Understanding land trusts for your estate plan in Arizona

Arizona real estate investors have options to keep their properties out of probate when making an estate plan. Just as trusts can often be a convenient solution for other types of assets, a land trust may be a good option for managing real estate holdings. By creating a land trust, the grantor creates a legal entity with ownership or authority over specific property. These are living trusts, and the property owner or grantor can manage their property throughout their lifetime.

How land trusts are created

The grantor creates the land trust, transfers property to the trust, and names a trustee. The trustee manages the property, while a named beneficiary benefits from the proceeds. Land trusts can hold multiple pieces of property as well as other assets related to property, such as mortgages and property notes. They can be a helpful tool for estate planning; like other types of trusts, land trusts can be used to transfer property outside of the probate process, which provides privacy.

Different types of land trusts

A title-holding land trust allows the original owner to maintain all of their rights over the land and direct the trust’s actions, maintaining control over the property in all assets. Land trusts may be used for properties under development and to protect assets in case of judgments or other legal issues. Conservation land trusts are less common for estate planning purposes, as these are typically used to protect wildlife or historical venues often with a tax advantage.

However, there are also caveats to keep in mind, including difficulty in accessing secondary market loans and a potential loss of redemption rights in foreclosure. Real estate owners may opt for a land trust to maintain their privacy while preparing for the future whether for their estate plan or for future development.