Most Land Trusts are set up for privacy purposes with the Grantor as the Beneficiary. This model is the extent of most attorney's and advisor's knowledge about how to set up a Land Trust and what the benefits are. We sometimes see attorneys set up Land Trusts for their clients with the client's name and or social security number in the name of the trust. This is not smart!

Since the primary purpose of a Land Trust is to hide ownership of the property's title, it makes no sense to use any identifying marks of the person in control of the Trust (the beneficiary). However, some individuals want more anonymity than others and are not satisfied with merely one degree of separation from the Trustee.

Since the Beneficial Interest in a Land Trust is PERSONAL PROPERTY one Land Trust cannot be the Beneficiary of another Land Trust (Land Trusts can only hold title to real estate interests). However, a Personal Property Trust CAN be the Beneficiary of a Land Trust.

The way to structure this scenario is to make the Trustee of the Personal Property Trust the Beneficiary of the Land Trust. The ultimate "owner" in control of this labyrinth would be the Beneficiary of the Personal Property Trust. What might this accomplish for you?

First, if the Land Trust is holding title to real estate that is located in a state with an income tax, any profits passed through the Land Trust to the Personal Property Trust would not be taxed (assuming the beneficiary of the Personal Property Trust is domiciled in a non-income taxed state). This would save the investor an amount equal to the income tax rate imposed by the state where the property is located.

Furthermore, if the property is located in one state, the Land Trust is domiciled in another state and the Personal Property Trust is located in a third state the amount of legal fees required to "crack" this structure would be prohibitive. Now you can see why conventional thinking about Land Trusts is folly. Learn all you can about Land Trusts. They will serve you well.

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