Minnesota Real Estate Investors Association, Inc.

There are sooo many benefits to using Land Trusts, and I don't know of any negatives related to using them. There is very minimal paper work involved; that takes maybe 5 extra minutes to prepare. There are no separate tax reporting issues to deal with because the IRS considers a Land Trust to be a Flow-Through-Entity, which means that you report the property on your own (or your corporations) tax report.

Why use a Land Trust?

1. Privacy.  A land trust keeps your name or your companies name off of public records and out of the chain of title.  Privacy is extremely important to most people who don’t want others knowing what they own. For example, if you own several properties within a city that has strict code enforcement, you could end up being hauled into court for too many violations, even minor ones. Having your real estate titled in land trusts makes it difficult for city code enforcement to find who the owner is, since the trust agreement is not public record for everyone to see.
2. Discourages Frivolous Litigation.  Maybe you upset an annoying tenant because you charged them a lost key charge because they keep losing it or whatever other crazy reason some tenants find to sue you, just because that is how they roll.  If you have all your properties in separate land trusts, which each have a separate name, then it will become extremely difficult for a lawyer to run an asset search on you and/or very expensive for the tenant to pursue their frivolous law suit, so they usually just go away.
3. Protect your Properties from Personal Liens.  If you are sued personally or file bankruptcy, it will not affect your properties that are in land trusts because they are not in your name and you are not the owner of record, or legal title holder.  You have a beneficial interest in the properties, but your name is not attached to the properties from a legal stand point.
4. Land Trusts are Assignable/Wholesalable. The ownership of a land trust (called the “beneficial interest”) is assignable, similar to the way stock in a corporation is assignable. Once property is title in trust, the beneficiary of the trust can be changed without changing title to the property. This can be very advantageous in the case of a real estate contract that is non-assignable, such as in the case of a bank-owned or HUD property. Instead of making your offer in your own name, make the offer in the name of a land trust, then assign your interest in the land trust to a third party at or after closing avoiding the whole seasoning issue.