The Value of Privacy
Land Trusts: A Secure
Way to Hold Title
By John M. Coombe, Vice President, Fiduciary
Business Services, First American Trust, FSB, and Elizabeth A. “Libby” Markworth, Vice President, Relationship
Manager, Fiduciary Business Services, First American Trust, FSB
In today’s day and age, privacy is becoming a scarce
resource. With the rise of social media and search engines, celebrities and
business leaders alike are finding their privacy under siege. Their homes and
assets are targeted by tenacious paparazzi or unruly protestors, and in the
worst cases, they and their families have been personally targeted. It’s scary,
but we see it on the news all the time.
Owning real estate through a land trust is a time-tested way
of protecting your privacy when it comes to your home, your business and your
family. For centuries, land trusts have been a standard way of protecting one’s
privacy and transferring real property, and in today’s culture, this type of
ownership structure is as popular as ever because it offers one of the most
valuable assets of all – anonymity.
However, not all land trust products are the same. Only a
small handful are truly recognized. Many companies say they deliver anonymity
and may make false promises about their trust services. A reliable trust would
be arranged after a thorough vetting process that weeds out unscrupulous
speculators. The trust organization should also have a successful track record
of ensuring privacy and an affiliation with a financial institution such as a federal
savings bank to minimize risk and maintain confidentiality.
Why a Land Trust?
Before determining if a land trust is for you, it is
important to first understand how it works. Essentially, it is a special trust
arrangement through which a trustee (i.e. First American Trust, FSB) holds
legal title to the real estate while all of the rights of ownership, possession
and management are retained by the beneficiary (i.e. you).
Beneficiaries of land trusts remain private and protected.
The only name recorded on the deed to the property is the trustee and the trust
number of the trust. Whenever someone – whether it’s a journalist, business
competitor or someone with a grudge – looks up the address, they would only see
that it is owned by a non-descript land trust. The same result would occur
during a reverse look-up if someone tried searching for a name in a municipal
tax roll or county clerk’s deed database.
Such arrangements are ideal for celebrities and business
leaders looking to stay out of the real property ownership limelight. Officials
within the criminal justice system – such as police, prosecutors and judges –
also seek anonymity from those looking to do them harm. Large companies have sought
out land trusts as well because executives don’t want competitors to know of
their expansion plans or they wish to avoid price escalations. Even some public
utilities and timeshare companies are adopting the land trust structure of
property ownership in order to protect investors.
In a land trust with a federal savings bank serving as
trustee, the names of its beneficiaries must be kept confidential at all times
unless the trustee is compelled to divulge information by court order or
statute. It acts as a corporate trustee holding the legal and equitable title
to the real property but all decisional and operational powers over the trust
assets remain under the control of trust beneficiaries.
The trustee takes action only when directed by beneficiaries
of the trust. The interest of the beneficiaries is personal property, and the
beneficiaries maintain the following exclusive rights:
-
Power to direct or control the trustee in
dealing with the title to the trust property
-
Possession and control of the management,
operation, renting and selling of the trust property
-
Right to the earnings and proceeds generated
from the trust property
There also may be a succession of ownership agreement
included with the trust, which would allow the title to pass to a third party
upon the death of the beneficiary without having to go through the trouble –
and often great expense – of going through probate proceedings after a loved
one passes away.
There are many good reasons to hold title through a land
trust, including financial and emotional benefits, but in today’s culture,
privacy might be the best reason of them all.
First American Trust,
FSB, a wholly owned subsidiary of First American Financial Corporation (NYSE:
FAF), has offered a land trust product since the 1950s. In total, it
administers more than 70 land trusts with about 400 real property assets
throughout the United States and Virgin Islands. For further information,
contact the writer at lmarkworth@firstam.com.
© First American Financial Corporation. All rights reserved.
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