Land trust, living trusts, and the difference between them? Sometimes, it's as thin as splitting hairs. Here, we'll take a deeper look at the differences between the two and why which one would work best in case examples. If you're still uncertain, definitely consult a lawyer after reading this article. They'll know any local specifications that may make a difference in your decision. Let's get started.
What is a Land Trust?
A land trust is a type of trust that allows someone to assume control over a parcel of property for very specific purposes. A good example here is entrusting someone else with your home prior to bankruptcy. Since someone else technically has legal rights to it, the bank can't establish claim over the property (in most cases) and you're left with your assets intact after everything has died down.
However, if not sent to trust early enough, this whole idea can be flipped upside down in a court of law. Some judges may even call it contempt. Be careful.
What is a Living Trust?
A living trust is what happens when I entrust you with something of mine for very specific purposes. Perhaps I'm leaving the country and I need someone to take care of my dog for a few years. I leave the dog in your care and you must report to me anything that happens to the pooch and a variety of other matters.
Though pet care is typically a contract and not a trust issue, it has happened before. Living trusts are usually a broad-spectrum fix to a specific problem through litigation (though in most cases this is a very short issue since all parties are in agreement). More frequently, these situations are usually for anonymity issues and providing a barrier between the owner and the people who may be investigating said owner.
Which Should I Choose?
In most cases when dealing with land, a land trust is the most viable option. However, since we can't possibly know the specifics of your situation, we can only give you a general outline to follow. Again, if the situation is sensitive, we cannot recommend enough that you go to a legal professional in your area that can fully assist you.
A living trust may also be a land trust, in some cases. For instance, if aging parents are behind on their taxes, it may fall to an adult child of theirs to hold on to the house in a trust so the county cannot seize the property. This would be a living trust with a specific note regarding the lands and properties of the parent. A land trust would be something more along the lines of saving just the property itself. The line, again, is very thin between these two trusts and is often used in overlapping manners.
What Happens if I Choose the Wrong One?
It depends strongly on your personal situation. In most cases, failed trusts are simply overturned by the court and whatever assets are available are seized due to whatever mishap is going on in court. Whether this happens to you or not is beyond our ability, but with the right planning and a good deal of foresight, you can make the trust laws work to your advantage.
If there is time to change the trust, it may be possible to fix the error. Though we realize this is incredibly unlikely since most errors are found at the last moment while in court and during the process of seizure, it is still an option to consider if you have it available. It may mean more filing charges and more effort on your part, but protecting your assets is a deeply important goal to fulfill.
Land trusts and living trusts often run along the same incline and may even be substituted for each other in specific circumstances. They are incredibly similar documents. Living trusts often include land trust protection within them and a secondary document isn't usually required to protect your land as well as your liquid assets (and so forth).
If you do require a land trust, you can typically have these drawn up at the same time; and often by the same lawyer, as your living trust. In fact, it is usually a good idea to continue to use the same lawyer to this effect so that you do not have to try to remember who has which trust paperwork in the case of an access emergency happening during trials.