 2011

When it comes to real estate investing, many investors believe using land trusts as a tax savings measure and for privacy is a benefit for their portfolio protection. In many cases the investor can receive many benefits for using the land trust. Let’s take a look at why you would want to use a land trust as a measure of protection or for a tax reduction measure for your investment portfolio.

The ABCs of Land TrustsOne of the reasons to a land trust as a protection measure is for conservation of protected lands. Counties play a vital role in the conservation of the diverse natural landscapes that define our region. Did you know that many counties are some of the most biologically diverse and the lands protected by them are used to collect donations? They also are written off as a tax shelter for the maintenance county’s residing within the continental United States?

Goals for this type of property are long-term conservation. There are several techniques available, all of which can be tailored to fit your unique circumstances. Your choice of which technique to pursue depends upon your goals for the property, the natural characteristics of the land, and your financial objectives, including income and estate tax planning.

Another option for these land trusts are to have the ability to donate this land, lease, will & testament, sell it as an annuity, protect as trade lands, your lands remain in private ownership. You may have also heard that land trusts give you an option to pay no taxes on income property. True, a land trust does not pay income taxes.

A revocable trust (a land trust is a revocable trust) is not a taxable entity. Instead, all income earned by the trust is passed through to the beneficiary of the trust and taxed accordingly on the beneficiary’s personal tax return. The trust income is still taxed. The trust does not pay the taxes, the beneficiary does.

Land Donations that Establish Life Income

If you have land you would like to protect by donating it to a land trust, but need to receive income during your lifetime, you might use a charitable gift annuity. In a charitable gift annuity, you agree to transfer certain property to a charity, and the charity agrees to make regular annuity payments for life to one or two beneficiaries you specify.

A land trust aims to protect the lands and waters that define our communities and enrich our quality of life. A land trust may accomplish this through establishing and monitoring permanent conservation easements. Conservation easements are legal agreements by which landowners voluntarily limit the development potential and use of their land.

As a land trust or donor, whether considering a donation of land or a conservation easement, there are many federal tax regulations you must follow to ensure proper credit for a charitable gift. Why conserve your land? Across America, thousands of people are determined to conserve the places they value. Landowners have a deep connection to their land and know the gifts undeveloped properties provide their communities: clean air and water, fresh food, wildlife habitat, and sheer scenic beauty.

In common law legal systems, a trust is a relationship between three parties whereby property (real or personal, tangible or intangible) is transferred by one party to be held by another party for the benefit of a third party. A trust is created by a settlor (archaically known as the feoffor to uses), who transfers some or all of his property to a trustee (archaically known as the feoffee to uses), who holds that trust property (or trust corpus) for the benefit of the beneficiaries (archaically known as the cestui que use, or cestui que trust). The trustee has legal title to the trust property, but the beneficiaries have equitable title to the trust property. The trustee owes a fiduciary duty to the beneficiaries, who are the “beneficial” owners of the trust property. – source Wikipedia,┬áTrust law

Talk with your family attorney, real estate broker, CPA or accountant to learn more about how a land trust can benefit your portfolio. Remember the A, B, C’s of a land trust – assets, benefits, and charitable opportunities.

No related posts.

Leave a Comment

Previous post:

Next post: