land trusts in florida (legal survival guides)

✔ Details on Uses and Benefits of Land Trusts

✔ Tips for Setting UpLand Trusts

✔ Explanations on Managing LandTrusts Effectively

✔ Florida Forms

Mark WardaAttorney at Law

SPHINX LEGALTAKING THE MYSTERY OUT OF THE LAW™

7th edition

SPHINX LEGAL

Sphinx® PublishingAn Imprint of Sourcebooks, Inc.®

www.SphinxLegal .com

UPC

EAN

Mark Warda received his J.D. from the University of Illinois inChampaign. Licensed in Florida, he has written or co-authoredover sixty self-help law books, including How to Form Your OwnCorporation in Florida and The Most Valuable Personal LegalForms You’ll Ever Need.

20 years

your #1 sourcefor

for real world

legal information

Real Estate$29.95 U.S.$44.95 CAN

Land trusts are some of the best vehicles to protect your assets, keep youraffairs private and execute your estate plan. They provide numerous benefitsand are both easy and inexpensive to create.

Land Trusts in Florida gives you all the agreements, forms, notices and direc-tions necessary to create a land trust, transfer property into it, manage it anduse it for privacy and savings. Everything you need to take advantage of thiswonderful tool is right here in one place.

• • • • •

The Complete Guide to Florida Land Trusts


Land

Tru

sts inFlo

rid

a

✪ Keeping Your Assets Secret

✪ Dealing withSecurities Laws

✪ Complying withRICO Laws

✪ TransferringProperties

✪ Avoiding Gift Taxes

✪ Land trust formation checklist

✪ Plain-Englishglossary of terms

✪ Land trust termination checklist

✪ Step-by-stepinstructions

✪ Ready-to-use, blank forms

Ready-to-Use Formswith Instructions:

✔ Land TrustAgreement

✔ Trustee’s Deed

✔ Directions to Trustee

✔ Promissory Note

✔ Assignment ofMortgage

✔ and many more…

Written by Attorneys

A Simple English Explanation of the Law

Ready-to-Use Forms withDetailed Instructions

LandTrusts

in

FloridaWarda

7th

Edition

“Easy to understandguides—an

excellent sourcefor readers.”

—Library Journal

Land Trusts in

Florida

SPHINX® PUBLISHINGAN IMPRINT OF SOURCEBOOKS, INC.®

NAPERVILLE, ILLINOIS

www.SphinxLegal.com


Seventh Edition

Printed and bound in the United States of America.VHG Paperback — 10 9 8 7 6 5 4 3 2 1

Library of Congress Cataloging-in-Publication DataWarda, Mark.

Land trusts in Florida / by Mark Warda.-- 7th ed.p. cm.

Includes index.ISBN 1-57248-381-4 (alk. paper)

1. Land trusts--Florida. 2. Land trusts--Florida--Forms. I. Title.KFF139.L3 W37 2004

346.759'068--dc222004024491

Copyright © 1985, 1990, 1992, 1996, 1998, 2002, 2004 by Mark WardaCover and internal design © 2004 by Sourcebooks, Inc.®

All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means includinginformation storage and retrieval systems—except in the case of brief quotations embodied in critical articles or reviews—with-out permission in writing from its publisher, Sourcebooks, Inc.® Purchasers of the book are granted a license to use the formscontained herein for their own personal use. No claim of copyright is made in any government form reproduced herein.

Seventh Edition, 2004

Published by: Sphinx® Publishing, An Imprint of Sourcebooks, Inc.®

Naperville OfficeP.O. Box 4410

Naperville, Illinois 60567-4410630-961-3900

Fax: 630-961-2168www.sourcebooks.comwww.SphinxLegal.com

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is soldwith the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legaladvice or other expert assistance is required, the services of a competent professional person should be sought.

From a Declaration of Principles Jointly Adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations

This product is not a substitute for legal advice.

Disclaimer required by Texas statutes.

Using Self-Help Legal Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

Chapter 1: Land Trusts History . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 2: Benefits of Using Land Trusts. . . . . . . . . . . . . . . . . . . 5PrivacyAvoiding ProbateAvoiding Ancillary AdministrationKeeping Liens and Judgments off the PropertyAvoiding LitigationEase of Control by Multiple OwnersEase of Transferability of InterestsEase of Changing Contingent BeneficiariesSimplification of Making GiftsEase of ForeclosureSafer Lease/Option AgreementsKeeping Assessments LowerKeeping Sales Price SecretLimiting Liability

Contents

Improving the Financial StatementEase of NegotiationAvoiding PartitionAvoiding Personal Problems of BeneficiariesHolding Judge’s PropertyEase of Property ManagementSaving Title Insurance PremiumsAvoiding Real Estate Brokerage LawsBuying ForeclosuresAvoiding Seasoning ProblemsSpouse’s Forced Share

CHAPTER 3: How Land Trusts Work . . . . . . . . . . . . . . . . . . . . . . . 19Florida Requirements for a Land TrustDifferent Florida StatutesValidity of Land Trusts in FloridaTitle to the PropertyOwner of the PropertyThird PartiesMergerTrustee’s DutiesNecessary DocumentationNecessary PartiesOptional PartiesTypes of PropertyAgency LawLiabilityPersonal Property

Chapter 4: Setting Up a Land Trust . . . . . . . . . . . . . . . . . . . . . . . 29Buying Property into TrustPutting Property into TrustPutting a Mortgage into TrustChoosing the TrusteeNaming the TrustPreparing the DeedPreparing the TrustPreparing Trust CertificatesPreparing the Beneficiaries’ AgreementDue-on-Sale Clauses

iv ◆ land trusts in florida

Obtaining InsuranceMultiple PropertiesSale and Mortgage BackOther Interests in LandOut-of-State PropertyPower of DirectionForeign BeneficiariesNotaryForm DR-219Notice to the IRS

Chapter 5: Financing Property In a Land Trust . . . . . . . . . . . . . 47Mortgage of the Real EstatePledge of the Beneficial Interest

Chapter 6: Operating a Land Trust . . . . . . . . . . . . . . . . . . . . . . . . 51Leasing the PremisesAmending the TrustChanging Successor BeneficiariesDeath of a BeneficiaryChanging TrusteesDeath of a TrusteeGovernmental LiensTerminating the Trust

Chapter 7: Litigation Involving Land Trusts . . . . . . . . . . . . . . . 57Parties to the LawsuitIdentification of the TrusteeJoining the Trustee IndividuallyEvictionsBankruptcyTort ActionsCreditor Actions

Chapter 8: Selling Land Trust Property. . . . . . . . . . . . . . . . . . . 63Deeding the PropertyTrustee’s DeedAssigning the Beneficial InterestContract for SaleLease Option Agreements

contents ◆ v

Oral AgreementsBrokers’ CommissionsRICO Lien SearchTax Forms

Chapter 9: Federal Taxation Of Land Trusts . . . . . . . . . . . . . . . . 69Tax ReturnsNotice of Fiduciary CapacityBeneficiary StatusTax-Free Sale of ResidenceSection 1031 ExchangesEstate TaxesFIRPTAIRS Form W-9

Chapter 10: State Taxation of Land Trusts . . . . . . . . . . . . . . . . . 75Real Estate TaxesHomestead ExemptionIntangible Personal Property TaxDocumentary Stamp TaxSales and Use TaxRental License Tax

Chapter 11: Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81What a Security IsWhen a Security ExistsAvoiding Securities ProblemsExemptions from Securities LawsGet an Opinion

Chapter 12: Florida Rico Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87RICO LiensForeign Beneficiaries

Chapter 13: Concerns For Trustees . . . . . . . . . . . . . . . . . . . . . . . 89Fiduciary ObligationsLiabilityCERCLACorporate Trustees

vi ◆ land trusts in florida

Chapter 14: Drawbacks and Pitfalls of Land Trusts . . . . . . . . 95Unfamiliarity in the MarketplaceCostsTrusteeHomestead Exemptions

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Appendix A: Index of Cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Appendix B: Statutes & Regulations . . . . . . . . . . . . . . . . . . . . . 117

Appendix C: Checklists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Appendix D: Blank Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

contents ◆ vii

Before using a self-help law book, you should realize the advantages and disad-vantages of doing your own legal work and understand the challenges anddiligence that this requires.

Rest assured that you won’t be the first or only person handling your own legalmatter. For example, in some states, more than seventy-five percent of divorcesand other cases have at least one party representing him or herself. Because ofthe high cost of legal services, this is a major trend and many courts are strug-gling to make it easier for people to rep-resent themselves. However, somecourts are not happy with people who do not use attorneys and refuse to helpthem in any way. For some, the attitude is, “Go to the law library and figure itout for yourself.”

We at Sphinx write and publish self-help law books to give people an alterna-tive to the often complicated and confusing legal books found in most lawlibraries. We have made the explanations of the law as simple and easy to under-stand as possible. Of course, unlike an attorney advising an individual client, wecannot cover every conceivable possibility.

Whenever you shop for a product or service, you are faced with various levels ofquality and price. In deciding what product or service to buy, you make a

Using Self-HelpLaw Books

The GrowingTrend

Cost/ValueAnalysis

cost/value analysis on the basis of your willingness to pay and the quality youdesire.

When buying a car, you decide whether you want transportation, com-fort, sta-tus, or sex appeal. Accordingly, you decide among such choices as a Neon, aLincoln, a Rolls Royce, or a Porsche. Before making a decision, you usuallyweigh the merits of each option against the cost.

When you get a headache, you can take a pain reliever (such as aspirin) or visita medical specialist for a neurological examination. Given this choice, most peo-ple, of course, take a pain reliever, since it costs only pennies; whereas a medicalexamination costs hundreds of dollars and takes a lot of time. This is usually alogical choice because it is rare to need anything more than a pain reliever for aheadache. But in some cases, a headache may indicate a brain tumor and failingto see a specialist right away can result in complications. Should everyone witha headache go to a specialist? Of course not, but people treating their own ill-nesses must realize that they are betting on the basis of their cost/value analysisof the situation. They are taking the most logical option.

The same cost/value analysis must be made when deciding to do one’s own legalwork. Many legal situations are very straight forward, requiring a simple formand no complicated analysis. Anyone with a little intelligence and a book ofinstructions can handle the matter without outside help.

But there is always the chance that complications are involved that only anattorney would notice. To simplify the law into a book like this, several legalcases often must be condensed into a single sentence or paragraph. Otherwise,the book would be several hundred pages long and too complicated for mostpeople. However, this simplification necessarily leaves out many details andnuances that would apply to special or unusual situations. Also, there are manyways to interpret most legal questions. Your case may come before a judge whodisagrees with the analysis of our authors.

Therefore, in deciding to use a self-help law book and to do your own legalwork, you must realize that you are making a cost/value analysis. You havedecided that the money you will save in doing it yourself outweighs the chancethat your case will not turn out to your satisfaction. Most people handling theirown simple legal matters never have a problem, but occasionally people findthat it ended up costing them more to have an attorney straighten out the situ-ation than it would have if they had hired an attorney in the beginning. Keep

x ◆ land trusts in florida

this in mind if you decide to handle your own case, and be sure to consult anattorney if you feel you might need further guidance.

The next thing to remember is that a book that covers the law for the entirenation, or even for an entire state, cannot possibly include every procedural dif-ference of every county court. Whenever possible, we provide the exact formneeded; however, in some areas, each county, or even each judge, may requireunique forms and procedures. In our state books, our forms usually cover themajority of counties in the state, or provide examples of the type of form thatwill be required. In our national books, our forms are sometimes even more gen-eral in nature but are designed to give a good idea of the type of form that willbe needed in most locations. Nonetheless, keep in mind that your state, county,or judge may have a requirement, or use a form, that is not included in thisbook.

You should not necessarily expect to be able to get all of the information andresources you need solely from within the pages of this book. This book willserve as your guide, giving you specific information whenever possible and help-ing you to find out what else you will need to know. This is just like if youdecided to build your own backyard deck. You might purchase a book on howto build decks. However, such a book would not include the building codes andpermit requirements of every city, town, county, and township in the nation;nor would it include the lumber, nails, saws, hammers, and other materials andtools you would need to actually build the deck. You would use the book as yourguide, and then do some work and research involving such matters as whetheryou need a permit of some kind, what type and grade of wood are available inyour area, whether to use hand tools or power tools, and how to use those tools.

Before using the forms in a book like this, you should check with your courtclerk to see if there are any local rules of which you should be aware, or localforms you will need to use. Often, such forms will require the same informationas the forms in the book but are merely laid out differently, use slightly differ-ent language, or use different color paper so the clerks can easily find them.They will sometimes require additional information.

Besides being subject to state and local rules and practices, the law is subject tochange at any time. The courts and the legislatures of all fifty states are con-stantly revising the laws. It is possible that while you are reading this book, someaspect of the law is being changed or that a court is interpreting a law in a dif-

using self-help law books ◆ xi

Local Rules

Changes in the Law

ferent way. You should always check the most recent statutes, rules and regula-tions to see what, if any changes have been made.

In most cases, the change will be of minimal significance. A form will beredesigned, additional information will be required, or a waiting period will beextended. As a result, you might need to revise a form, file an extra form, or waitout a longer time period; these types of changes will not usually affect the out-come of your case. On the other hand, sometimes a major part of the law ischanged, the entire law in a particular area is rewritten, or a case that was thebasis of a central legal point is overruled. In such instances, your entire abilityto pursue your case may be impaired.

Again, you should weigh the value of your case against the cost of an attorneyand make a decision as to what you believe is in your best interest.

xii ◆ land trusts in florida

The land trust is both the most useful and the least known legal device used byreal estate investors. Those who discover the benefits of land trusts start usingthem for all of their properties. But very few investors know how or why theywork so well.

When you consider that law school property law professors must teach compli-cated legal concepts from the 1500s, you will understand that there is not muchtime left for a simple 1963 statute. Statutes that clearly tell you the procedurejust are not as exciting as trying to analyze trust concepts born in 1536. Thebeginnings of these statutes are discussed in Chapter 1.

This book was first published in 1984, just twenty years after Florida’s land truststatute was adopted. Since then many investors have begun using land trustsand the Florida bar has held seminars for attorneys every two years. So today theland trust is much better known than it was in 1984.

It is the purpose of this book to simplify the law and uses of land trusts for bothattorneys and property owners in Florida. It is believed to be the most thoroughanalysis of the subject available in Florida. Chapter 2 will explain the benefits ofland trusts, while Chapter 3 explains how they work. Chapters 4 through 6 willdetail how to set up, finance, and operate a land trust.

Introduction

Sometimes it becomes necessary to take land trust issues to court. Chapter 7 willtouch on the common reasons for this. It may also become necessary to sell landtrust property, and Chapter 8 will help you. There are many federal and statetax, securities, and racketeering laws governing issues related to land trusts.Chapters 9 through 12 will explain what these laws are and how they operate inland trusts.

Chapters 13 and 14 raise possible drawbacks to land trusts and issues fortrustees. Check the glossary after Chapter 14 for any words you may not under-stand, as well as the Florida Statutes in Appendix B for some land trust law. Forfurther analysis of specific problems reference is made to case law from Florida,Illinois, and other jurisdictions and these cases are listed in Appendix A. Foryour convenience, some checklists and forms appear in Appendix C and D foryour use with land trusts. Since no book can be expected to answer all questionsregarding each particular case and because some of the material is technical,readers who are not attorneys, and do not understand the book fully, are urgedto consult an attorney before setting up a land trust.

NOTE TO THE READERIn response to reader inquiries, Mark Warda, author of this book, has formed atrustee company to serve as trustee for Florida properties. (See page 32 fordetails on choosing a trustee.) The company is called Land Trust ServiceCorporation. For a fee of $250, it will set up the trust (fee includes the first yeartrustee fee). The fee each year thereafter is $100.

For information, contact:

Land Trust Service CorporationP.O. Box 8

Clearwater, FL 33757727-581-8685

www.floridalandtrust.com

xiv ◆ land trusts in florida

Land trusts were first invented about 500 years ago for some of the same rea-sons they are used today—for privacy and to eliminate some of the burdens ofownership. In those days, before stocks and bonds were invented, land was theprimary form of wealth. They used the feudal system, and like nearly all forms ofgovernment, wanted to control this wealth. Under this system, owners of landhad to pay taxes and do military service for the overlord. They could only passland to their oldest sons; they could forfeit it for conduct deemed treason; and,they could lose it in payment for their debts.

To avoid some of these burdens, clever lawyers invented the land trust by whichland could be transferred to someone else (a trustee) to hold for the real owner (thebeneficiary). For example, a young man could put his land in his uncle’s name. Theuncle would be too old for military service and the nephew would not lose theland if he ran up debts or offended someone higher in the social system.

In England, in 1536, King Henry VIII decided to put an end to the boomingtrust business and passed the Statute of Uses. This statute said that where landwas placed in a trustee’s name for the use of another person, the use was executedand the beneficiary again became the owner of the property.

Land Trusts History1

The lawyers took some cases to court and in 1545. The English courts held thatthe Statute of Uses only applied to passive trusts (trusts in which the trustee hadno legal duties). It did not apply if the trustee had some minor duties to per-form, which would make the trust active.

As each American state joined the Union, it adopted the most current existingEnglish law. Therefore in most states the Statute of Uses is the law and a passivetrust (such as a land trust) is void. In some states, a version of the Statute of Useswas also passed by the state legislature. In Florida, the Statute of Uses wasadopted in 1828 (before statehood) and is still the law of Florida as Section(Sec.) 689.09 in the Florida Statutes (Fla. Stat.).

But in some states, such as Illinois, the courts decided that passive trusts couldbe a good thing. Therefore, they ruled that if a trustee had any minor duty, suchas to sign a deed twenty years in the future, then that little duty was enough tomake it an active and a legal trust.

In Florida the legislature decided that land trusts would be a good thing andpassed a law in 1963 making an exception to the Statute of Uses for the landtrust. The Florida land trust statute is Section 689.071 of Florida Statutes.

Shortly after Florida’s land trust statute was passed, a number of trustees startedbuying large tracts of land in central Florida. Eventually these tracts were con-tiguous. You have probably been on this land. Today it is called Disney World.It might not have been as easy to accomplish without the land trust.

In 1984, after a court case held a trustee of a land trust liable for something heshould not have been liable for, the legislature amended the land trust statute tomake sure the trustee had protection from liability. It did this by adding a sub-section to Section 689.071 stating that a land trust would be subject to FloridaStatutes, Section 737.306, the law that says that in most instances a trustee isnot liable.

In 1984 the first edition of this book was published and since then the use ofland trusts has grown. But still, very few Floridians know what a land trust is orhow many benefits it can offer them.

While some legal commentators have criticized the land trust for allowing peo-ple to keep their ownership private, it still has strong support in Florida. In

2 ◆ land trusts in florida

2002, the legislature amended the law, again, to clarify that LLCs (limited lia-bility companies) could serve as trustee of land trusts.

Land trusts today offer the same benefits that they did over 500 years ago—pro-tecting owners of property from some of the burdens of ownership and to keepingpeople’s wealth private. As government gets bigger and its burdens greater, theland trust will become even more valuable to Florida property owners.

NOTE: There has been little litigation (court cases) in Florida regarding land trusts,so many questions on how land trusts will be treated by courts have not yet beenanswered. But since Illinois was the first state to recognize land trusts and its courtshave decided numerous cases involving land trust issues, Florida courts have fol-lowed Illinois rulings where Illinois law does not conflict with Florida law.Therefore, Illinois cases are used throughout this book to answer questions about howland trusts will likely be interpreted.

Florida cases and some other state and federal cases are used as well. All cases appearin parentheses with their name (e.g., First Federal v. Pogue), the citation where tofind it, and the date (e.g., 389 N.E.2d 652 (1979)). Ask a law librarian to helpyou if you want to read these cases.

land trusts history ◆ 3

There are many benefits of using a land trust to hold the title to your real prop-erty. This chapter includes an explanation of the most popular uses. However,the list keeps growing and you may find a new use.

PrivacyOne of the most important benefits of the land trust is privacy. When you usea land trust to buy property, no one knows—and it is almost impossible to findout—that you are the owner.

There is no public record of the beneficiaries of a land trust. The trustee is listedas the owner and only he or she knows the identity of the beneficiary. Thosechecking the courthouse records will find no record of the beneficiaries of a landtrust. This privacy insulates owners from annoyances of ownership and keepstheir wealth from public view. While some may object to such secrecy of own-ership and claim it helps criminals hide their wealth, many feel land ownershipshould be no more public knowledge than bank balances or stock holdings.

Benefits of UsingLand Trusts

2

When this book was first written, the Internet did not exist. Looking up a per-son’s properties necessitated a trip to the courthouse and poring through dustybooks and microfilms. Today you can access many property records in your ownhome with the click of a mouse. In some areas, you can click and see a map oreven an aerial photo of the property.

Now, for a small fee, anyone can be connected to a computer system that cando an instant search of the property records of all sixty-seven of Florida’s coun-ties. The system even shows which property is a person’s homestead and givesthe street address. This system is a great help to divorce and collections lawyers.But by placing property in a land trust, the ownership can be hidden.

Disney World was developed on land quietly put together through separatetrusts. If neighbors knew that a large enterprise like Disney was buying up thearea, they would have demanded much higher prices for their land.

In Arizona and Hawaii (two other states allowing land trusts), beneficiaries mustbe disclosed, but Florida still allows secrecy. To avoid abuses by organized crime,the Florida RICO Act put some limitation on land trusts as discussed inChapter 12. (RICO stands for Racketeer Influenced Corrupt Organizations, relat-ing to organized crime.) But for those not involved with organized crime, theland trust offers privacy.

NOTE: A land trust is not absolute protection against disclosure. It is a barrier thatwill hide your ownership from public view. But as with other types of wealth, a courtcan order you to disclose what you own if you have lost a lawsuit. Courts can orderan attorney to disclose the identity of a client who has ownership in a land trust.(United States v. Aronson, 610 F. Supp. 217 (1985).)

These instances of disclosure are rare. The land trust will protect most people,most of the time. It will also give you the time and freedom to deal with yourproperty in the event court action is taken against you. Usually, while a lawsuitis pending, you do not have to disclose your wealth. If your property is in landtrusts, you would be free to sell it, even while the case is pending, and spend themoney unless there was a court order forbidding you to do so.


Avoiding ProbateAnother very important benefit of a land trust is that the property owned by thetrust does not have to go through probate when you die. (Probate is the processof distributing property according to your will.) A land trust can allow propertyto pass automatically to whomever one chooses without any court proceedings.The trust document usually names contingent beneficiaries and upon the deathof the first beneficiary the contingent beneficiaries (the next in line or co-bene-ficiaries) immediately become the owners of the trust. This avoids both the costand delay of probate proceedings.

By avoiding probate a land trust also avoids the complications of a will. If youdecide to take someone out of your will, you must either have the will rewrittenor execute a codicil (a modification), and have it signed before two witnesses, usu-ally in the presence of a notary public (an official who verifies signaturesauthenticity). But to change the beneficiary of your land trust, you just put yoursignature alone on a simple amendment to the trust form and deliver it to thetrustee and his or her attorney. There is no formality and no one has to know.

Although the property in a land trust avoids going through probate, it does notavoid all the claims of probate. In most cases a person’s debts do not have to bepaid out of land trust property, but the spouse’s forced share and federal estatetaxes may need to be paid by the successor beneficiary of a land trust (the next toget the land trust property). A forced share is an amount in the statutes that aspouse may choose instead of what a will gives that spouse. It is 30% of theestate in Florida. (See p.17 for more information regarding a spouse’s forcedshare.)

Avoiding Ancillary AdministrationAncillary administration is a court proceeding in a state other than the one inwhich a person died to determine the ownership of a deceased person’s property.It is like a second probate proceeding. For persons who do not live in Florida, aland trust is a good way to avoid a Florida ancillary administration, even if theystill need a probate in their home state. This can be especially valuable for citi-zens of other countries whose ancillary administration may be expensive becausecourt documents would need to be translated from another language. Likewise,

benefits of using land trusts ◆ 7

Florida residents who own property in other states should look into the possi-bility of setting up land trusts in those states to simplify their estates.

Keeping Liens and Judgmentsoff the PropertyWhen property is held in a trust, judgments and liens against the individual ben-eficiaries do not attach to the land. (First Federal v. Pogue, 389 N.E.2d 652(1979).) Therefore, a beneficiary may freely sell his or her beneficial interest even with numerous certified judgments against his or her own name in thepublic records. This also applies to IRS liens. (Chicago Federal Savings & Loanv. Cacciatore, 185 N.E.2d 670, 25 Ill.2d 535 (1962).) It also applies to welfareliens. (Nelson v. Fogelstrom, 284 N.E.2d 339, 5 Ill.App.3d 804 (1972).)

One type of lien that does attach to a land trust and requires payment from theland trust if needed is a RICO lien filed against a beneficiary. A RICO lien is alien filed by a state attorney against a person believed to be involved in organ-ized crime. Before a property is transferred by a trustee, the trustee is requiredto complete a RICO lien search of the beneficiaries. (This is explained in moredetail in Chapter 12.)

As said before, use of a land trust allows persons who already have judgmentsfiled against them to buy and sell property without having the judgments attachto the property. Of course, if asked under oath what assets he or she owns, a per-son must disclose the ownership of beneficial interests in land trusts underpenalty of perjury. That means that it is a crime if you do not disclose that youare a beneficiary of a land trust when asked under oath about your property.

Theoretically, a creditor can still seize a person’s beneficial interests in trusts (ifthey are known), but there are no Florida cases yet that clearly define how thisshould be done. If the beneficial interest is represented by a certificate, then thecertificate would probably be subject to a levy (seize and sell property to pay acreditor) by the sheriff in the county or state where the certificate is located. Ifthe certificate were sent out of state, it would be that much harder to reach. Ifthere is no certificate, then the creditor could probably obtain a writ of execu-tion against the interest in the trust. (Writ of execution is a court document thatmakes a claim against specific property.)


The land trust will not completely shield a debtor from a determined creditor,but it should slow down the process of collecting a debt and might cause aninexperienced attorney to give up in frustration. Any attempt to seize an inter-est in a land trust could probably be delayed by filing an appeal since there areno Florida cases on how it should be done. Such a scenario would provide agood argument for settlement by the creditor at a reduced amount.

In the event a judgment is filed against the trustee in his or her individual capac-ity, it would not attach to any properties held by the trustee as trustee. (YandleOil Co., Inc. v. Crystal River Seafood, Inc., 563 So.2d 839 (Fla. 5DCA 1990).)

Example: If Bank of America owed money to its landlord, the landlord couldnot seize property of the bank’s customers that the bank was hold-ing as trustee.

Where the trust is not set up properly and determined creditors work throughan aggressive bankruptcy court, the property may be reached. (In re Steven S.Saber, 233 B.R. 547 (S.D. Fla. 1999).)

Avoiding LitigationOwners of property are easy targets for lawsuits. Even a frivolous lawsuit may beworth filing if the defendant has numerous properties that can be tied up in lit-igation or seized. But if it looks like a person has no assets, it may be difficultfor a disgruntled person to find a lawyer to take even a case with a lot of merit.

If you plan to own several properties, a part of your asset protection planningshould include keeping your name off the property records. That is what a landtrust is designed to do.

Ease of Control by Multiple OwnersWhen several parties own interests in a property, it is often difficult to havedeeds, mortgages, and other documents executed and notarized by all parties.This is a special problem when some owners are out-of-state; but the land trusthelps here. With a trust, only the trustee need sign the documents. The benefi-


ciaries can sign Directions to Trustee. (form 5, p.145.) This form does nothave to be witnessed or notarized and can even be sent by fax.

The beneficiaries can also empower one person to give directions to the trusteewithout their signatures. The is usually done by giving that person a power ofdirection.

Ease of Transferability of InterestsAnother benefit to land trusts is that it makes transferring property easy. Interests(legal rights to property) in a land trust are personal property, (not classified asreal estate) only they need a simple signature for a transfer. The transfer does notrequire any witnesses or notary. This position has been clearly established by theFlorida Fifth District Court of Appeals. (Goldman v. Mandell, 403 So.2d 511(1981).)

Ease of ChangingContingent BeneficiariesWhile a will requires a formal ceremony for execution, a person can change thesuccessor beneficiary of his or her land trust with a simple signature. Percentagesgiven to successor beneficiaries can be changed as properties change, and per-sons can be cut out of their inheritance without delay or expense.

Simplification of Making GiftsTo avoid the gift tax, it is common to make use of the annual exclusion of$11,000 per year tax free. An individual can give a tax-free gift of $11,000 to asmany people as he or she wants per year. For couples, $22,000 in joint gifts canbe given each year to each person without paying a gift tax. (These amounts willrise with inflation in $1,000 increments.) By putting a property into a landtrust, the process of transferring $11,000 or $22,000 of equity each yearbecomes simplified. (This is explained in more detail in Chapter 9.)


Ease of ForeclosureWhile the foreclosure of a real estate mortgage requires lengthy court proceedingsand gives the mortgagor a right of redemption, a beneficial interest given as col-lateral can be recovered much more quickly. This is because the UniformCommercial Code, a law covering commercial transactions, allows personal prop-erty to be taken back quickly when payments are not made.

When the beneficial interest in a land trust is given as collateral, a chattel mort-gage and a UCC-1 Financing Statement are used as security. In such a case, theforeclosure is a much simpler procedure and is governed by Florida Statutes,Section 679.304. There is a Security Agreement (Chattel Mortgage)(form 17, p.164) and a Uniform Commercial Code Financing Statement(form 18, p.165) located in Appendix D.

At present, Florida law is not clear in this area. As explained in Chapter 5, thereare cases that say the UCC procedure can be used and others that say it cannot.But since few transactions go as far as appeals court, most transactions shouldbe able to take the advantage of the quick procedures under the UCC.

Safer Lease/Option AgreementsSometimes property is leased with an option to purchase or the right to buy theproperty a person is leasing. The tenant often acquires vested rights (legal rightsthat are very difficult to take away) in the property that may prevent the ownerfrom using a simple eviction action when the tenant fails to pay rent. When atenant puts a mere $1,000 or so down for this option and defaults (fails to pay),it is unfair to require an owner to pursue a lengthy foreclosure or ejectment pro-ceeding to get the property back.

One recent attempt to avoid this problem has been to divide the transactioninto two parts. The tenant can sign a regular lease of the real property (the actualbuilding or land) with the trustee and sign a separate option agreement to buythe beneficial interest of the land trust from the beneficiary. The option agree-ment can allow credits for each month the lease is in force and provide fornullification of the option upon default of the lease. For more protection, theoption agreement can be drafted as a contract for option, which does not


become an actual option unless all of the terms of the lease and the option havebeen fulfilled.

Such an arrangement has not been ruled on by Florida courts. It is possible thatin an extreme case, a court would call it a mortgage that must be foreclosed. Butif the lease specifically stated that both parties agree it is to be governed byFlorida Statutes, Chapter 83, Landlord Tenant Law, the owner should be alloweda quick eviction. The existence of an option agreement with another party onthe beneficial interest, which is personal property as discussed before, shouldnot prevent the right to use eviction procedures. Dating the contract for optionlater than the lease would make an even stronger case to separate the agree-ments.

In such a case, a separate suit would have to be brought by the tenant regardingthe option and under the reasoning of the case Ferraro v. Parker (see Chapter 5),the owner should win. Without possession of the property, the defaulting ten-ant would not likely be able to pursue lengthy litigation in circuit court over anuntested area of law.

Keeping Assessments LowerThe land trust may help to keep assessments (rate of tax) low. Tax assessors watchfor property sales to adjust property tax assessments. If the beneficial interest ina land trust is sold, there is no public record of the transaction and the assessornever knows that it has been sold or what the sales price was.

Keeping Sales Price SecretWhen a deed is recorded in the courthouse, the documentary stamp tax (tax onthe transfer of real estate) must be noted on it. The tax is based on the amountof the sales price. Anyone can use this to find out the sales price. Although thedocumentary stamp tax must be paid on the sale of the beneficial interest in aland trust, there is no public record of the tax paid, unlike with recorded deeds.As will be explained in Chapter 4, when you purchase a property into a landtrust, you can set it up so that the stamps are not put on the deed and no onecan know what you paid for the property.


Limiting LiabilityWhen a person signs a note and mortgage or assumes an existing mortgage, thatperson can be liable for a deficiency judgment in the event of foreclosure. A defi-ciency judgment is any amount still owed when the money from the sale of theproperty does not cover the amount owed on the mortgage. If a property is pur-chased by a trust, the transaction can be structured so that only the trusteeexecutes the documents and that this is done without personal liability to thetrustee. Even though it is not explicitly stated in the documents, a mortgagefrom a trustee allows the lender to look only to the property in the trust as secu-rity for the loan. No deficiency judgment can be entered against the beneficiary.

Of course, institutional lenders require personal guarantees from the beneficiaries.Sophisticated sellers may also require them. But many sellers take back mortgagesfrom trusts without question. Since many real estate sellers in Florida do not useattorneys, they often accept offers from trustees without realizing that they haveno recourse against the buyer.

Improving the Financial StatementIf a person owns property worth $100,000 that has a $80,000 mortgage againstit, the value ($100,000) is put on the asset side of his or her financial statementand the debt ($80,000) is put on the liability side. The property adds $20,000to his or her net worth, but the $80,000 debt is weighed heavily by lenders.Owners of numerous properties often cannot get loans because their debt ratio(size of their debt compared to the amount of their assets) is too high.

If a property is in a land trust and only the trustee signed the documents, thebeneficiary is not liable on the loan. Therefore, in the above case, the ownercould list the beneficial interest in the trust as a $20,000 asset with no debt. Thedebt is a debt of the trust payable out of the income of the trust property andthe beneficiary owns only an asset worth $20,000 (the value minus the debt, or$100,000 - $80,000 here).


Ease of NegotiationWhen a property is bought, sold, or rented by a trust, the beneficiary or othernegotiator can tell the other party that the terms of the trust arrangement donot permit certain types of deals. The negotiator can work closely with a buyeror seller to put a deal together, but explain that the trust has certain rules suchas, the trust must receive 20% down or the trust cannot have a negative cash flowon a property. This way the negotiator can get the terms desired without per-sonally upsetting the other side. Of course, it is best to write out some trust rulesahead of time so that one can be honest in one’s presentation. They can beamended later if desirable.

Avoiding PartitionWhen property is owned jointly by two or more persons, any one of them maygo to court and require partition (division of real estate) and sale of the prop-erty. This way a disgruntled partner can ruin the progress of an ongoing projector a family farm can be broken up by feuding siblings.

In Illinois, land held in a land trust is not subject to partition. (Breen v. Breen,103 N.E.2d 625 (1952).) Because of the legislative intent in the land truststatute, Florida courts should follow this holding, but there is a Florida Statute(Sec. 64.091) that allows partition of personal property in some instances, whichis what the legal ownership in a land trust is. For extra protection in Florida, theLand Trust Agreement (form 3, p.137) and beneficiary agreement shouldspecifically say that partition of the property is not allowed.

Avoiding Personal Problemsof BeneficiariesWhen several partners own property jointly, the death, incompetency, divorce,bankruptcy or other problems of one of them can ruin a project. When prop-erty is in a land trust, these problems have no effect on the property; they onlyaffect the one beneficiary’s interest. Of course, the beneficiary agreement should


spell out what is to happen in the event of each of these occurrences. There is aCo-Venture Agreement (form 10, p.151) in Appendix D to help you shapesuch an agreement. There is also a Partnership Agreement (form 11, p.153)in the same appendix.

Holding Judge’s PropertyThe Committee on Standards of Conduct Governing Judges has issued an opin-ion (#76-19) that a circuit judge could continue to own an interest in a landtrust with former law partners and other businessmen in the community. Thisway a judge would not have to give up his or her real property holding uponbecoming a judge. Of course, the judge would have to disqualify him or herselfin proceedings regarding the trust since there would be a conflict of interest.

Ease of Property ManagementWhen a tenant cannot pay his or her rent and explains his or her personal prob-lems to a landlord, it is often difficult for the landlord to insist on strictcompliance with the lease. However, a land trust can allow the landlord to sym-pathize with the tenant and blame the trustee for the fact that an eviction mustbe filed. Rather than have a personal confrontation with the tenant, the landlordcan explain that the eviction is beyond his or her control. To allow the landlordto be honest with the tenant, rules can be created for the land trust limiting theflexibility with tenants.

Saving Title Insurance PremiumsWhen a property is sold, it is usually necessary to have a new title insurance pol-icy insuring the new deed. However, when an interest in a land trust is sold, thetitle can remain in the same trustee and the interest transferred by Assignmentof Beneficial Interest. (form 6, p.146.) This would avoid the necessity fora new title insurance premium, which can be quite expensive on large develop-ments.


When such event is contemplated, it is best to use a neutral party such as a bankor corporation as trustee so that the buyer will be comfortable with the arrange-ment and not need to replace the trustee.

Avoiding Real Estate Brokerage LawsFlorida’s Real Estate Brokerage law (Florida Statutes, Chapter 475) requires thatbrokers (those that help sellers and buyers conduct transactions) be licensedbefore performing any brokerage services for a fee. Such services include help-ing to buy, sell, lease, or option the property. The land trust statute states thatthe interest of the beneficiary of a land trust is personal property for all purposes,and the statute says that it shall be liberally construed. Therefore an unlicensedperson should be able to conduct transactions on an interest in a land trust. Thisis the opinion of the Florida Attorney General’s office as expressed in a letter tothe author.

An interest in a land trust that does not come under real estate brokerage lawsmight be considered a security if the interest was in the nature of a passive invest-ment. Therefore a broker of land trust interests might need to be licensed as asecurities dealer. (See Chapter 11 for more information on when securities lawsaffect land trust transactions.)

Buying ForeclosuresWhen mortgage lenders sell a property that they took back in a foreclosure, theyoften have a rule that their contract is not assignable. However, if you use a landtrust as the contract purchaser, you can sell the beneficial interest of the trustseveral times without assigning the underlying real estate contract.


Avoiding Seasoning ProblemsSeasoning is the length of time a property has been owned. Some lenders refuseto make loans on properties that are being sold quickly at profit or to refinanceproperties that have not been owned very long. Using a land trust can allow aproperty to stay with the same owner (trustee) while the beneficial interest isbeing sold.

Spouse’s Forced ShareIn Florida, like many states, the spouse of a person who dies is entitled to a por-tion of the estate, even if it was left to others. In the past, one way to avoid thisforced share of the estate was to put property in trust so it wouldn’t be part of theestate.

Unfortunately, the Florida legislature recently made it impossible to avoid aspouse’s forced share with a land trust. Now the 30% share to which a spouse isentitled applies to all property owned by a person at death, including propertyin the land trust.

If you leave your spouse 30% of your total estate, then your land trust is safe,but if you do not, the successor beneficiary of the land trust could be requiredto pay a portion of the spouse’s share.

Since land trusts are very private, it is possible that an interest could pass with-out the knowledge of the spouse. But any intentional attempt to avoid the lawcould subject the parties to penalties if discovered.

If you wish to avoid a spouse’s share, you need to sign either a premarital agree-ment or a marital agreement. Check with a lawyer to be sure your agreementcomplies with the latest law.


A land trust is an arrangement where one person (the trustee) holds both legaland equitable title to real estate and holds it for the benefit of another party (thebeneficiary). Legal title means the person who is listed as the owner of the prop-erty in the official records of ownership. Equitable title means the person whois really entitled to the property.

This is a very unusual setup and is different from most types of trusts becausein all other kinds of trusts, the trustee holds legal title to the property and thebeneficiaries hold equitable title to the property. If the legal and equitable titleare held by the same person, there is a legal merger of the two interests and thetrust dissolves.

However, a true land trust, sometimes called an Illinois-type land trust, trans-forms the equitable interest in the land into an interest in personal property.This transformation has many legal ramifications as will be explained later.

How Land Trusts Work3

Florida Requirements for a Land TrustThe requirements for forming a Florida land trust are that it fulfills two condi-tions in Florida Statute, Section 689.071. Those requirements are that aninstrument conveys an interest in real property to a trustee without naming thebeneficiaries and that the trustee be given certain powers to deal with the prop-erty. Once these requirements have been fulfilled, the trust is entitled to thebenefits of the land trust statute. These characteristics differ from those of otherstates that may have different statutes or may not have a statute at all, but mayoperate under a series of court decisions.

The statute also says that if the deed says the interests of the beneficiaries arepersonal property, they will be. This is not mandatory, but it is advisable becausepersonal property is legally simpler to deal with.

Different Florida StatutesA previously enacted Florida Statute, Section 689.07, has nothing to do withland trusts and should not be confused with the land trust statute. This statutestates that where a person’s name appears on a deed designated as trustee with noindication whom the beneficiaries are or of the nature of the trust, then the per-son named as trustee is deemed to have title to the property in his or her ownname and not as trustee. The purpose of this statute was to eliminate title prob-lems in cases where people added as trustee to their names on deeds.

Use of a deed with merely the words as trustee can have unfortunate conse-quences.

Example: If you put your property in a friend’s name as trustee and a largejudgment is filed against him, you can lose your property becausethe statute says the property will be considered his, even though thedeed said as trustee.

Other problems come up when an instrument is recorded that does not complywith either statute. If a deed was recorded that named both a trustee and bene-ficiaries, then it would not fit the requirements of either statute. If the only


problem is clearing the title, the simple solution would be to obtain the signa-tures of all interested parties. However, if the property were involved inlitigation with complex issues of liability or ownership, the court would proba-bly look to other areas of law such as general trust law or contract law.

NOTE: Be sure that any deed you are using for a trust complies with FloridaStatutes, Section 689.071 and not Section 689.07 or neither of them.

Validity of Land Trusts in FloridaWhile in some states land trust use may be legally questionable, their validity inFlorida is clearly established by Florida Statutes, Section 689.071. The statuteeven states that it shall be liberally interpreted. Florida courts ruling since pas-sage of the statute have upheld the validity of both land trusts and the statute.(Grammer v. Roman, 174 So.2d 443 (1965).)

Title to the PropertyIn a land trust, both legal and equitable title are vested in the trustee. (Fla. Stat.,Sec. 689.071.) The beneficiary has no interest in the real estate as such. Whatthe beneficiary has is an interest in the trust. The statute provides that this inter-est can be designated as personal property in the deed. In most land trust deedsit is so designated. This setup is like owning stock in a corporation that ownsland. You do not own land, you own stock (the beneficial interest). But in noother way is the land trust like a corporation.

Owner of the PropertyWhere a statute or regulation refers to an owner of property, there is no set ruleas to whether this would be the trustee or the beneficiary. Most Illinois casesindicate that the beneficiary is the owner. (Robinson v. Walker, 211 N.E.2d 488(1965).) However, the Illinois courts also recognize that the term owner does nothave a fixed meaning. In some cases, the trustee has also been held to be anowner. (Coombs v. People, 64 N.E. 1056 (1902).) (In re Argonne Construction

how land trusts work ◆ 21

Co., 10 B.R. 570 (1981).) In Florida it would depend upon the context inwhich the term owner was used, and hopefully a court would use common sensein applying the law to the party it was meant to apply to.

Third PartiesThird parties dealing with the trustee of a land trust can rely upon the deed andneed not look at the trust. In fact, they have no right to look at the trust. FloridaStatutes, Section 689.071, Subsection (2) says that a person dealing with thetrustee does not have to look to the trust to see if the trustee has the right to sellthe property and does not have to see if the beneficiaries are paid.

Occasionally, an unenlightened title company or attorney dealing with a landtrust will ask to see the trust. Such request can be declined and Section 689.071,Subsection (2) pointed out to them. To protect them, Subsection 689.071(3)says that a person dealing with a trustee cannot be sued by the beneficiaries ofthe trust. If they still demand to see the trust you should choose another titlecompany or attorney.

Attorneys Title Insurance Fund, also called The Fund is a title insurer organizedby a group of Florida attorneys. In their underwriting book, Fund Title Notes,Title Note 31.02.03A is titled No Examination of Trust Required. It explains thatagents do not need to see the trust. Most Florida real estate attorneys shouldhave a copy of this.

MergerThe issue of merger occasionally arises when dealing with trusts in which one partyis or may become both trustee and beneficiary. An early Florida case, held that aperson could not hold identical interests as both beneficiary and trustee or thetrust would be void. (Axtell v. Coons, 89 So. 419 (1921).) However, with landtrusts, since the legal and equitable title are already in the same person, this the-ory would not apply. This was the opinion of a federal district court in Illinois thatheld that the Illinois land trust is a species of trust that, unlike other trusts, is immuneto the doctrine of merger under most circumstances. (Chrysler Credit Corporation v.Louis Joliet Bank and Trust Co., 863 F.2d 534 (1988).)


Although this case cites Illinois statutory law that is different from Florida’s, thelogic should still apply to a Florida land trust. Subsection (6) of the Florida landtrust statute states that the statute shall be given a liberal interpretation to effec-tuate the intent and purposes of the statute. Additionally, Florida Statutes, Section689.075(1)(g) states that a trust is not invalid if the settlor (the one creating thetrust) is, or later becomes, sole trustee.

Unfortunately, a federal bankruptcy court in Florida has held that merger doesdestroy a Florida land trust when the same person is both trustee and benefici-ary. (In re Steven S. Saber, 233 B.R. 547 (1999).) However, this court neverconsidered Florida Statutes, Section 689.075(1)(g) nor the land trust casesagainst merger. Also, bankruptcy cases are not controlling in Florida courts ininterpreting Florida law. So a well-advised Florida court might rule that there isno merger. However, until then, it is not advisable to make or allow the sameperson to become trustee and beneficiary.

Trustee’s DutiesThe trustee’s only duty and power in a Florida land trust is to hold the title tothe property and to sign documents affecting the title when directed by the ben-eficiary or the terms of the trust. The terms of the trust usually contain the dutyto convey the property to the beneficiaries at the termination of the trust (if notconveyed earlier). The beneficiary retains all other rights and duties regardingthe property. Accordingly, the beneficiary collects rents, does maintenance, paystaxes, obtains insurance, and otherwise manages the property.

As a practical matter, the trustee often receives tax notices, solicitations from realestate brokers, offers to purchase, claims of lien, and other correspondenceaffecting the property. The trustee usually forwards the important documents tothe beneficiaries.

It is fortunate that Florida has a statute allowing a land trust without extensiveduties. In many states, the trustee must have several duties (such as collectingthe rents) or else the trust is void.


Necessary DocumentationThe two documents necessary for a land trust are:

1. a deed containing the proper language (this can be a Warranty Deedto Trustee (form 2, p.135) or Quitclaim Deed to Trustee (form 4,p.143)) and

2. the Land Trust Agreement (form 3, p.137).

If there are two or more beneficiaries (other than husband and wife), then thereshould also be an agreement between the beneficiaries spelling out their legalrelationship. That relationship can be a partnership or a joint venture, or it canbe set up as a legal entity such as a corporation or a limited liability company(LLC). A Co-Venture Agreement (form 10, p.151) and a PartnershipAgreement (form 11, p.153) are provided in Appendix D.

Trust certificates can be used for evidence of ownership. New investors may likea fancy certificate as evidence of their beneficial interest, but for active investors,the need to locate and return a certificate whenever a property is sold is moretrouble than it is worth. The Land Trust Agreement itself is adequate evi-dence of a beneficiary’s interest.

The IRS requires that it be given notice of the fiduciary relationship (a relation-ship holding the parties legally bound to each other to perform certain duties).(IRS Code, Sec. 6903(b).) (See Chapter 9 for more information on this require-ment.)

Full details for setting up a land trust are explained in detail in Chapter 4.

Necessary PartiesThe necessary parties to a Land Trust Agreement are a trustee and a beneficiary.


The beneficiary of a land trust can be a person, corporation, partnership, lim-ited partnership, limited liability company, other legal entity, or a combinationof these.

NOTE: A land trust is only a conduit for holding title. It makes no difference whothe ultimate owner is.

One Illinois case has held that the beneficiaries need not be explicitly specifiedin the trust if instructions are given to the trustee as to how to distribute theinterests. (Teeple v. Hunziker, 454 N.E.2d 1174 (1983).)

Until 1992, the trustee could only be a human being, a bank, or a speciallylicensed trust company. A corporation could not be a trustee unless it had a mil-lion dollars in assets and complied with requirements of Florida Statutes,Section 658.21. (Fla. Stat., Sec. 660.41.) However, a change in the law nowallows any corporation to serve as a land trust trustee. This change was a greathelp for land trusts. Because the possibility for environmental and other liabili-ties, many people were afraid to individually serve as trustee. Now anyone canset up a corporation to serve as trustee, and an attorney can have his or her pro-fessional association (P.A.) serve as trustee.

In 2002, the Florida legislature amended the land trust statute to clarify thatentities other than persons and corporations could be trustees. This wouldinclude limited liability companies.

Optional PartiesBesides the beneficiary and trustee, a land trust can have successor beneficiariesand directors.

A successor beneficiary is the person who becomes the owner of the propertywhen the beneficiary dies. This can be a person or any type of legal entity,including a charity.

Under traditional land trust law, putting a successor beneficiary does not requirethat the trust be formalized like a will (with witnesses). Conley v. Petersen, 25Ill.2d 271, 184 N.E.2d 888 (1962), First National Bank of Joliet v. Hampson, 88Ill.App.3d 1057, 410 N.E.2d 1109 (1980). Since the trust interests are personal


Beneficiary

Trustee

SuccessorBeneficiary

property, it is like putting POD (pay on death) on a bank account. However, instates where the land trust is not familiar, having witnesses like a will wouldmake it less likely that the trust could be challenged.

A director of a trust is a person who can direct the trustee to sell or mortgage theproperty without the beneficiaries’ direction. The director can have the soleright to direct the trustee or can have the right along with the beneficiaries. Thiscan be useful in many situations.

✪ If you want to give interests in the trust to other members of your family,but want to retain control.

✪ If you want to loan money to a property owner, but keep control withouthaving a mortgage.

✪ If you have several investors and want one of them to sign the papers.

Types of PropertyNot only land, but also mortgages, leases, and other interests in real estate can beheld in a land trust. But a land trust is not a classic living trust or inter vivos trust.These are usually trusts set up by individuals wanting to hold all of their per-sonal assets in trust to avoid probate. For example, it cannot hold stocks orbonds or other property not related to real estate. A hybrid trust can be created,incorporating the characteristics of both a living trust and a land trust. Thistrust would take the basic form of the living trust, but the deeds would be drawnup to conform to the land trust statute.

What many people do is make their living trust the beneficial owner of their landtrusts. This gives them one more layer of protection from liability. However, asexplained later, using an LLC or a corporation is even better protection.

Agency LawAgency law concerns the issue of who can legally do something that will bindanother person. Court cases involving land trusts have held that the trustee is not


Director

the agent of the beneficiary. Therefore, a trustee’s acts do not create liability forthe beneficiary. (Lawyer’s Title Guaranty Fund v. Koch, 397 So.2d 455 (1981).)However, the trustee’s acts would be binding upon the property in the trust.

Likewise, the beneficiary is not the agent of the trustee and cannot create liabil-ity against the trustee. (Gallagher & Speck v. Chicago Title & Trust Co., 238 Ill.App. 39 (1925).) However, to avoid any doubts (and litigation) in these areas,the Land Trust Agreement should specifically say that neither party is anagent of the other.

LiabilityBecause the beneficiary has the duty to manage the property, the beneficiary alsohas the liability for mismanagement. Thus, a trust is not insulation from law-suits for negligence. For extra protection, the beneficiary can be set up as acorporation or a limited liability company (LLC). An LLC would usually bebetter than a corporation as it offers more asset protection. It also is allowedmore passive income than even an S corporation.

The trustee is not personally liable for the debts, obligations, or liabilities of thetrust unless provided for in the Land Trust Agreement or unless the trusteeis in some way negligent. (Fla. Stat., Sec. 689.071(5).) Section 689.071(5) wasadded to the land trust statute to overrule a court decision that held a trusteepersonally liable. (Taylor v. Richmond’s New Approach Association, Inc., 351So.2d 1094 (1977).) A trustee is personally liable, however, for contracts, forattorney fees to which he or she agrees, and for such statutory obligations asproperty taxes. As a practical matter, the tax authority would foreclose the taxesbefore attempting to collect from the trustee personally.

In a 1990 case, a judgment was entered against a trustee (an attorney), person-ally, on a loan of $25,000 to the trust from one of the beneficiaries of thetrust.The rationale of the trial judge was that since the beneficiary who loanedthe money to the trust never signed the trust and since the trustee never kept anaccounting or performed any other fiduciary duties, the trust never existed. Thiswas clearly a wrong decision and the appeals court reversed the judgment.


Under an Illinois-type land trust, the trustee has no duty to keep records or per-form any other fiduciary functions that usually apply to trusts. Also, the courtheld that the trust was not invalidated by the fact that one beneficiary whoowned 5% of the beneficial interest did not execute the trust. (Schwartz v. Hill,562 So.2d 779 (1990).)

Personal PropertyOccasionally, a purchase of real property will include considerable personalproperty such as furniture or equipment. Although there are no cases regardingthis issue, Professor Kenoe, the authority on land trust law, says there is no inhi-bition to providing in the trust agreement for the trustee to own this personalproperty. It can be transferred to the trustee by a bill of sale. (See Kenoe on LandTrusts, Section 2.66.)


There are two basic ways to set up a land trust: to put a currently-owned prop-erty into a trust or to purchase a new property and have it deeded directly to thetrust.

Buying Property into TrustThe best way to set up a land trust is to do so when you are purchasing a pieceof property and have the seller deed the property directly to the trust. This wayyour name never appears in the public records. The other way to structure it isto buy it in your name and then deed it into trust.

The only time you would use the second way is if your lender required the prop-erty to be in your name to grant the mortgage. Whenever possible, you shouldavoid lenders with this requirement. This may mean that they do not understandland trusts. As long as the lender receives a title policy covering the mortgage anda personal guarantee of the note, the fact of the land trust should make no dif-ference to the lender. (More information is contained in the next chapter.)

Setting Up a Land Trust4

If you wish to keep your purchase price of the property secret and not let theproperty appraiser know it was sold (assessments go up when a property is sold),then you should set up the land trust with the seller as the initial beneficiary. Atthe closing, the seller will sign the trust and then deed the property into thetrust. Since it is his or her trust, documentary stamps are not paid on that deed.Then the seller immediately signs an assignment of beneficial interest to youand the correct amount of documentary stamps are put on that assignment. InFlorida, the seller usually pays the documentary stamps on the transaction so heor she should pay them on the assignment rather than the deed. The buyer canpay the 70¢ stamp tax on the deed to the trustee.

To be sure the transaction is handled this way, you should spell it out in the con-tract. A clause like this should work:

If you fail to require it in the contract, a suspicious or skittish seller might notwant to have anything to do with your trust, but if you explain the reason youare doing it and the fact that he or she immediately is taken off the trust, he orshe should consent. If not, you might offer the seller some incentive for doingit such as an extra $100. (The author gave a seller a copy of his land trust bookand a will book for agreeing at closing to go along with a trust.)

If you are buying property at some type of foreclosure sale, such as a sheriff ’sexecution sale, a tax deed sale, or a clerk’s mortgage foreclosure, you should firsthave the property deeded to a straw man and then to the trustee. (A straw manis a person used to hold title for an instant just to make sure property passeslegally.) The reason for this is that there is a legal question whether a sheriff orcourt clerk has the power to grant the trust powers needed in a land trust deed.


It is agreed between the parties that at or before closing the property

will be conveyed to a land trust of which Seller is the initial beneficiary

(with ____________ [insert buyer or seller] to pay any transfer tax on

the purchase price) and at closing Seller will convey the property to

Buyer by signing an Assignment of Beneficial Interest to Buyer (with

___________ [insert buyer or seller] to pay any transfer tax on the pur-

chase price).

So you have the sheriff ’s or clerk’s title certificate go to a straw man and thenthe straw man immediately deeds the property into the land trust with a properland trust deed containing all the needed clauses.

The straw man can be any person or entity. Often it is an attorney or his or hersecretary. It can be a corporation, but then some secrecy will be lost because any-one can check the officers and directors on the secretary of state’s website.

One simple solution is to have the land trust trustee take title merely as trusteewith no powers and then immediately deed it to him or herself with a deed con-taining the correct powers and other clauses.

The most important thing to consider when using a straw man is to be sure thathe or she has no judgments or liens of record in his or her own name. If so, thosewill immediately become claims against the property. Even if you put trusteeafter the straw man’s name, the lien could attach to (become a claim to moneyfrom) the property because of Florida Statutes, Section 689.07. This was discussedearlier in Chapter 3.

Putting Property into TrustIf you already own property and you wish to put in trust, you can just deed itto the trust. Because it has been in your name and the ownership records areopen to the public forever, you will lose some secrecy. People will always be ableto find out that you once owned that property and you deeded it to the trustee.Since you will not pay documentary stamp taxes on the transfer they will alsoknow that you put it into your own trust. (You could pay the taxes unnecessar-ily, but that is expensive, and in some cases unethical.)

Putting your existing property into trust does give you some secrecy, however,because after about a year, your name will come off of the tax rolls and you willno longer be listed as owner. While a sharp researcher can find out you onceowned the property, a quick asset search will show that you currently do notown the property.

setting up a land trust ◆ 31

Putting a Mortgage into TrustWhen a property is sold out of a land trust and the seller takes back a mortgage,the mortgage can be signed by the buyer with the land trust trustee as the mort-gagee. When preparing this mortgage, it is important to include the samepowers as would be used on a deed to trustee.

If a trust buys an existing mortgage, the mortgage would need to be assigned to thetrustee. This is done with an Assignment of Mortgage. (form 23, p.174.)

Choosing the TrusteeThe basic concept behind a trust is that you are giving your property to some-one you can trust. Because a trustee has the ability to deal with your property,you should use one who you know will not steal it or otherwise harm yourinterest in it.

A bank is probably the most trustworthy entity available, but the fees at manybanks are unreasonable. Because banks are used to dealing with active trusts thatrequire much time to manage, their charges for serving as trustee can reachthousands of dollars a year. Unless a bank agrees to set a fee designed for the landtrust that requires almost no work, you will probably not want to use one foryour trusts.

Most attorneys that charge reasonable fees and deal fairly with their clients canbe trusted to be land trust trustees. Since a land trust is a written documentspelling out all terms and transfers by deed and mortgage are public records, theonly time you would have trouble with an attorney as a land trust trustee wouldbe if the attorney was a complete fraud and was ready to lose his or her licenseand go to jail. Even then, it would be more likely that the attorney would takecash out of someone’s probate or from his or her trust account than to do some-thing dishonest with your trust property.

Relatives can often be used as trustees as long as there is a close family relation-ship and you know they will not sell or mortgage your property without yourpermission. For privacy, a same last name can be a give away, so a relative witha different last name is better.


Some investors once thought they had the perfect plan for keeping the owner-ship secret and avoiding trustee fees. They made up a fake name and deeded theproperty to that imaginary person as trustee. Unfortunately, when it came timeto sell the property, it was impossible to have the trustee’s deed notarized.

Now that corporations that are not banks can legally serve as trustees of landtrusts, there are many new possibilities. Attorneys who were afraid to serve astrustee personally can use their professional association or form a separate corpo-ration to serve as a trust company. (After many inquiries from readers of this book,the author has formed a trust company. See the Introduction, page xvi for details.)

Individuals can also form their own corporation for the sole purpose of servingas trustee. The filing fee for forming a corporation can be as low as $70 and theannual fee is $150.00.This can be lower than the annual fee of a bank or attor-ney. Also, a limited liability company (LLC) can be formed for $125 filing feeand $50 a year annual fee.

However, the big problem with using your own corporation or LLC is that thenames of the directors, managers, and registered agent are permanent publicrecords available on the website of the office of the secretary of state. One cantype in your name and find every corporation you were ever involved with. Ifyou wanted to keep your name out of the public records you would need at leastone other person to be the sole officer and director. You could be the sole share-holder since shareholders are not public record.

Naming the TrustA trust may be given any number or name. A trustee may require numbersrelated to his or her record keeping system. Very often the street number of theproperty may be used. Since two properties may have the same street number,the date of the trust is used with the number (e.g., Trust No. 1506 dated May 6,2004). If a trust name is used and business is transacted in the name of the trust,it should be registered by the beneficiaries as a fictitious name. (Fla. Stat., Sec.865.09.) This is a name being used in business that is not a person’s name orregistered company name. Forms can usually be obtained from the Clerk of theCircuit Court at your local courthouse. Since it is the beneficiary who is doingbusiness in the name of the trust, registering the fictitious name will sacrificesecrecy.



Preparing the DeedThe deed is the most important document in a land trust since it creates the trustarrangement. Even if a trust is never executed, the trustee has all the powers con-ferred in the deed. In drafting the deed, the following points are important.

✪ The deed must grant full powers to the trustee. At least those listed inthe statute should be mentioned as follows:

It is advisable to refer specifically to the statute to show the intent to cre-ate a land trust and to utilize the liberal interpretation allowed by thestatute.

Some feel that where the trustee is to execute other documents such asa condominium declaration, all such other powers should be given.Under the statute full rights of ownership vest with merely the abovewords, so this would seem unnecessary, but since the issue may be raisedby a title insurer it is advisable to add other powers to a deed when theiruse can be expected. If the trustee may at some point take back mort-gages and need to sign satisfactions or assignments, it would similarly beadvisable to add those powers.

✪ The deed must have a person or legal entity as trustee. There is a lot ofconfusion on this issue. Some people want to make the trust the granteeon the deed. A trust is not a legal person (unless it is a registered busi-ness trust) so title cannot be given to the trust itself. It must be given toa person (natural or artificial) as trustee for the trust.

To make it more likely that the deed will be indexed in the recordsunder the trust name, some people put, for example, "…to Trust No.1234, dated February 17, 2005, Acme Trust Corp, Trustee…"

"...to JOHN DOE as Trustee under Trust No. 6 dated 1/29/2004

with full power and authority either to protect, conservee, sell,

or to lease, or to encumber, or otherwise m a nage and dispose

of as provided in Florida Statutes, Section 689.071."

Some people put at the top of the deed "…to the Smith Trust whosetrustee is hereinafter mentioned…" and then put the trustee’s name inthe fine print on page two of the deed. The hope is that the clerk record-ing the deed with index only the name of the trust and not the trustee.

✪ The deed should contain a provision that the interest of the beneficiaryis personal property.

✪ The deed should provide that the trustee has no personal liability.Although the statutes relieve the trustee of liability, such language in thedeed should take care of possible exceptions that might be found in thelaw.

✪ If the trustee is a natural person (and not a corporation or LLC) thedeed should provide for a successor trustee in the event of the originaltrustee’s death. Unless a successor is provided, a court action may haveto be filed or the trust recorded. If the trustee is a corporation or LLC,which would not die like a person would, no successor trustee is needed.

✪ The deed should state that persons dealing with the trustee take title tothe property free and clear of claims of the beneficiaries.

✪ Where a deed is given by a sheriff in an execution sale, a Clerk of Courtin a tax deed sale or as a certificate of title, it is best to convey to a strawman and then to a trustee with a deed which gives powers to the trustee.Otherwise, a question may arise as to the capacity of the sheriff, or clerk,to grant trust powers.

✪ The deed can come from the beneficiary who is setting up the trust orfrom a third party selling to the trust. However, there is some questionabout the capacity of a third party to grant trust powers in another’strust. Therefore the best method is for a third party to deed the prop-erty to a trust of which he or she is the beneficiary and then to assignthe beneficial interest to the intended beneficiary.

✪ The deed must comply with state law as to form and formalities. Forexample two witnesses are required, and there must be a blank 3 inchsquare in the upper right corner. The deed can be on 11 inch or 14 inchpaper.


Preparing the TrustUnder Florida Statutes, Section 689.05, a trust must be in writing. It should beexecuted prior to the deed, but if not, it is still valid if executed later.

✪ It should provide that it is being established under Florida Statutes,Section 689.071.

✪ It should provide for a duty of the trustee to deal with the property atthe direction of beneficiaries and to convey the property to the benefi-ciaries at the end of twenty years. This term is chosen because of theRule Against Perpetuities, but it can be extended whenever necessary.(The Rule Against Perpetuities states that future owners of propertymust be able to be determined within twenty years.)

✪ It should state that neither party is the agent of the other.

✪ It should allow compliance with Florida’s RICO law.

✪ It should provide for the trustee’s resignation and a successor trustee.

✪ It should clearly eliminate personal liability on the part of the trustee.

✪ It should provide that interests of the beneficiaries are personal property.

✪ It should clearly spell out the interests of the beneficiaries. This is usu-ally designated as percentages. To avoid probate, ownership can be injoint tenancy and provide for successor beneficiaries who acquire theirinterests upon the deaths of the existing beneficiaries. To designate jointtenancy the wording should include "...as joint tenants with full rightsof survivorship and not as tenants in common."

There are many other clauses that aid in the operation of the trust and elimi-nate problems which may arise. The Land Trust Agreement usually used bythe author is included in Appendix D of this book. (form 3, p.137.)


When designating a person who will be beneficiary after the death of the origi-nal beneficiary, it is important that the successor not be given a present vestedinterest. It must be made clear that the successor beneficiary has no interest untilthe death of the original beneficiary, that the successor beneficiary does not haveto consent to any actions regarding the trust and that the successor beneficiarycan be changed at any time. The following wording is suggested:

A Land Trust Data Sheet (form 1, p.133) is often completed by the benefi-ciaries. It is used by the trustee to prepare the trust and other forms such as theReturn Transfers of Interest in Real Property (DR-219). (form 24,p.175.)

Preparing Trust CertificatesThe use of certificates is optional and based on the preference of the parties.Most beneficiaries prefer some tangible evidence of their interest that they canput with their deeds and other valuables. It can be shown to loan officers and ismore easily understood by a personal representative if the beneficiary dies. Atrust certificate can be a plain piece of paper with the interest of the beneficiaryspelled out or a fancier form. A Trust Participation Certificate (form 20,p.171) is included in this book.


____________________________, ________% of entire beneficial

(current beneficiary)

interest hereunder, with full power to assign or deal with all of the rights

and interests of the beneficial interest. Upon the death of the said bene-

ficiary during the existence of this trust, and provided that the beneficial

interest shall not have been previously assigned or otherwise disposed

of, then the interest hereunder shall vest in, and be owned

by:________________________________

(successor beneficiary)

For those who are buying and selling properties in their trusts, certificates maybe more trouble than they are worth, since they must be located and forwardedto the trustee for each transaction. Legally, the Land Trust Agreement(form 3, p.137), itself, is adequate evidence of the trust.

Preparing the Beneficiaries’ AgreementA beneficiaries’ agreement is necessary when two or more individuals own inter-ests in the trusts. If a married couple owns the entire beneficial interest in anestate by the entireties, then it would not be necessary. To eliminate any possibleconflicts, it is preferable to have an elaborate agreement between the parties. Butat a minimum, it should contain provisions to avoid double taxation and secu-rities law violations. This can be done by providing for equal control ofmanagement and restriction on the sale of a beneficiary’s interest. Other usefulprovisions would provide solutions for:

✪ deadlocks between beneficiaries;

✪ contributions of capital;

✪ default by a beneficiary;

✪ death of a beneficiary; and,

✪ withdrawal by a beneficiary.

In many cases, the agreement can be either a Partnership Agreement(form 11, p.153) or a Co-Venture Agreement (form 10, p.151). An expla-nation of the rights and liabilities of partnerships is beyond the scope of thisbook, but the main difference is that partners are agents for each other and liablefor each other's actions in the scope of partnership business. As a result, theymust file a partnership tax return.

Form 10 in this book is an example of a simple Co-Venture Agreement.(p.151.) Form 11 is a more lengthy Partnership Agreement. (p.153.) It isalso possible to create a lengthy Co-Venture Agreement or a simple


Partnership Agreement. In a case in Miami, a court held that a partnershipagreement among several beneficiaries imposed personal liability on them for alease entered into by the trustee. In a footnote, the court seems to describe thetrust as one under Florida Statutes, Section 689.07, but then it cited FloridaStatutes, Section 689.071. Therefore it is not clear why such liability shouldapply in a land trust. In order to guard against this happening again, a benefi-ciary agreement should mention that the beneficiaries are not agreeing to bepersonally liable for the debts of the trustee. (First D.M.V., Inc. v. Amster, 545So.2d 936 (1989).)

Occasionally, beneficiaries will want to give each other rights of first refusal tobuy each other’s interests. These are valid and are very useful in many situations.A Florida case on the subject has held that when there is such an agreement, thebeneficiary wishing to exercise the right must strictly comply with the terms.(Green v. First American Bank and Trust, Trustee, et al., 511 So.2d 569 (1987).)The beneficiary made an offer matching a third party’s offer except for the bro-ker’s commission. The court held that this did not comply with the agreement,which said that the offer must match with no exceptions.

Often beneficiaries provide each other with options to purchase each other’sinterests in the event of death or withdrawal. Such agreements must be carefullydrafted. In one case the option failed to provide for credit for the mortgage bal-ance or for apportionment of the fractional interest in the property and thecourt held that the remaining partner had to pay the full value stated. (Santo v.Santo, 497 N.E.2d 492, 146 Ill.App.3d 774 (1986).)

Due-on-Sale ClausesAs a general rule, a land trust cannot be used to avoid a valid, existing due-on-sale clause contained in a mortgage. A due on sale clause requires that the lenderbe paid in full in the event a mortgaged property is transferred to another party.In an Illinois case, the court held that a conveyance to a trustee for the originalowner did violate a due-on-sale clause that forbid the transfer of any interest inthe property. (Damen Savings v. Heritage Standard Bank, 431 N.E.2d 34(1982).)

However, the federal Garn-St. Germain Act provides that a lender cannot call aloan due to a transfer into an inter vivos trust in which the borrower is and remains


a beneficiary and which does not relate to a transfer of rights of occupancy in theproperty. Therefore, lenders are used to allowing properties to be put into trusts.As long as there is no indication to the lender that the beneficiary has changed,there is usually no problem.

Since putting a property into trust may also involve a subsequent change ofoccupancy, it would be prudent to request a letter from the lender stating thatputting the property into trust will not cause an acceleration (full payment dueimmediately) of the loan.

If the lender declines to send such a letter, one can send a letter to the lenderstating that unless we hear from you to the contrary we will assume that putting ourproperty into trust will not violate the due-on-sale clause.

The prudent lender will require notification from the trustee of a change of ben-eficiary. If the lender does not, as a practical matter, once a property has beenconveyed to a land trust the beneficial interest can be transferred without thelender finding out.

One of the nation’s largest lenders, Countrywide Home Loans, has a form let-ter they send to borrowers who ask about putting a property into a trust (FormTRUST 174 12042002). It says that if your transfer qualifies under the Garn-St. Germain Act, then it is not necessary for you to obtain Countrywide’s consent totransfer your property into the trust, nor will Countrywide exercise its right to accel-erate your loan. However, it then asks that a transfer form be filled out (FormTRUST 579 06/28/2003) and submitted with a $45 fee. However, it does sayit reserves the right to accelerate the loan if it learns that the trust fails to qual-ify under the Act.

If a property is purchased by a trustee and the mortgage signed by the trusteecontains a due-on-sale clause that only covers conveyances of the title, then atransfer of the beneficial interest would not violate the due-on-sale clause.(Wachta v. First Federal, 430 N.E.2d 708 (1981).)

A question occasionally comes up as to whether violating a due-on-sale clause isillegal or unethical. This issue came before the U.S. Supreme Court in 1995.(Field v. Mans, 516 U.S. 59). This was a bankruptcy case in which a creditorsaid it was fraud for the debtor to ask permission to transfer the property afterit was already transferred. The Court said that even though the creditor couldhave easily checked the records, this could be considered misleading and fraud-


ulent. In a concurring opinion, Justice Ginsburg quoted a conversation theCourt had with the creditor’s lawyer in which he admitted that if the debtornever said anything when he violated the due-on-sale clause, there would havebeen no problem. While this concurring opinion is not binding law, it indicatesthat at least one justice of the United States Supreme Court feels that violatinga due-on-sale clause without saying anything to the lender is not fraudulent.

The change of a trustee under an installment contract with a due-on-sale clausedid not trigger acceleration in one case. (Conner v. First National Bank, 439N.E.2d 122 (1982).) An installment contract is an agreement whereby a personbuys a property but does not get the deed until all payments are made. It issometimes called a land contract.

Obtaining InsuranceInsurance agents are often confused by land trust arrangments. Although thetitle to the property is in the trustee, the duty to manage it is in the beneficiarywho needs the protection from liability. And for fire coverage, the beneficiary isthe party in interest, but the trustee has the title.

The basis for liability for injury on the premises is the duty to maintain theproperty in safe condition. Because the trust does not place this duty on thetrustee there is no basis for liability against a trustee. There are many Illinoiscases supporting the position that the trustee has no liability for injuries on thepremises. (Fields v. Indiana Ave. Apts, Inc., 196 N.E.2d 485, 47 Ill.App.2d 55(1964).) Therefore the party in need of liability protection is the beneficiary.However, it is advisable to also list the trustee as an additional insured to avoidneedless litigation.

One way to keep the beneficiaries’ names off the policy is to have it issued inthe name of the trustee and the beneficiaries of the trust as their interests appear.This way you can change beneficiaries without changing the policy.

Because the trustee has title to the property, it is necessary to have the trustee’sname on the hazard insurance policy. To avoid confusion for the insurance agentor to be sure of getting the homeowner rate, both names can be listed as insuredparties on the policy. However, it should be kept in mind, that this may causesome loss of secrecy if the policy is disclosed to others (such as a mortgagee).


Multiple PropertiesAny number of properties can be put into one trust, but more benefits areobtained if each property is in a separate trust. With several properties in onetrust, a judgment against one property could be a lien against the others, and itwould not be easy to sell or option the beneficial interest for just one propertyin a large trust.

The same trustee can be used for any number of trusts, as long as each trust hasa different name or number.

Sale and Mortgage BackWhen a property is sold out of a trust it is possible for the trust to take back amortgage on the property even if the mortgage is the only interest remaining inthe trust.There is not as much reason to have separate trusts for mortgages sincethere is not the risk of liability from them, so many investors have one trust tohold all their mortgages.

Other Interests in LandThe statute allowing the creation of land trusts applies to any interest in realproperty in this state, including but not limited to a leasehold or mortgagee interest.Therefore a land trust could be used for other interests such as agreements fordeed, options, and time shares.

Out-of-State PropertyClients often ask if they can put their out-of-state property in a Florida landtrust. Because the law that allows the Florida land trust is a Florida statute, itonly applies to land in the state of Florida. Unfortunately, not many states havelaws allowing land trusts. However, a committee of the American Bar


Association is proposing a uniform land trust law that can be adopted in allstates. Hopefully, in a few years, more states will allow land trusts.

For now, there are some states that have land trust statutes and a few that havecourt opinions that allow land trusts. The following are those that appear toallow typical land trusts as of the time of publication, along with the statutesauthorizing them. For a final determination of whether the law allows a trust tosuit your needs you should check with an attorney with experience in the juris-diction you are concerned with.

Hawaii Haw. Rev. Stat. Ch 558

Illinois 765 ILCS 430/1 and 765 ILCS 405/1

Indiana Ind. Code. Sec. 30-4-2-13

North Dakota N.D. Cent. Code. Sec. 59-03-02

Virginia Va. Code. Ann. Sec. 55-17.1

The following states have court opinions that have recognized land trusts:

Arizona Land Title & Trust v. Brannon, 103 Ariz.272, 440 P.2d 105 (1965)

Arkansas Randolph v. Reed, 129 Ark. 485, 196S.W. 133 (1917)

California In re Tutules Estate, 204 Ca. 2d 481, 22Cal. Rptr. 427 (1962)

Trusts similar to land trusts may be used in many other states, but there areadditional requirements that make them somewhat different from pure landtrusts. For example, in some states, the trustee must manage the property or col-lect the rents in order for the trust to be valid. (For additional information onlandtrusts in other states, see Land Trust for Privacy and Profit by Mark Warda,Galt Press.)


Power of DirectionOne way to simplify management of a property with multiple owners is to granta power of direction to one person. In most cases, all beneficiaries of a trust mustsign a Directions to Trustee (form 5, p.145) to instruct the trustee to takeaction. But with a power of direction vested in one or more persons the direc-tion to trustee can be signed by them alone. This power is usually included inthe trust or an Amendment to Trust. (form 26, p.183.)

This is a sample clause allowing a director:

In some cases you might want to allow the beneficiaries or the director to havethe power. But in other cases, you might give the sole power of direction to thedirector. In such case you might use the following clause.

It is also possible to vest the power in a person who is not a beneficiary. (In reEstate of Schaaf, 312 N.E.2d 348, 19 Ill.App.3d 662 (1974).) However, whenless than all of the beneficiaries control the power of direction, the issue comesup of whether the arrangement involves a security. Be sure to consider the issuesin Chapter 11 any time the power of direction is vested in anyone other than allof the beneficiaries.

A power of direction can be used to protect a financial interest in a property. Forexample, if an investor wishes to provide money to a homeowner in default ona mortgage, and then look for a buyer, he or she can have the homeowner putthe property into a trust in which the homeowner is 100% beneficiary and theinvestor has power of direction. This way he or she can control the propertywithout taking title or paying transfer taxes on his or her interest.


POWER OF DIRECTION. _______________________ shall have fullpower of direction on this trust and Trustee shall follow any directions ofsaid director without needing to contact the beneficiaries.

POWER OF DIRECTION. ___________________ shall have solepower of direction on this trust and Trustee shall follow only the directionsof said director, even if the beneficiaries shall direct otherwise.

Foreign BeneficiariesIn recent years, the concern over increased foreign ownership of U.S. real prop-erty has resulted in disclosure requirements for properties held in land trusts.The laws that apply in this area are the International Investment Survey Act of1976, the Agricultural Foreign Investment Disclosure Act of 1978, and Florida’sBusiness Corporation Act.

The International Investment Survey Act of 1976 requires various types of personsinvolved with real estate transactions to file reports with the federal government.It requires initial and annual reports and the penalties for violations can includeimprisonment and fines of up to $10,000. The reports are confidential and arenot available to the public. The rules are complex and are explained in the Codeof Federal Regulations., Title 15, Sections 806.1 through 806.18.

The Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA) applies onlyto agricultural land. The reports are public information so foreign persons whowish confidentiality should not invest in U.S. agricultural land. The rules forAFIDA are located at Code of Federal Regulations, Title 7, beginning withSections 781.

The Florida Business Corporation Act (Fla. Stat., Ch. 607) requires foreign corpo-rations that are transacting business in the state must register and have a localresident agent (Fla. Stat., Sec. 607.1501(1)). Foreign corporations are all corpo-rations that are not incorporated in Florida. However, a corporation that merelyowns property in the state is not considered to be carrying on a business (Fla.Stat., Sec. 607.1501(2)(m)). (Trusts with foreign beneficiaries must also complywith the Florida RICO Act as explained in Chapter 12.)

Because foreign investors may be concerned about political persecution athome, they often wish to avoid disclosure of their identity in any way. Anyonewith such concerns should work with an attorney specializing in foreign invest-ment in real estate.


InternationalInvestmentSurvey Act

AgriculturalForeign

InvestmentDisclosure Act

FloridaBusiness

CorporationAct

NotaryThere is no law requiring notarization of a Land Trust Agreement (form 3,p.137), but because it involves an interest in real estate and may some day needto be recorded for some unforeseen reason, it is often witnessed and notarized.

Form DR-219Whenever a deed is recorded, the Florida Department of Revenue requires thatForm DR-219 be completed. This form, titled Return for Tranfers ofInterest in Real Property in Real Property (form 24, p.175), containsthe names and addresses of the parties, the type of instrument, transfer price,balance on the mortgage and other information used to determine the amountof documentary stamp tax due. The recorders will not record a deed unless thisform has been fully completed. You can either use a carbonless version of theform available from the recorder’s office, or you can download the form in pdfformat from the Department of Revenue’s website, type the information intothe form, and print it out from your computer.

Whenever a property is transferred between a beneficiary and his or her owntrust there is no tax due except 70¢ for the basic consideration of the deed. Besure to list "0" as the transfer price under question 5. Under question 8 youshould check "yes" special circumstances. The author usually writes "GrantorTrust" nearby to clarify.

Notice to the IRSAs explained in Chapter 9, notice should be sent to the Internal Revenue Servicewhen a trust is formed and a fiduciary relationship begins.


The financing of a land trust can be structured in two ways: with a mortgage ofthe real estate signed by the trustee or a pledge of the beneficial interest signedby the beneficiaries.

Mortgage of the Real EstateWhen property in a land trust is to be mortgaged, the trustee signs the mort-gage document, and usually, the beneficiary signs the Promissory Note.(form 14, p.161.) However, since a copy of the note may be recorded along withthe mortgage and this may cause a loss of secrecy, the note may be signed by thetrustee. Because the copy of the note that is attached to the mortgage is notindexed by the recording clerks, including such a note with the mortgage is nota big risk unless a very thorough asset investigation is expected.

A wise mortgagee will require a personal Guaranty of Promissory Note byBeneficiaries. (form 15, p.162.) However, a wise purchaser will draft his or herpurchase contract so only the trustee signs the note with no liability on behalf ofthe beneficiary.

Financing Propertyin a Land Trust

5

Although the land trust statute prevents personal liability of the trustee unlessspecifically provided in the documents, it is always wise to add a clause to thenote and mortgage freeing the trustee from liability. In a tough case, a courtmight interpret standard mortgage language as creating personal liability. Atrustee who executes documents on a regular basis might want to prepare a rub-ber stamp as described in Chapter 14. At a minimum, the typed name of thetrustee under his or her signature should include the words as trustee of trust[name of trust] and not individually.

Even if a beneficiary does not sign the note personally, he or she may be heldliable if fraud and deceit can be proven. (Lake Shore Savings & Loan Assn. v.American National Bank & Trust Co., 234 N.E.2d 418, 91 Ill.App.2d 143(1968).) But a beneficiary will not be held liable merely based upon the fact thathe directed the trustee to sign the note. (Conkling v. McIntosh, 58 N.E.2d 304,324 Ill.App. 292 (1944).)

A mortgage signed by a trustee of a land trust can be on any standard form, butthe name of the trustee should be followed by the exact designation of the trustand powers as cited on the deed, such as ...Trustee under Trustee No. 6 dated1/29/04 with full power and authority either to protect, conserve, sell, or to lease, orto encumber, or otherwise manage and dispose of as provided in Florida Statutes,Section 689.071.

Pledge of the Beneficial InterestAn alternative to mortgaging the real estate is to pledge the beneficial interest.This is accomplished by use of a Promissory Note, a ConditionalAssignment of Beneficial Interest, a Security Agreement (chattelmortgage) and a UCC-1 Financing Statement under the UniformCommercial Code (UCC) (Florida Statutes, Chapter 679). The PromissoryNote (form 14, p.161) documents the indebtedness. The ConditionalAssignment of Beneficial Interest (form 16, p.163) gives the lender aclaim on the beneficial interest. The Security Agreement (form 17, p.164)and State of Florida UCC-1 Financing Statement (form 18, p.165) pro-tect that interest if the lender must take the beneficial interest because of failureto pay. An advantage to the creditor in this situation is that he should not haveto go through a costly and time-consuming foreclosure action to get the prop-erty. He or she should be able to quickly seize the property as provided in


Florida Statutes, Section 679.304 and the borrower should have no right ofredemption. A procedure like this was used successfully in one case. (Ferraro v.Parker, 229 So.2d 621 (1969).)

Under Illinois and Florida law, a transaction that pledges real estate as collateralfor a loan must be treated like a mortgage and foreclosed like a mortgage. (Fla.Stat., Sec. 697.01.) A 1922 Illinois case, held that a land development arrange-ment executed simultaneously with a trust was to be treated like a mortgage.(Devoigne v. Chicago Title & Trust Co., 136 N.E. 498.) But in 1957, the courtheld in another case that where the trust was created earlier and not as part ofthe financing arrangement, there was no mortgage and no right of redemption.(Horney v. Hayes, 142 N.E.2d 94 (1957).) In more recent cases, Illinois courtshave held that factors that would indicate that an equitable mortgage exists are:

✪ creation of the trust simultaneous with the loan;

✪ creation of the trust for the purpose of the financing arrangement;

✪ requirement in the loan documents that the property be sold upondefault; and,

✪ inclusion of more than just the beneficial interest in the pledge.

Two other Illinois cases on the issue are Melrose Park National Bank v. MelrosePark National Bank, Trustee, 462 N.E.2d 741 (1984) and Commercial NationalBank of Chicago v. Hazel Manor Condominiums, Inc., 487 N.E.2d 1145 (1985).

Unfortunately, a recent case has confused the law regarding foreclosure of ben-eficial interests under the UCC. (Kirkland v. Miller, 702 So.2d 620 (1997).) Abeneficial interest was pledged and the trial court allowed a UCC foreclosure,but the defendant appealed and the appeals court said that the plaintiff had togo through a mortgage foreclosure to get the property back. However, this caseseems to be one in which the court was more concerned with getting a result itwanted than following the law. The defendant was a poor minority person los-ing her home, and the plaintiff was a corporation.

The fact that the court did not even understand the case is clear since it ruledthat this was not a valid land trust. But actually the validity of the land trust(which was created four months earlier) was not the issue in the case. The issuewas whether the sale of the beneficial interest secured by a collateral securityagreement should be treated like a mortgage or foreclosed under the UCC.

financing property in a land trust ◆ 49

In a similar case, a court might rule the same way. But if the parties were moreequal, the UCC foreclosure would be more likely to be successful. (See Chapter 7for more information on foreclosing a beneficial interest.)

In 1986, a different appeals court ruled that where a valid land trust has beencreated the interest is personal property and as such may be foreclosed under theUniform Commercial Code (Florida Statutes Chapter 679). But in this case, thecourt noted that the borrower neither alleged nor proved that the transactionwas in essence a mortgage. (Magnuson v. Jones, 491 So.2d 1315 (1986).)

In Florida, it is important that a State of Florida UCC-1 FinancingStatement (form 18, p.165) be filed with the Secretary of State in Tallahasseeto perfect the security interest (Fla. Stat., Sec. 679.302) (In re Povia, 224 B.R.209 (1998).)

NOTE: This differs from Illinois where their Uniform Commercial Code is wordeddifferently and filing is not necessary.

To secure a loan in this manner the beneficiary should execute thePromissory Note, Conditional Assignment of Beneficial Interest,Security Agreement (chattel mortgage), and UCC-1.

It is important to be sure that all beneficial interests are included and that noprevious pledges or assignments have been made. This can be done with an affi-davit or estoppel certificate from the beneficiaries and the trustee stating thatthere are no other interests.

Where the beneficiary is an artificial entity such as a corporation or limited part-nership the lender should be sure that the entity’s registration is current and thatthe proper officers have authorized the transaction.

In foreclosing a beneficial interest under Florida Statutes, Chapter 679, it wouldnot be necessary to go to court since the statute allows a private, non-judicialsale of the collateral. If the subject property is a residence and the former bene-ficiary lives there, court action may be necessary to get the former beneficiaryout. This would be an eviction if a landlord/tenant relationship could be estab-lished or an ejectment if not.

To release a UCC-1 Financing Statement, use State of Florida UCC-3Uniform Commercial Financing Statement Amendment. (form 25,p.179.)


Questions come up during the life of a land trust as to who the proper party isto execute documents and how to deal with changed situations.

Leasing the PremisesA lease of the premises can, in most cases, be executed by either the trustee orthe beneficiary. This is because the trustee is the actual titleholder and the trustgrants the beneficiary the power to manage the property. (Southeast VillageAssociates v. Health Management Association, 416 N.E.2d 325 (1980).) The doc-trine of estoppel would bar a tenant from contesting the beneficiary’s right tosign a lease of the property. (Avila South Condo Assoc., Inc. v. Kappa Corp., 347So.2d 599 (1977).) However, the lease must be drafted in the name of the partysigning. In a case where a lease was drawn up in a trustee’s name and signed bythe beneficiary as agent, the lease was held unenforceable. (Feinberg v. The GreatAtlantic and Pacific Tea Co., 266 N.E.2d 401 (1970).)

One way around this would be for the trustee to sign a power of attorney thatspecifically gives the beneficiary the power to sign a lease. But it is much easierfor the beneficiary to sign leases in his or her own name as a property manager.

Operating a Land Trust6

There would not be a problem with real estate brokerage laws since the benefi-ciary is the actual owner. Using a corporation or LLC as landlord would giveextra insulation to the beneficiary.

If exculpatory language is used in a lease to protect the trustee from liability, itshould also include the beneficiaries. In an Illinois case, exculpatory languageprotecting a trustee was held not to be applicable to the beneficiaries who werelater brought into the case. (Levi v. Adkay Heating & Cooling Corp., 274 N.E.2d650, 1 Ill.App.3d 509 (1971).)

Amending the TrustBecause the beneficiaries have the power to terminate the trust at any time andstart a new trust, beneficiaries have been allowed by courts to freely amend thetrust at any time. This is true even when no power is given in the trust docu-ment, as long as there is not a specific prohibition. The amendment wouldusually only be effective when signed by all beneficiaries and accepted by thetrustee. As with the trust itself, no witnesses or notary are required for anamendment.

If a party takes over another person’s beneficial interest in a trust or a new trusteetakes over a trust, either of them may wish to make major changes to the trustinstrument. This can be done by a simple Amendment to Trust. (form 26,p.183.) If the changes are substantial, then the easiest way to do this is to exe-cute an amendment stating that all of the terms of the trust are amended to theattached form and attach an entire new trust agreement.

Changing Successor BeneficiariesA beneficiary can change the successor beneficiary at any time. To do so, anamendment to trust should be executed stating the change. As long as the pre-vious successor beneficiary was not given a vested interest, no approval is neededfrom such previous successor beneficiary.


Death of a BeneficiaryIf a land trust is drafted with a successor beneficiary properly designated, thenimmediately upon the death of the beneficiary, the successor would own thebeneficial interest. The trustee would normally require a certified death certifi-cate before complying with instructions of a successor beneficiary.

If no successor is named in the trust, the interest would pass to the estate of thebeneficiary. The Land Trust Agreement (form 3, p.137) form in this bookspecifies that it passes under the beneficiary’s will and not under the statutes thatname heirs. If you use a corporation, LLC, or living trust as beneficiary, you donot need a successor since these entities do not die.

There are two ways that claims may exist against a successor beneficiary’s inter-est in a land trust. If the estate of the beneficiary was subject to federal estatetaxes, the beneficiary might be called upon to contribute to payment of thosetaxes. Also, if the beneficiary did not leave enough property to a survivingspouse then the spouse could claim property in the trust.

Changing TrusteesIt is occasionally necessary to convey the property to a successor trustee, such asat the resignation of a trustee. A question may arise as to the power of a trusteeto confer trust powers on another. However, since the land trust statute statesthat any conveyance with the proper language does confer such powers, and thestatute is to be liberally interpreted, there should be no problems with one trusteeconveying to a successor trustee. In Illinois such transfers have been consideredeffective. (Connor v. First National Bank and Trust Co., 439 N.E.2d 122, 108Ill.App.3d 534 (1982).) A recent Illinois statute specifically allows them.

If the trustee uses a warranty deed to convey the property to a successor trustee,then the protection provided by the original title insurance should protect thenew trustee through the warranty of title. Bank trust departments prefer to signtrustee’s deeds. However, a land trust trustee should not have trouble signing awarranty deed as long as the warranty is given as trustee and not personally.

operating a land trust ◆ 53

Death of a TrusteeBecause the deed is the only instrument of record for a land trust, there may bea problem proving who the successor trustee is in the event the trustee should die.To avoid such a situation, the successor trustee can be mentioned in the deedalong with a statement to the effect that the recording of a death certificate of thetrustee along with an affidavit of acceptance by the successor shall be sufficientto pass title to the successor. Title companies have accepted this as sufficient.

If a deed has already been of record without naming a successor and the trusteedies, it may be possible to put of record an affidavit citing only the clause of thetrust naming a successor, rather than recording the trust. Check with your titleinsurance underwriter to see what would be required to make the title insurable.If one company requires the entire trust to be recorded and you would prefer thatit not be, check with other underwriters who may be more flexible.

If it appears that the Land Trust Agreement will need to be placed of record,one option is to place it in the court file of the probate of the deceased trustee’sestate. Since such files are not as accessible as the Official Records of the county,this method may preserve some secrecy.

Governmental LiensBecause land trusts are relatively new to Florida, government bureaucrats areoften confused by them. Liens filed against a trustee rarely contain the properidentification of the trust involved. Trustees must be vigilant to avoid blanketliens that may cause title problems for several properties. It is also possible forsuch liens to be filed against a trustee personally by someone who does notunderstand the term trustee. Such liens can be municipal code violation liens,Department of Revenue liens, fire district liens, tangible property tax warrants,or any similar liens.

If any type of preliminary notice to file a lien is received by a trustee, it should,of course, be sent to the beneficiaries. If the notice does not contain the properdesignation of the exact trust to which it applies, such as, trustee under trustNo. 123, dated January 1, 2004… then a letter should be sent to the issuing


authority stating that "there is no such entity as ‘John Smith, Tr,’ my correct posi-tion is John Smith, Trustee under trust No. 123, dated January 1, 2004."

An erroneous lien damaging the trustee’s credit may be slanderous. If it affectsproperty owned by other parties, it may be slander of title. If a lien has been filederroneously without notice, then the trustee should request or demand that itbe corrected.

Florida’s tort claims statute (Fla. Stat., Sec. 768.28) requires that a person plan-ning to sue the state or a division of the state such as a municipality, must firstgive notice. If the trustee sends proper notice that he or she intends to sue a sub-division of the state, that is often enough to get some action.

Terminating the TrustThe termination of the trust usually takes place when the last piece of propertyhas been conveyed out of the trust. No specific action or documentation is nec-essary as the trust ceases to exist when there is no property in it. However, theIRS requires that it be given notice by a trustee when a fiduciary capacity ends.(see Chapter 9.)

When a seller of property owned by a land trust sells it and takes back financ-ing, it is usual to have the trust hold the mortgage. This preserves the secrecy,avoids probate, and retains many of the original benefits of the land trust. Whileeach piece of real property should be in its own land trust, many mortgages canbe in one land trust since the holding of a mortgage usually does not involverisk. However, if there is some risk, such as problems on a property over whicha buyer may sue the seller, then separate trusts could protect other mortgagesfrom claims involving that property.

operating a land trust ◆ 55

Because litigation has strict rules of procedure and land trusts are different frommany other forms of ownership, simple errors in litigating land trust issues cancause loss of the case.

Parties to the LawsuitThe evolution of the land trust has required an evolution of legal theories as towho is the proper party in litigation involving land trust property. The generalrule in Illinois is that both parties are usually necessary since the trustee has legaland equitable title and the beneficiaries have the ultimate interest. However inFlorida, the trustee has the power to prosecute or defend actions, claims or pro-ceedings for the protection of trust assets and of the trustee in the performance of his[or her] duties so the beneficiaries’ presence as a party may not always be neces-sary. (Fla. Stat., Sec. 737.402(2)(z).)

In a mortgage foreclosure suit, it was confirmed that the beneficiaries were notnecessary parties. (Cowen v. Knott, 252 So.2d 400 (1971).) (This ruling wasmade under Florida Rule of Civil Procedure 1.210(c) which was replaced by

Litigation Involving Land Trusts

7

Florida Statutes Section 737.402(2)(z).) But because the trustee failed to file adefense, the beneficiaries were allowed to defend it.

In a malpractice suit by a trustee against an attorney for failure to see that theland trust received the proper amount of land contracted for, the court held thatthe beneficiaries were the proper parties and the complaint could be amendedto add the beneficiaries. (Datwani v. Netsch, 562 So.2d 721 (Fla. 3DCA 1990).)

Therefore, it appears that when dealing solely with the trust property, the ben-eficiaries need not be joined. However, when dealing with the interests of thebeneficiaries as such, or when seeking to bind the beneficiaries personally, theymust be joined in any litigation.

For actions in federal court, it appears that Rule 19(b) of the Federal Rules ofCivil Procedure may require adding beneficiaries as parties to a suit where theirinterests are at stake. (Tick v. Cohen, 787 F.2d 1490 (1986).)

Identification of the TrusteeIn suits involving a land trustee, the trustee should be identified by name, trustnumber (or name), and trust date in both the caption and the body of the plead-ings. Thus a correct identification would read, John Smith, Trustee under TrustNo. 1234 dated January 29, 2004. A common mistake is to merely name JohnSmith, Trustee as the party. This can cause serious problems with the title toother properties held in trust, even if unrelated to the litigation. If a trustee isserved with papers not naming him or her properly, he or she should explainthis to opposing counsel and, if necessary, file a motion with the court to cor-rect the error.

A judgment filed against a trustee can be amended at a later time to correctlydesignate the trust against which it applies. (Johnson v. First National Bank ofPark Ridge, 463 N.E.2d 859, 123 Ill.App.3d 823 (1984).) This would beaccomplished by a Motion to Amend Judgment filed in the original case.


Joining the Trustee IndividuallyIn suits against the trust, plaintiffs, such as mortgagees, occasionally join thetrustee individually to attempt to wipe out any possible interest he or she mighthold. While this would be necessary for a trust under Florida Statutes, Section689.07, it is not necessary for a land trust, since the trustee does not have anypersonal interest in the property. The land trust statute clearly states that allrights of ownership are vested in the trustee as a trustee.

Example: In a mortgage foreclosure suit (involving a trust of which theauthor was trustee), the author was joined individually and astrustee. The plaintiff ’s attorney made the additional error ofdemanding a deficiency judgment against all defendants. Onerationale used by the attorney was that if the trustee lived in theproperty (which he did not) there might be some individual inter-est that needed to be foreclosed.

However, this did not provide any reason for demanding a deficiencyjudgment personally against the trustee. The Circuit Court assessedattorney’s fees against the plaintiff under Florida Statutes, Section57.105 for lack of a justiciable issue. (Ridgewood Savings Bank v.Warda, Pinellas County Circuit Court Case No. 84-15780-7 (1985).)

EvictionsSome authorities suggest that both the trustee and beneficiary be named plain-tiff in an eviction action, however, the proper party to the lawsuit would be theparty named as the landlord on the lease. As explained earlier either party canbe listed as landlord on a lease. A landlord can represent him or herself in courtor be represented by an attorney, but no one else can represent the landlord incourt.

In Florida the tenant should not be able to contest the right of a beneficiary whosigned this lease to bring an eviction action, even though he or she does not havetitle to the property. (Avila South Condo Assoc., Inc. v. Kappa Corp., 347 So.2d599 (1977).)

litigation involving land trusts ◆ 59

BankruptcyThe courts have ruled both ways in deciding whether a land trust can file bank-ruptcy. Early cases said it could file. (Mayo v. Barnett Bank of Pensacola, 448 F.Supp. 250 (1978), In re Matter of Maidman, 2 B.R. 569 (1980).) Then afteramendments to the bankruptcy law indicated that the beneficiary, not the trust,should file, bankruptcy courts rejected the cases. (In re Dolton Lodge Trust No.35188, 22 B.R. 918 (1982).) This was thought to be the correct rule becausethe land trust is not an active business; it is a conduit for holding property. Twocharacteristics of a business trust that is allowed to file bankruptcy are that it isregistered with the secretary of state and that it files a tax return. Land trusts doneither of these.

However, three recent Middle District of Florida bankruptcy cases considered aland trust a business trust. (In re Star Trust, 237 B.R. 827 (1999), In re MetroPalms I Trust, 153 B.R. 922, (1993), and In re Arehart, 52 B.R. 308 (1985).)These may just be erroneous decisions, but a party who needs protection and isin the Middle District of Florida, might want to rely on these cases.

The author knows of a trustee who filed a bankruptcy for a land trust, whichimmediately stopped a pending foreclosure action, though the bankruptcy waslater dismissed. However, an attorney who knowingly does this could be subjectto sanctions (penalties).

If a beneficiary files personal bankruptcy, then his or her interest in a land trustis property that may be liquidated by the bankruptcy trustee.

Tort ActionsTort actions against the trust are based upon breach of a duty to maintain theproperty. In a land trust, that duty is held by the beneficiaries. Therefore,actions are proper against only the beneficiaries. A long line of Illinois caseshas held a trustee immune from personal liability in such actions. (Fields v.Indiana Ave. Apts, Inc., 196 N.E.2d 485, 47 Ill.App.2d 55 (1964).) In Florida,a trustee is personally liable only if he or she is personally at fault. (Fla. Stat.,Sec. 737.306(1)(b).)


However, since the names of the beneficiaries are not public record, the suitmust initially be filed against the trustee. The identity of the beneficiaries is thenlearned from the trustee and they are joined as parties as the trustee is dismissed.(The procedure for this is described in Saeed v. Bank of Ravenswood, 427 N.E.2d858, 101 Ill.App.3d 20 (1981).)

If the beneficiaries disappeared or could not be located to serve them with thecourt papers, it is possible that they could escape personal liability in a court caseagainst them. However, the court would have jurisdiction over the trust and theproperty in the trust and this could be seized by the plaintiff in the court action.

Creditor ActionsAs explained in Chapter 2, the law in Florida is not clear as to how a creditorshould proceed to make a claim against a beneficiary’s interest in a land trust.

In Illinois, a creditor can bring an equitable action called a creditor’s bill. InFlorida, this is covered by Florida Statutes, Section 68.05. It may also be possi-ble to bring a proceeding supplementary under Florida Statutes, Section 56.29.

If the beneficial interest were owned by a limited liability company, it would beespecially hard to reach by a creditor because if set up properly it would only besubject to a charging order, which gives the creditor no useful rights in the interest.

litigation involving land trusts ◆ 61

A property in a land trust can be sold in two basic ways. Either the trustee candeed the property to the purchaser or the beneficiary can assign his or her ben-eficial interest in the trust to the purchaser. If the property is deeded out of trust,then the trust can either be ended or kept by the seller to hold the financing orother properties. If the beneficial interest is assigned, then the buyer of the prop-erty becomes the new owner of the trust. Sometimes the buyer can keep thesame trustee; other times he or she may want a new trustee.

Deeding the PropertyIf the property is to be deeded out of trust to the buyer, then the main documentsthat are needed are the contract for sale, the deed from the trustee, and thedirection to trustee to sign the contract and deed. As explained in Chapter 13, thetrustee must comply with the Florida RICO law by having a RICO lien searchdone of the beneficiaries.

Selling Land TrustProperty

8

Trustee’s DeedThe trustee can convey the property by either trustee’s deed or warranty deed,depending on what is called for in the contract. A Trustee’s Deed (form 7,p.147) appears in Appendix D.

If the contract requires the trustee to sign a warranty deed it should be madeclear that this is being done in the capacity of trustee for one specific trust. Thiscan be done using the rubber stamps mentioned in Chapter 13.

Before signing either the contract or deed, the trustee must obtain a Directionsto Trustee (form 5, p.145) signed by the required beneficiaries. (If the pur-chase is being financed, see Chapter 5 for explanation of how to finance a landtrust sale.) As explained in Chapter 9, notice should be sent to the InternalRevenue Service when the trust ends and the fiduciary status no longer exists.

Assigning the Beneficial InterestRather than receiving a deed of the real estate from the trustee, a buyer of theproperty can receive an Assignment of Beneficial Interest (form 6,p.146) from the beneficiaries. In such case the trustee would remain the sameand the buyer would step into the shoes of the previous beneficiary.

If the buyer does not wish to use the same trustee, then he or she can replacethe trustee simultaneously or at a later time. The advantage to buying the ben-eficial interest and then replacing the trustee, over having a deed from the seller’strustee to the buyer’s trustee, is that the documentary stamps can be paid on theassignment rather than the deed, concealing the purchase price. This is the pre-ferred sequence to maintain secrecy.

1. Beneficial interest assigned to buyer (documentary stamps paid onassignment but not recorded).

2. Trustee deeds property to successor trustee or to beneficiary (no docu-mentary stamps).


The documents needed for a sale of beneficial interest are a contract and theassignment.The contract can be a common real estate sales contract, as long as itclearly specifies that the conveyance will be by assignment of beneficial interest.

The Assignment of Beneficial Interest does not require any witnesses ornotary. (Goldman v. Mandell, 403 So.2d 511 (1981).) The trust documentshould provide for the procedures for lodging the assignment with the trustee,otherwise the trustee would not know from whom to take direction.

Since the beneficial interest is personal property, even if the trust owns thehomestead (primary residence), a spouse should not be required to join in theassignment to convey good title. While no Florida case has ruled specifically onthis, Illinois courts have long taken this position. (Duncanson v. Lill, 322 Ill.528, 153 N.E. 618 (1926).)

If the seller is holding financing on the property, this can be done either with apledge of the beneficial interest or with a mortgage on the property.

Contract for SaleThe rule in Illinois has been that a contract for sale of property in a trust is notvalid if signed only by the beneficiary. (Schneider v. Pioneer Trust and SavingsBank, 168 N.E.2d 808 (1960).) This is based upon the rationale that to makeuse of the benefits of a land trust, a beneficiary must not ignore the formalitiesof a land trust. But in 1981, a contract executed by a sole beneficiary was heldenforceable. (First National Bank of Barrington v. Oldenberg, 427 N.E.2d 1312(1981).) Florida courts could go either way. To be sure a contract is enforceable,the trustee should sign it. If you are not really worried about suing to enforcethe contract (you could easily find a new buyer if this one backs out), then thereis no need to bother the trustee with signing the contract.

An issue has been raised as to whether a trustee might be personally liable forsigning a contract if no deed is recorded since the statute seems to require somerecording. The trustee should not be liable since the statute applies to allinterests in land and is to be liberally construed, but for extra protection it wouldbe best to add language to the contract insulating the trustee from personalliability.

selling land trust property ◆ 65

When contracting with third parties for the sale of trust property, the trusteemight want to specify that title will be conveyed by Trustee’s Deed to avoidmaking a warranty on the deed. However, since the trustee will execute the deedas the trustee of a specific trust, making a warranty as to title should not be aproblem. This is especially true if title insurance was issued insuring the titleheld by the trustee.

Lease Option AgreementsOne of the most creative ways to use a land trust is to structure a transaction inwhich you lease the real estate to a person and sell them an option to purchasethe beneficial interest of the trust. This way they can be buying the propertyfrom you, but still be evicted like a tenant.

The problem with a normal lease/option agreement is that even if a purchaser haslittle or no equity in a property, courts grant them much greater rights thanmere tenants. Also, it may take months or even years to get them out when theydefault.

With a land trust, the purchaser can be given a lease of the real property thatclearly allows for a tenant eviction, and then a separate option, or even a con-tract for option (in which they do not get an option until the contract isfulfilled) on the beneficial interest of the trust (which is personal property tech-nically unrelated to the real estate).

Of course a judge could look at the big picture and require a foreclosure or eject-ment rather than a tenant eviction. But this would take sophisticated legal workand most cases would never get to court or would be settled much sooner.

Oral AgreementsAn Illinois case raised the question of whether a contract for sale of a beneficialinterest in a land trust had to be in writing. One party argued that since theinterest was personal property, the requirement that contracts for the sale of realestate be in writing did not apply. However, the court ruled that since the ben-eficiary retains every attribute of real property ownership except title, such


interest would fall within the wording of the Illinois Statute of Frauds, whichrequires the contract to be in writing. (IMM Acceptance v. First National Bankand Trust, 499 N.E.2d 1012 (1986).)

No Florida case has ruled on this issue, so the issue could go either way. TheFlorida Statute of Frauds is even broader than the Illinois statute. (Fla. Stat. Sec.725.01.) However, the Florida land trust statute says that the property is to beconsidered personal property for all purposes.

To be safe, all agreements should be in writing, but considering the lack of clar-ity in Florida law, an oral agreement might be worth taking to court.

Brokers’ CommissionsTechnically, if a broker has an agreement that entitles him or her to a commis-sion on the sale of a piece of real property, and if the beneficial interest is soldwithout transfer of the real property out of the trust, it could be argued that nocommission is due. However, if the transaction were a trick to avoid the com-mission, a court could rule in the broker’s favor, especially if the broker had astrongly worded listing agreement.

In an Illinois case involving a land trust and a real estate broker, the court heldthat the broker could collect his commission even though just one beneficiarysigned the listing agreement and the trustee did not sign it. (Ellis Realty v.Chapelski, 329 N.E.2d 370, 28 Ill.App.3d 1008 (1975).)

RICO Lien SearchAs will be explained in Chapter 12, Florida law requires the trustee to conducta RICO lien search when conveying the property from a land trust. This is asearch of the Official Records of the county where the real property is located.Such a search can be obtained from a title company for anywhere from $25 to$100 or more. It is not a difficult search to do and an experienced real estateattorney can do it in a few minutes.

selling land trust property ◆ 67

Tax FormsAs explained in Chapter 9, the trustee must file documents with the IRS whenterminating a trust and someone involved in the transaction (usually the titlecompany) must issue an IRS Form 1099.

To avoid withholding part of the proceeds at closing, the closing agent usuallyuses an Affidavit Regarding Status Under Internal Revenue Code,Section 1445. (form 22, p.173.)


Land trusts allow much flexibility in how real estate transactions will be taxed.This chapter explains what your tax options and requirements are when using aland trust.

Tax ReturnsA Florida land trust does not file any tax returns. For tax purposes, the trust isdisregarded and all taxable activities of the trust are reported on the returns ofthe beneficiaries. These returns may be individual, partnership, or corporate,depending upon the filing status of the beneficiary. (Pommier v. Commissioner,52 T.C.M. (CCH) 766 (1986), Pieroni Building Trust v. Commissioner, 45 B.T.A.157 (1941).)

A corporate owner of an interest in a land trust may be a C corporation or anS corporation. A partnership beneficiary may be either general or limited.Limited liability companies can also be beneficiaries. If you are unsure of whichis best for you, a tax expert should be consulted before a decision as to whichtype of entity to use.

Federal Taxation of Land Trusts

9

An Illinois-type land trust does not obtain a taxpayer identification number orsocial security number unless it is set up as a business trust. The beneficiaries usetheir own taxpayer identification numbers on their returns and report the incomeand expenses of the trust.

Notice of Fiduciary CapacityUnder Section 6903(b) of the IRS Code and Treas. Regs. Secs. 301.6903-1(a)and 301.6903-1(b), the trustee must disclose to the IRS that he is acting as afiduciary for the beneficiary. Revenue Ruling 63-16 discusses this requirement.This disclosure is meant to help the IRS connect the beneficiary claiming theincome and deductions to the property owned by the trust. It should be filedwithin thirty days.

Years ago, IRS Form 56 (Notice Concerning Fiduciary Relationship)(form 8, p.149) had a box to check for an Illinois-type land trust. Then it wasrevised and did not have any place for the important information for land trusts.When it was filed, the IRS would sometimes get confused and send a taxpayeridentification number.

In 2001, the IRS issued a new proposed Form 56-A (Notice ConcerningFiduciary Relationship Illinois Type Land Trust. (form 9, p.150.) It ismeant to be used for Illinois-type land trusts. Since no specific form is requiredto be used to comply with Sec. 6903(b), the author started using this form. Buthe received a phone call asking where the form came from and requesting thathe not use it because it was not yet approved.

In 2003, the form was published in the Federal Register with requests for com-ments. When, in late 2003 the author emailed the agent in charge to ask thestatus, he was told that it is still on hold because the IRS is being reorganizedand they have not yet received comments from all concerned divisions of theIRS as to whether the proposed form is adequate. The agent in charge had noidea when it might be approved and seemed to think it might be a long time.

The best suggestion he could offer was to file Form 56. Since it does not haveplaces for the right information, to complete the proposed Form 56-A and attachit to the Form 56. The other possibility would be to just send a letter to the IRSstating that it is disclosing a fiduciary relationship pursuant to Sec. 6903(b).


TaxpayerIdentification

Number

Beneficiary StatusWhere there are two or more beneficiaries of a trust (other than a married cou-ple), an agreement should be carefully drafted spelling out their relationship. Ifthis is not done, it is possible that they will be treated as an association and sub-ject to double taxation like a corporation.

NOTE: If beneficiaries can avoid two of the following characteristics, they will notbe taxed as a corporation.

The six attributes of an association are:

1. Associates. Whenever there are two or more beneficiaries, there are asso-ciates.

2. Objective to Carry on a Business. Unless the trust holds a family residenceor raw land, the objective is usually to carry on a business.

3. Continuity of Life. Most land trusts will not terminate on death so usu-ally there is continuity of life.

4. Centralized Management. Management can be equally shared by thebeneficiaries or under control of a director. In federal Revenue Ruling64.220, a trust had one manager but he was controlled by a majorityvote of the beneficiaries and management was held not to be centralized.

5. Limited Liability. Beneficiaries are liable for damages caused by theirmanagement of the property so this characteristic is avoided.

6. Free Transferability of Interests. Interests can be freely transferable or canbe controlled by a buyout agreement.

Therefore, every beneficiary agreement should either provide for equal controlof management or for restricted transferability of interests so they will not beconsidered a corporation. (Further guidance is provided by Federal RevenueRulings 78-371 and 79-77, IRS Regulation, Section 301.7701-2 and byLandsdown Realty Trust v. Commissioner, 50 F.2d 56 (1930).)

federal taxation of land trusts ◆ 71

Two beneficiary agreements are included in this book, a simple Co-VentureAgreement (form 10, p.151) (in which two or more people own the propertybut are not partners) and an extended Partnership Agreement. (form 11,p.153.)

Tax-Free Sale of ResidenceThe Taxpayer’s Relief Act of 1997 exempts the first $250,000 of gain on the saleof a residence ($500,000 for married couples). This can be used on any resi-dence that a person has lived in for two of the last five years. Under TreasuryRegulation 1.121-1, property in a land trust can qualify for this Section 121exclusion if the trust is a grantor trust under I.R.C. Sections 671-679 and is adisregarded entity under Treasury Regulation 301.7701-3. Check with your taxadvisor to be sure you can qualify.

Section 1031 ExchangesUnder Section 1031 of the Internal Revenue Code (I.R.C.), certain propertymay be exchanged tax-free for like-kind property as defined by the IRS. Althoughinterests in trusts are specifically not allowed to be exchanged tax-free underTreasury Regulation Section 1.103(a)-1, interests in land trusts are consideredreal property, which is allowed under Section 1031. (Revenue Ruling 92-105,also Hubert Rutland, 36 T.C.M. (CCH) 40 (1977).)

NOTE: For more information on this subject, see "Can A Beneficial Interest In AnIllinois Land Trust Qualify For Tax Free Exchange Treatment?" by Jeffrey L. Kwallin the Illinois Bar Journal, November, 1982, pages 178-182. "Illinois Land TrustMay Effect Sec. 1031 Exchange," 33 Tax Management Memorandum 387-388,Dec. 28, 1992 of the Illinois Bar Journal.

Since beneficial interests in land trusts can be held by corporations, partnerships,LLCs and other trusts, they offer many creative possibilities for Section 1031exchanging.

A company known to the author to be experienced with using land trusts inSection 1031 exchanges and to be able to serve as a qualified intermediary is Keys


Agreements

Capital, Inc.; 727-586-2445. (The author is not affiliated with this company, buthas known its principal for over twenty years to be knowledgeable and trustwor-thy.) You can find other companies in the yellow pages or on the Internet.

Estate TaxesPutting property into a land trust does not avoid estate taxes. The net value ofa trust would be included in a decedent’s estate for federal estate tax purposes.However, a land trust can be used to divide up interests in real property in orderto take advantage of the $11,000 annual exclusion under I.R.C. Section2503(b). (This amount will rise in $1,000 increments based on inflation.) Inorder for the exclusion to apply, the interests given away must be present inter-ests, meaning that the beneficiaries must receive some control along with theinterest. In one case where the grantor conveyed interests but kept all controlhimself, the exclusion was denied. (McClure v. United States, 608 F.2d 478(1979).)

FIRPTAWhere a foreign person owns an interest in a land trust, the trustee is requiredto comply with the provisions of the Foreign Investment in Real Property Tax Act(FIRPTA). (I.R.C. Secs. 861, 879, 6039C and 6652.) These provisions requirethe trustee to withhold part of the proceeds or to verify compliance with the Act.

When a property is sold, the title company usually requires a FIRPTA affidavit.The trustee could provide such an affidavit stating that the trust was not a for-eign entity, even if the beneficiaries are. However, the trustee would need tocomply with FIRPTA by sending the required withholding to the IRS. Since thetrustee rarely has control of the proceeds, it would be better for the trustee toadvise the title company that the beneficiaries are subject to FIRPTA and thatwithholding should be done by the title company.

Final regulations for FIRPTA were issued August 4, 2003. The newest require-ment is that a foreign seller of property must have a U.S. taxpayer identificationnumber (TIN) to avoid unnecessary withholding. These used to be quick andeasy to get, but since the events of September 11th, the process has been

federal taxation of land trusts ◆ 73

changed and it now takes months to get a TIN. This means that foreign own-ers of U.S. property may have problems selling their property if they do notknow to get the number well in advance of the closing.

These may include setting up a Florida LLC, making a loan to the trust, or set-ting up an irrevocable trust. A tax expert should be consulted in such situations.

IRS Form W-9Tax law requires that real estate closing agents file IRS Form 1099 listing the taxidentification numbers and net proceeds of real estate transactions. Also finan-cial institutions are required to make reports of interest paid and received. Forthis reason, title agents and lenders may request the trustee sign IRS Form W-9disclosing the taxpayer identification number of the trust.

Because the beneficiary is the party responsible for tax on the profits, the trusteecan sign the IRS Form W-9 with the beneficiary’s taxpayer identification num-ber. To avoid confusion, it would be best to use the trust name or number as thetaxpayer name on this form, rather than, or in addition to the trustee’s name. Asexplained in Chapter 8, the trustee can direct the title company to make theproceeds check payable to the beneficiary.


Many of the same state taxes that apply to ordinary income and transactions,apply to land trusts as well. However, some do not apply at all, or apply in a dif-ferent way from what is usually seen. An accountant or lawyer can help youunderstand and comply with law if you do not fully understand it.

Real Estate TaxesReal estate tax bills are sent to the trustee who is record owner of the property.It is paid by and deductible by the beneficiaries. The Truth in Millage noticesare also sent to the trustee, usually in August, and these should be forwarded bythe trustee to the beneficiaries in time to file any appeals that may be desired.

Homestead ExemptionThere has been some confusion among property appraisers regarding the abilityof a trust beneficiary to get the homestead exemption. This has resulted in fourrulings from the Florida Attorney General’s Office (AGO), AGO 74-313, AGO

State Taxation of Land Trusts

10

76-204 AGO 90-70, and AGO 94-50, and one rule in the FloridaAdministrative Code, (FAC) Section 12D-7.011.

Until recently, it was generally accepted that if the deed or trust gave the bene-ficiary use and benefit of the property for life, a homestead exemption would begranted. However, recently, some property appraisers have attempted to reeval-uate the situation and deny the exemption even when these words are used.

What do they want? The less helpful counties just say see an attorney but at leasttwo have provided specific clauses which they will accept. Brevard County sug-gests this clause:

Settlor reserves the right to reside upon any property placed into this

trust as Settlor’s permanent residence during Settlor’s life, it being the

intent of this provision to preserve in Settlor the requisite beneficial

interest and possessory right in and to such real property, to comply

with Sec. 196.031 of the Florida Statutes, such that Settlor’s posses-

sory right constitutes in all respects, equitable title to real estate, as

that term is used in Sec. 6, Article 7 of the Constitution of the State of

Florida. Notwithstanding anything contained in this trust agreement to

the contrary, the interest of Settlor in any real property on which the

Settlor resides pursuant to the provisions of this trust shall be deemed

to be an interest in real property and not personalty.

Hernando County provides this clause:

Grantor(s) reserves the rights to reside upon any real property placed

in this trust as their permanent residence during their lives. It is the

intent of this provision to retain for the grantor(s) the requisite benefi-

cial interest and possessory right in and to such real property to comply

with Florida Statutes 186.041(2), such interest being hereby

declared to be equitable title to real estate as that term is employed

in section 6, Article VII of the State Constitution.

Apparently the problem they are having is that even if the beneficiary has useand occupancy for life, the characteristics of the land trust where the beneficiaryhas no legal or equitable title conflicts with the state constitution.

Prior to setting up a trust for which you want the homestead exemption, youshould speak with someone in the appraiser’s office and find out exactly what


they will require. A land trust should not be recorded, so if this is what theywant you should ask if there is any other alternative, such as putting a statementon the deed that the beneficiary is entitled to the use and occupancy of theproperty.

Another way to solve the problem is to give the person claiming homestead alife estate (process the interest until death) in the property. This may eliminatesome secrecy, but the homestead exemption would usually do that anyway.When putting a homestead into a land trust, the way to do this would be to addthe words …reserving unto the grantors a life estate in said property. When buy-ing a property, the way to do it would be to have the seller convey the life estateto the beneficiaries and the remainder interest to the trustee. However, as men-tioned above, check with your property appraiser to see if they have an easierway than a life estate to preserve the homestead exemption.

One way to preserve privacy in a situation like this is to put the grantor andtrustee’s names in big bold print on the deed, and mention the life estate in thefine print. That way the clerks who enter the deed in the courthouse systemmight not enter the names included in the fine print.

A ruling by the Attorney General’s Office (AGO 94-50) states that a personalresidence trust under Internal Revenue Code, Section 2702(a)(2) and (3), thatgrants the beneficiary a possessory interest for a term of years in the corpus ofthe trust, should not be allowed a homestead exemption. The key words hereare term of years. If it is for life, the homestead is allowed, but if only for a setnumber of years, it will be denied.

Intangible Personal Property TaxAlthough the interest of the beneficiary is deemed to be personal property andit could conceivably be taxed as such, no attempts have yet been made to col-lect such a tax. Local assessors feel that it would amount to double taxation sincethe trust is passive and real estate is already taxed. The Land Trust Committeeof the Florida Bar is hoping to get this clarified by statute.

state taxation of land trusts ◆ 77

Documentary Stamp TaxThe documentary stamp tax is a tax on the transfer of real estate. It is 70¢ per$100 of the price paid for the property in all of Florida except Miami-DadeCounty where it is $1.05 per $100 (60¢ state tax plus 45¢ local surtax).

This tax is meant to be on sales of real property, but the Florida Department ofRevenue keeps trying to extend it to transfers of property that are not sales. Forexample, transferring property to your own corporation in exchange for stock isconsidered taxable. At 70¢ per $100 in value the tax is considerable ($700 for a$100,000 property).

Transferring a property to a trust in which the beneficiary is the same as the per-son putting the property into the trust is not taxable. This is made clear byFlorida Administrative Code (F.A.C.) Sec. 12B-4.013(33)(a) and River ParkVenture 315076 v. Dickenson, 303 So.2d 654 (1974). However, recording clerksoften demand that the tax be paid on such transfers. If you are faced with sucha clerk ask for a supervisor and point our these legal references.

Transfers between trustees where the beneficiary is the same (successor trustee)are not taxable (F.A.C. Sec. 12B-4.013(33)(d)).

A court case that applies in the Second Appellate District (Charlotte, Collier,DeSoto, Glade, Hardy, Hendry, Highlands, Hillsborough, Lee, Manatee, Pasco,Pinellas, Polk, and Sarasota counties) ruled that when a person transfers prop-erty to his or her own corporation not in exchange for stock, just as acontribution, no tax is due if there was no mortgage on the property. Kuro, Inc.v. Department of Revenue, 713 So.2d 1021 (Fla. 2DCA), appeal dismissed, 728So.2d 201 (Fla. 1998). The Florida Department of Revenue did not like thisdecision and is fighting similar cases in other districts in Florida.

Most transfers of property by owners to their own companies are not sales andnothing is paid. The reason in most cases is to take advantage of the limited lia-bility of a corporation or limited liability company (LLC). Thus, many lawyersargue that there is no sale, no change is underlying ownership and no reason fora tax to be paid.


In a 2003 ruling, the Department of Revenue said that when two people puttheir unencumbered property (no mortgage on it) into an LLC no tax is due.(Technical Assistance Advisement No. 03B4-008R, Aug. 29, 2003.)

When a property is transferred to another person as a gift there is no tax on thetransfer except if there is a mortgage on the property and then the tax is for theamount of the mortgage. (F.A.C. Sec. 12B-4.013(21).)

Sales and Use TaxThe Florida sales and use tax must be collected on commercial and short-termresidential rentals. The tax would be collected and paid by the beneficiaries whomanage the property of the trust. The beneficiaries should obtain a sales tax reg-istration number in their own names or in the name of their agent who will becollecting and paying the tax.

Rental License TaxMore and more cities are coming up with a new landlord license law as a sourceof income and a way to regulate rental units. Since the beneficiaries have fullmanagement control of the property and the trustee merely holds the title, thebeneficiaries are the ones who should be licensed under such laws.

Since land trusts are not well understood and licensing laws may require ownersto be licensed, there may be problems and in some cities convincing them thatthe trustee shouldn’t register. It may depend on whether the ordinance wantsowners to register or those in the business of renting property. The trustee is theowner, but is not in the business of renting property. He or she only holds title.

In any case, if the license must be in the name of the trustee, it should clearlybe in the name of the specific trust. If a federal tax identification number isrequired, then the beneficiary’s should be provided as this is the tax numberassociated with the trust.

state taxation of land trusts ◆ 79

Many people, including some attorneys, have shied away from land trustsbecause of the possibility of violations of securities laws (defined in the next sec-tion). But a land trust, in itself, does not involve securities laws. The trust ismerely a form of holding title to real estate. Whether securities laws apply woulddepend upon the relationship between the parties. The general rule is that secu-rities laws do not apply unless one person puts up money and expects to makea profit based on the efforts of another party.

If your land trust will have just you as the beneficiary, or you and your spouse,or you and your partner who equally participates in the management of theproperty, then you do not need to read this chapter. This chapter only applies ifone or more beneficiaries is putting up money in the hopes of making a profitbased on the efforts of another party.

What a Security IsUnder federal and state laws a security exists when four attributes exist:

1. an investment;

Securities Laws11

2. in a common enterprise;

3. with the expectation of a profit; and,

4. from the efforts of others.

The most famous case explaining what a security is, is SEC v. W. J. Howey Co.,328 U.S. 293 (1946). Although the Howey case used the words solely from theefforts of others, later cases have watered down the word solely so that even if theinvestor puts some effort into the transaction, it may be deemed a security. Agood examination of when securities laws apply is contained in another case.(Williamson v. Tucker, 645 F.2d 404 (1981).)

When a Security ExistsIf all of the above attributes exist in a venture, then the interests of the peo-ple who put up money are securities. In that case, they are subject to severallaws including the Securities Act of 1933, the Securities Exchange Act of 1934,the Investment Advisor Act of 1940, and the Florida Securities Act (Fla. Stat.,Ch. 517).

The purpose of these laws is to protect investors from losing their money insecurities scams and fraudulent deals. The main thrust of the laws is to requirecomplete disclosure of all of the risks involved in an investment. For larger deals,this is done through registration of the offering with the government.

Violations of these laws are serious. There are criminal and civil penalties andinvestors who lose money can sue the promoters personally for actual money lost;plus more money to punish the violators. Promoters is a legal term for peopleselling securities.

Avoiding Securities ProblemsTo avoid the possibility of problems with securities laws, a transaction can bestructured so that no security is involved. One way to do this is to give controlof the enterprise to all of the participants. One way this can be done is by struc-


turing the venture as a general partnership. You can simplify the managementof the project by consolidating day-to-day management in a single manager, butif all of the beneficiaries (partners) retain the power to replace the manager andmake ultimate decisions, the transaction should be safe.

However, keep in mind that the courts do not let form rule over substance. Ifyou call all of the parties general partners, but some of them are really passiveinvestors, you may lose if the matter goes to court. This is because courts willlook at the actual facts and circumstances, not just the labels you use.

If the ownership of the beneficial interest is in a corporation or limited partner-ship, then the issues involving securities law would be the same as with anystock or partnership interest issuance.

Whether or not certificates are used in the land trust should not affect the deter-mination of whether securities laws apply, since the law looks at the substance,not the form of the transaction. There have been cases where even corporatestock has been held not to be security when it usually is. (United HousingFoundation, Inc. v. Forman, 421 U.S. 837 (1975).)

Exemptions from Securities LawsEven if it is not possible to avoid securities laws by structuring the transaction,it may still be possible to avoid securities problems by fitting into one of theexemptions in the securities laws. Both the federal and state laws have safe har-bor exemptions that allow limited issuance of securities without compliancewith the complex and expensive registration provisions.

In situations where a husband and wife or a few partners are beneficiaries of thetrust, and all parties are active in the enterprise, securities laws would normallynot apply to their interests in the enterprise. As a practical matter, if your fatheror aunt wants to put up some money for an interest in a property you are buy-ing you probably will not get in trouble. They probably will not seek tripledamages and criminal penalties if your business fails.

There are other situations that may also be exempt.

securities laws ◆ 83

Florida PrivatePlacementExemption

Under Florida Statutes, Section 517.061(11) a Florida Private PlacementExemption can apply if all of the following are true:

✪ there are thirty-five or fewer purchasers of shares;

✪ no commissions are paid to anyone to promote the stock;

✪ no advertising or general solicitation is used to promote the stock;

✪ all material information regarding the stock issuance and the companyis given to or accessible to all shareholders; and,

✪ if there are five or more purchasers they must have a three day right ofrecision.

These rules may sound simple on the surface but there are many more rules, reg-ulations, and court cases explaining each one in more detail. For example, whatdoes thirty-five persons mean? Sounds simple, but it can mean more than thirty-five persons. For example, spouses, persons whose net worth exceeds a milliondollars, and founders of the corporation may not be counted in some circum-stances.

If you sell your stock to a small group of people without any advertising you canfall into the federal private offering exemption:

✪ all persons to whom offers are made are financially astute, are partici-pants in the business, or have a substantial net worth;

✪ no advertising or general solicitation is used to promote the stock;

✪ the number of persons to whom the offers are made is limited;

✪ the shares are purchased for investment and not for immediate resale;

✪ the persons to whom the stock is offered are given all relevant informa-tion (including financial information) regarding the issuance and thecorporation; and,

✪ a filing claiming the exemption is made upon the United StatesSecurities and Exchange Commission.


Federal PrivateOffering

Exemption

Again, there are numerous court cases explaining each aspect of these rules,including such questions as what is a financially astute person.

If you only offer your securities to residents of one state, you may be exemptfrom federal securities laws. This is because federal laws usually only apply tointerstate commerce. Intrastate offerings are covered by Securities and ExchangeCommission (SEC) Rule 147. If it is followed carefully, your sale will be exemptfrom federal registration.

In recent years, the SEC has liberalized the rules in order to make it easier forsmall business to grow. Under Regulation D adopted by the Securities andExchange Commission, there are three types of exemptions, under SEC rules504, 505 and 506.

Offerings of securities of up to $1,000,000 in a twelve month period can beexempt under SEC Rule 504. Offers can be made to any number of persons, nospecific information must be provided, and investors do not have to be sophis-ticated.

Under SEC Rule 505, offerings of up to $5,000,000 can be made in a twelvemonth period, but no public advertising may be used. Only thirty-five nonac-credited investors may purchase stock. Any number of accredited investors maypurchase stock. Accredited investors are sophisticated individuals with high networth, high income, large trusts, investment companies ,or persons involved inthe business.

SEC Rule 506 has no limit on the amount of money that may be raised but, likeSEC Rule 505, does not allow advertising, and limits nonaccredited investors tothirty-five. Under this rule you must register with the state.

NOTE: In all cases where exemption from securities laws is sought, there can be nogeneral advertising or solicitation and all persons to whom the stock is offered mustbe given full information about the offering and the condition of the corporation.(In some cases, to be safe, promoters list everything they can think of that is negativeabout themselves and the stock.)

In all cases, even if an exemption is used, the important issue that will determineliability is disclosure. A full and fair disclosure is considered necessary to allowthe investor to determine the extent of the risk.

securities laws ◆ 85

FederalIntrastate

OfferingExemption

Federal SmallOffering

Exemption

Get an OpinionBecause of the complexities of securities regulations, this book can only providea limited overview of your options. With the criminal penalties possible for vio-lations, anyone putting together an investment project should consult aspecialist in securities law. You should be able to pay for a one-hour consulta-tion in which you can lay out your proposed plan, have him or her explain theproblems and pitfalls, and suggest alternatives.


The Florida RICO Act is concerned with Racketeering Influenced and CorruptOrganizations and is contained in Florida Statutes, Chapter 895. It is aimed atferreting out money used in drug deals and organized crime. Because land trustscan be used to hide assets, the Act places certain requirements on trustees ofland trusts.

RICO LiensUnder Florida Statutes, Section 895.07, the state can file RICO liens againstpersons believed to be involved in illegal activities. Whenever a trustee of a landtrust is directed to convey property out of trust or to distribute money to a ben-eficiary, he or she must search the official records of the county in which theproperty is located to see if a RICO lien has been filed against the beneficiaries.The trustee must notify the state at any time he or she learns of a lien against abeneficiary. Failure to follow the RICO law is a second degree misdemeanor. Atrustee who distributes property to beneficiaries named in a RICO lien noticeis personally liable to the state of Florida for all amounts distributed. RICOliens are effective for six years and may be renewed for an additional six years.

Florida RICO Act12

Foreign BeneficiariesAn entity of which 10% or more is owned by a foreign person or entity is des-ignated an Alien Business Organization (ABO). Every ABO is required by theRICO Act to have a Florida registered agent and registered office under FloridaStatutes, Section 607.0505. This means that every land trust of which 10% isowned by a foreigner is an ABO and must have a registered agent. The Secretaryof State has prepared a form Designation of Registered Agent andRegistered Office for Alien Business Organization that is included inthis book. (form 12, p.157.) A form for changing the agent is also included.(form 13, p.159.)

Fortunately, the legislature did not require disclosure of the beneficiaries as longas a registered agent is named. The beneficiaries would only have to be namedif the Department of Legal Affairs issues a subpoena. Failure to comply withthese requirements could result in a fine of up to $1,000.00 per day. (A goodexplanation of the RICO requirements is contained in an article 1984 RICOAmendments in the October, 1984 issue of the Florida Bar Journal, page 501.)

NOTE: All Florida land trusts should contain provisions allowing the trustee tocomply with the RICO Act.


Because charges by banks are usually quite high for trust services, attorneys andothers are often asked to serve as trustees by those who wish to take advantageof the land trust at a reasonable cost. Considering the general lack of knowledgeabout land trusts and the usual fiduciary obligations on trustees, attorneys areoften hesitant to take on such work.

However, attorneys who do agree to serve as land trust trustees and let that will-ingness be known in the investment community usually attract a considerableamount of business. This business usually leads to other business, including thelucrative title insurance work. For a conscientious attorney, there is not muchrisk in land trusts now that the Comprehensive Environmental ResponseCompensation and Liability Act (CERCLA) liability has been eliminated. (Seepage 92 for more CERCLA information.)

Fiduciary ObligationsBoth Illinois and Florida courts have made it clear that an Illinois-type landtrust does not impose the standard fiduciary obligations on the trustee. The only

Concerns for Trustees13

duty of the trustee is to hold title to the property. There are no accounting,bookkeeping, or other duties. (Schwartz v. Hill, 562 So.2d 779 (1990).)

A few cases have held trustees liable in limited circumstances. A trustee was heldliable in one case for redeeming tax certificates that had been issued on the prop-erty. (Flagship Bank of Orlando v. Reinman, Harrell, Silberhorn, Moule &Graham, P.A., 503 So.2d 913 (1987).) However, this was not the case of a baretitle trust like most land trusts. In this case, the bank was appointed both trusteeand receiver and was specifically authorized by the court to redeem the certifi-cates. The bank’s attorney went to the courthouse, but instead of redeeming thecertificates, he bid in the sale and allowed himself to be outbid.

Illinois cases that have imposed liability on trustees have usually involved banksthat were both trustee and mortgagee. After one particular case, the Illinois leg-islature amended the law to protect trustees from liability. (Home Federal Savingsand Loan Assoc. of Chicago v. Zarkin, 89 Ill.2d 232, 432 N.E.2d 841 (1982).)

LiabilityThe trustee of a Florida land trust is protected from personal liability. (Fla. Stat.,Sec. 737.306.) The land trust statute was amended to include these protectionsafter a court imposed liability on a trustee in 1977. (Taylor v. Richmond’s NewApproach Ass’n., Inc., 351 So.2d 1094 (1977).) A trustee is only liable personallyunder three circumstances:

1. if the documents he or she signs provide for personal liability;

2. if the trustee fails to disclose his or her representative capacity andidentify the trust; or,

3. if he or she contracts for attorney services. (Fla. Stat., Sec. 737.306)

In Schwartz v. Hill, discussed earlier, the trustee was held personally liable for anote he had executed as trustee, but this judgment was reversed on appeal. In asuit against the author as trustee asking for a deficiency judgment on aDepartment of Veteran ’s Affairs (VA) mortgage foreclosure, the trial courtordered the plaintiff to pay the trustee’s attorney’s fee to defend, when it waspointed out that both the deed and the statute protect the trustee from liability.


In 2002, another trial court’s holding that a trustee was personally liable wasthrown out by an appellate court. In Jonathan D. Commander, P.A., et al. v.McCann-Coyner-Clarke Real Estate, Inc., 830 So.2d 116 (Fla. DCA 2002) thetrial court held that the attorney’s fees clause of a real estate contract with atrustee imposed personal liability on the trustee for attorney fees. In rejectingthis, the appellate court said that the real estate contract was not a contract forattorney’s fees in and of itself…holding such clauses to be attorney’s fee contractswithin the meaning of 737.306(1)(a) would have the effect of opening trustees topersonal liability under every contract containing an attorney’s fee clause. This theappellate court wisely rejected. Section 737.306(1)(a) only applies to when atrustee hires an attorney.

In all cases, the deed, the trust, and any other instruments such as mortgagesand notes, should clearly state that the trustee has no personal liability in thematter. The trustee should have some rubber stamps made up to use on all doc-uments signed as trustee. Such rubber stamps could read similar to thefollowing.

For signing notes, mortgages, and similar documents:

For signing other documents:

concerns for trustees ◆ 91

It is expressly understood and agreed between the parties and all successors and assigns that

this instrument is executed by the Trustee, not personally, but as Trustee in exercise of authority

conferred upon such Trustee. No personal liability or responsibility is assumed by or shall be

enforceable against said Trustee, either express or implied.

This statement is based solely upon information provided by beneficiaries of the trust to the

undersigned. The undersigned has no personal knowledge of any of the facts contained herein.


For endorsing checks made out to the trust:

For providing copies of trust documents when requested by beneficiary:

As long as clauses such as these are used on documents signed by the trustee,there should be no question of personal liability even if the document beingsigned provides for some liability for the trustee.

Example: In some loan documents the mortgagor agrees to protect the lenderagainst such liabilities as environmental problems. But federal casesin Illinois have noted the unique nature of Illinois-type land trusts.

CERCLAFor a while there was a serious concern for trustees with the ComprehensiveEnvironmental Response Compensation and Liability Act, known as CERCLA.(42 U.S.C. Sec. 9601-9675 (1988).) This is the law regarding hazardous wastecleanup. Because this was the issue of the day, the government had gottenexcited and gone overboard. CERCLA provides for unlimited, strict, joint andseveral liability for owners, operators, and even past owners of properties con-taminated by hazardous wastes. The result is that the courts have looked for thedeep pocket (the one with the most money) to hold liable for cleanup, regardlessof fault.

Pay to the order of: __________________________________________ without recourse or any

warranties of any kind, express or implied ______________________________________

Trustee under _________________________________________________________________

This is a true and correct copy of the original containing ___ pages, now held in our

files___________________________________________________________________Trustee

under________________________________________________________________________

In one case, a party that merely held a mortgage on a property was held liablebecause the mortgage gave it a capacity to influence the borrower. (United Statesv. Fleet Factors Corp., 901 F.2d 1550 (1990).) Other circuits declined to followthe reasoning of the court in Fleet Factors. Because Florida is in the circuit fromwhich this case came, this case was a problem, and trustees avoided any com-mercial properties or those near commercial properties.

Fortunately, Congress has taken action to protect trustees. The Asset Conservation,Lender Liability, and Deposit Insurance Protection Act provides that the trustee’sliability shall not exceed the assets of the trust (unless, of course, the trustee ispersonally at fault). The Act is found in Subtitle E of Public Law 104-208,Sections 2501-2505.

This should settle the issue. However, if a trustee wants to avoid the chance oflitigating the matter, then he or she could avoid commercial property, requirean environmental audit, or incorporate.

Corporate TrusteesBefore 1992, a trustee of a land trust could not be a corporation unless it had amillion dollars worth of assets as required by Florida Statutes, Section 660.41and also complied with Florida Statutes, Section 658.21. But that year, Section660.41 was repealed and now corporations can be used as trustees.

Attorneys who offer trust services would be well advised to do so through theirProfessional Association or a separate corporation. The reason for this is that ifthey set up the trust with themselves as trustee, there is a possibility that thefinancial affairs of the trust will be confused with their personal affairs and showup on their personal credit report.

AUTHOR’S NOTE: A good manual for land trust trustees is Land TrustAdministration, by Martin S. Edwards. It is published by the Illinois Institute forContinuing Education, 2395 West Jefferson, Springfield, IL 62702, 800-252-8062, www.iicle.com.

concerns for trustees ◆ 93

After finding out all the benefits of a land trust, many people figure there mustbe drawbacks or everyone would have property in trusts. Actually, the reasoneveryone does not have their property in trusts is that they do not know enoughabout them. But there are a few problems and drawbacks of which you shouldbe aware.

Unfamiliarity in the MarketplaceBecause only a few knowledgeable people are using land trusts, not all of thepeople in the real estate industry have experience with them and some are afraidto deal with them.

Lenders, insurance agents, title agents, and even some attorneys may be reluc-tant to get involved with your deal if they know nothing about land trusts. Youmay have to check with a few different providers before you find one who cando the paperwork correctly for your land trust transaction. But since land trustsare becoming more popular every year you will find more and more profession-als eager to deal with them.

Drawbacks and Pitfallsof Land Trusts

14

CostsIn order to obtain the benefits of a land trust one must incur the cost of settingit up and maintaining it. An attorney’s fee for setting up a simple land trustwould usually be between $200 and $500, although some have been known tocharge over $1,000. The yearly fee can range from $100 to $250 per year ormore, so it is advantageous to compare prices. A bank in the Miami area hasbeen advertising that it will serve as land trust trustee for a minimum fee of$1500 per year.

The only duty of the trustee is to keep the trust file and occasionally forwardmail so a low annual fee can often be negotiated, especially if the trustee is famil-iar with land trusts. Any work performed by the trustee is billed separately at anagreed-upon rate.

TrusteeIt is important to choose a trustee you can trust. A trustee has full power to sellyour property, and in most cases you cannot get it back if he or she does. Butsuch an act could be criminal fraud if done without your consent. An attorneywho is established in the community or a bank would not present much risk,but if you use a friend or relative, the temptation may prove too great and youmay be cheated.

One precaution that could be taken is to put a small ($1,000) mortgage on theproperty in trust or to record a Memorandum of Option (form 21, p.172) tothe beneficiary or a relative, so the property could not be sold without somenotice to the beneficiary.

Homestead ExemptionsThe term homestead exemption has two meanings under Florida law. One is the$25,000 exemption from property taxes that is allowed on a person’s home-stead.This saves about $500 a year in real estate taxes. The other meaning is theconstitutional provision that a person’s homestead cannot be seized to pay debts.


As explained in Chapter 10, there have been several opinions as to whether aperson can obtain an exemption for property in trust. In order to get thisexemption, you may be required to give up some secrecy. Be sure to check withyour property appraiser’s office to be sure you have properly set up the trust toobtain the exemption if you wish to take advantage of it.

A problem with the second type of homestead exemption, the constitutionalexemption from forced sale, is that it may not be available if the property is ina land trust. However, the exemption is very liberal, so it is possible to keep yourproperty in a trust for the benefit of secrecy, but if later you do get a judgmentagainst you, you can take it out of trust and declare it your homestead.

Some people do not put their homestead in trust because of these issues.However, as long as you are aware of how they (and land trusts) work, you canget the benefits of the land trust and both homestead exemptions as well.

drawbacks and pitfalls of land trusts ◆ 97

Aagent. A person who is legally authorized to act for another person.

agreement for deed. A contract that provides that a person will receive a deedto property after a number of payments have been made.

assessment. The value of property as set by the property appraiser in eachcounty.

assignment. Transfer of an ownership interest.

Bbankruptcy. A court action to reorganize or wipe out debts.

beneficial interest. Ownership of a land trust.

Glossary

beneficiaries. Persons entitled to the ownership of property (such as a trust).

beneficiary agreement. An agreement spelling out the rights and oblig-ationsof the beneficiaries of a trust.

broker. Person licensed to perform buying, selling, and renting services for realproperty.

Ccharging order. A claim against an interest in property.

Comprehensive Environmental Response Compensation and Liability Act(CERCLA). Federal law controlling hazardous substance pollution and liability.

contingent beneficiaries. Persons who become owners of property after theprevious owners die.

creditor. A person to whom money is owed.

creditors’ bill. A legal action to collect money.

Ddebt ratio. The amount of money a person owes in relation to his or her networth.

deed. A legal instrument that transfers ownership of real property.

deficiency judgment. The amount still owed on a debt after a foreclosure orcourt-ordered sale.

documentary stamp tax. Florida state tax on the transfer of an interest in realproperty.


due-on-sale clause. A clause in a mortgage that requires that the mortgage bepaid if the property is sold.

Eejectment. A lawsuit to remove a person from real property.

equitable title. The ownership interest of the person entitled to ownership ofreal property.

equitable mortgage. A financial interest in real property based on what a courtdeems is fair.

eviction. A court action to remove a tenant from real property.

Ffiduciary. Someone who acts for another.

financial statement. A listing of a person’s assets, liability, and net worth.

forced share. The amount of property a spouse can obtain from a deceasedspouse’s estate even if left nothing in the will.

foreclosure. A court procedure to take property from its owner to pay moneythat the owner owes.

Foreign Investment in Real Property Tax Act (FIRPTA). Federal law requir-ing aliens to pay taxes on profits and sales made in the U.S.

Hhomestead. 1. The permanent residence of a person. 2. The exemption fromtaxes that a homeowner is entitled.

glossary ◆ 101


homestead exemption. A $25,000 exemption from taxation given to home-owners.

Iintangible personal property tax. An annual tax on a person’s stock, bondsand other items of intangible personal property.

inter vivos. During one’s lifetime.

Jjudgment. A court decree that money is owed.

Llease/option. An agreement to rent a piece of property to someone who alsoobtains the right to buy the property during or after the term of the lease.

legal title. The name in which real estate ownership is registered.

liability. Legally obligated to pay for something.

lien. A claim that attaches to a piece of property.

life estate. Ownership of a property for the term of one’s life.

litigation. Court proceedings.

living trust. A trust made by a person prior to death, usually to hold all typesof real and personal property.

Mmerger. When two separate legal interests combine into one.

mortgage. A claim against a piece of property used to protect a creditor untilmoney owed is paid in full.

Nnotary public. An official licensed to take acknowledgements and verifysignatures.

Oofficial records. The registry of deeds and other interests in real property ineach county.

options. The right to purchase a property some time in the future.

Ppartition. A court action to sell a property and split the proceeds between theowners.

perjury. The crime of giving false statements under oath.

personal property. Property other than real estate, such as appliances, clothes,and a car.

pledge. To put up property as security for a loan.

power of direction. The power of some person to instruct a trustee to takeaction.

glossary ◆ 103

probate. The court proceeding that distributes a person’s assets.

proceeding supplementary. A court action to enforce a court judgment orcollect money owed.

Qquit claim deed. A legal instrument that transfers ownership of real propertyin which the transferor gives all interest he or she owns, but does not guarantythat he or she owns anything.

RRacketeering Influenced and Corrupt Organizations Act (RICO). Floridalaw dealing with activities that are considered organized crime.

real property. Land and things attached to it, such as a house or tree.

redemption. The right to save a property from foreclosure after it has been soldfor nonpayment.

Revenue Ruling. A decision by the Internal Revenue Service on a tax question.

right of first refusal. The right to buy a property when an owner gets an offerfrom an interested party.

Ssettlor. Person who sets up a trust.

security. An investment agreement in which one person put up money with theexpectation of making a profit from the efforts of others.


Statute of Uses. Law passed in England in 1536 that made most land trustsillegal.

straw man. Person to whom a property is conveyed temporarily in order toclear the title.

successor trustee. A person who becomes trustee after a previous trustee nolonger is willing or able to act as trustee.

Ttitle insurance. A guaranty that a person purchasing property actually owns it.

tort. An act that is legally wrong.

trust certificate. Optional legal instrument that denotes ownership of an inter-est in a land trust.

trust. An agreement in which one person is given property to hold for anotherperson.

trustee. Person who holds property for another person.

trustee’s deed. A legal instrument that transfers ownership of real property froma trustee to another party.

UUniform Commercial Code (UCC). A set of laws passed by all fifty stateswhich governs commercial transactions.

glossary ◆ 105

Vvested rights. Legal rights that are currently possessed, as opposed to rights thatwill not be possessed until some time in the future.

Wwarranty deed. A legal instrument that transfers ownership of real property andincludes a guaranty that the transfer is valid.


Florida CLE (Continuing Legal Education) Seminar Manuals

Land Trusts: Ownership and Conveyances Made Safe, Simple andConfidential (2000)

Land Trusts: Ownership and Conveyances Made Safe, Simple and Stealthy(1998)

Land Trust Seminar (2002)Land Trust Seminar (1995)1993 Land Trust Seminar (1993)1989 Land Trust Seminar (1989)1987 Land Trusts (1987)Land Trusts (1985)Land Trusts: An Important Vehicle for Ownership of Real Estate (1983)Land Trusts: Their Formation and Uses in Florida (1981)

Books

Edwards, Martin S., Land Trust Administration. Springfield: IllinoisInstitute for Continuing Legal Education, 1999. Available from theIllinois Institute for Continuing Education, 2395 W. Jefferson,

Bibliography

Springfield, IL 62702. An excellent book for corporate trust depart-ments and others who serve as trustee.

Kenoe, Henry W., Kenoe on Land Trusts. Springfield: Illinois Institute forContinuing Legal Education, 1989. Available from Illinois Institutefor Continuing Legal Education, 2395 W. Jefferson, Springfield, IL62702. Out of print.

Lowell, David R. and John G. Grimsley, Florida Law of Trusts. 3rd ed.Norcross: The Harrison Company, 1984.

Warda, Mark, Land Trusts for Privacy and Profit 2nd ed. Clearwater: GaltPress, 2004. Available from Galt Press, P.O. Box 8, Clearwater, FL33757. A national version of this land trust book written by theauthor and containing legal information about the status of land trustsin all 50 states.

Articles

“Can a Beneficial Interest in an Illinois Land Trust Qualify for Tax FreeExchange Treatment?,” Illinois Bar Journal. (Nov. 1982): 178-181.

Dorsey, John C. and Walter H. Nunnallee, “A Shell Corporation May be aGood Devisee of Contaminated Realty,” Estate Planning. 20 (Sept.-Oct. 1993): 283-288.

“The Florida Land Trust: and Overview,” Nova Law Journal. 6 (1982): 489.

“Florida Land Trust: Tax Planning and Problems,” Florida Bar Journal. 49(June 1975): 308.

Garrau, Douglas M., “The Potentially Responsible Trustee: Probable Targetfor CERCLA Liability,” Virginia Law Review. 77 (Feb. 1991): 113.

“Illinois Land Trust May Effect s. 1031 exchange,” Tax ManagementMemorandum. 33 (1992): 387-388.

“Land Trust Act,” University of Miami Law Review. 18(1964): 669.


“Power of Direction in Illinois Land Trust Exercisable by Less Than All ofthe Beneficiaries is as. 2038 Power,” Tax Management Memorandum.36 (Feb. 1995): 64-65.

“The Use of Revocable Trust to Defeat the Elective Share,” Florida BarJournal. 57 (Feb. 1983):110.

bibliography ◆ 109

All of these cases were used in explaining the information in this text. If youneed further explanation, you may want to read the entire text of the case orcases. Ask a law librarian to help you find the cases you need.

FLORIDA

Avila South Condo Assoc., Inc. v. Kappa Corp., 347 So.2d 599 (1977) . .51, 59

Axtell v. Coons, 89 So. 419 (1921) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Cowen v. Knott, 252 So.2d 400 (1971) . . . . . . . . . . . . . . . . . . . . . . . . . . .57

Datwani v. Netsch, 562 So.2d 721 (1990) . . . . . . . . . . . . . . . . . . . . . . . . .58

Ferraro v. Parker, 229 So.2d 621 (1969) . . . . . . . . . . . . . . . . . . . . . . .12, 49

First D.M.V., Inc. v. Amster, 545 So.2d 936 (1989) . . . . . . . . . . . . . . . . . .39

Goldman v. Mandell, 403 So.2d 511 (1981) . . . . . . . . . . . . . . . . . . . . .10, 65

Appendix A: Index of Cases

Grammer v. Roman, 174 So.2d 443 (1965) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Green v. First American Bk. and Trust, Tr. et al., 511 So.2d 569 (1987) . . . . . . . . . . . . . . . . . . . .39

Jonathan D. Commander, P.A., et al. v. McCann-Coyner-Clarke Real Estate, Inc.,830 So.2d 116 (Fla. 4DCA 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91

Kirkland v. Miller, 702 So.2d 620 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Kuro, Inc. v. Dept. of Revenue, 713 So.2d 1021 (Fla. 2DCA),appeal dismissed, 728 So.2d 201 (Fla. 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78

Lawyer’s Title Guaranty Fund v. Koch, 397 So.2d 455 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Magnuson v. Jones, 491 So.2d 1315 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Ridgewood Savings Bank v. Warda, Pinellas Co. Cir. Ct. Case No. 84-15780-7 (1985) . . . . . . . . .59

River Park Joint Venture 315076 v. Dickenson, 303 So.2d 654 (1974) . . . . . . . . . . . . . . . . . . . . .78

Schwartz v. Hill, 562 So.2d 779 (Fla. 2DCA 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Taylor v. Richmond’s New Approach Ass’n., Inc., 351 So.2d 1094 (1977) . . . . . . . . . . . . . . . . . . .27

Yandle Oil Co. v. Crystal River Seafood, Inc., 563 So.2d 839 (1990) . . . . . . . . . . . . . . . . . . . . . . .9

ILLINOIS AND OTHER STATES

Breen v. Breen, 103 N.E.2d 625 (1952) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Chicago Federal v. Caccitore, 185 N.E.2d 670 (1962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Commercial Nat’l. Bk. of Chicago v. Hazel Manor Condo., Inc., 487 N.E.2d 1145 (1985) . . . . . . .49

Connor v. First Nat’l. Bk.and Tr. Co., 439 N.E.2d 122, 108 Ill.App.3d 534 (1982) . . . . . . . .41, 53

Conkling v. McIntosh, 58 N.E.2d 304, 324 Ill.App. 292 (1944) . . . . . . . . . . . . . . . . . . . . . . . . .48

Coombs v. People, 64 N.E. 1056 (1902) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21


Damen Savings v. Heritage Standard Bank, 431 N.E.2d 34 (1982) . . . . . . . . . . . . . . . . . . . . . . .39

Devoigne v. Chicago Title & Trust Co., 136 N.E. 498 (1922) . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Duncanson v. Lill, 322 Ill. 328 (1927) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

Ellis Realty v. Chapelski, 329 N.E.2d 370, 28 Ill.App.3d 1008 (1975) . . . . . . . . . . . . . . . . . . . .67

Feinberg v. The Great Atlantic and Pacific Tea Co., 266 N.E.2d 401 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

Fields v. Indiana Ave. Apts, Inc., 196 N.E.2d 485, 47 Ill.App.2d 55 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41, 60

First Federal v. Pogue, 389 N.E.2d 652 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

First National Bank of Barrington v. Oldenberg, 427 N.E.2d 1312 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

First National Bank of Joliet v. Hampson, 88 Ill.App.3d 1057, 410 N.E.2d 1109 (1980) . . . . . . .22

Gallagher & Speck v. Chicago Title & Trust Co., 238 Ill.App 39 (1925) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Horney v. Hayes, 142 N.E.2d 94 (1957) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

IMM Acceptance v. First Nat’l. Bk.and Trust, 499 N.E.2d 1012 (1986) . . . . . . . . . . . . . . . . . . . .67

Johnson v. First Nat’l. Bk. of Park Ridge, 463 N.E.2d 859, 123 Ill.App.3d 823 (1984) . . . . . . . . .58

Lake Shore S. & L.Assn. v. American Nat’l Bk. & Tr. Co., 234 N.E.2d 418, 91 Ill.App.2d 143 (1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

Land Title & Trust v. Brannon, 103 Ariz. 272, 440 P.2d 105 (1965) . . . . . . . . . . . . . . . . . . . . . .43

Levi v. Adkay Heating & Cooling Corp., 274 N.E.2d 650, 1 Ill.App.3d 509 (1971) . . . . . . . . . . .52

Melrose Park Nat’l. Bank v. Melrose Park Nat’l. Bank, Trustee, 462 N.E.2d 741 (1984) . . . . . . . . .49

Nelson v. Fogelstrom, 284 N.E.2d 339, 5 Ill.App.3d 804 (1972) . . . . . . . . . . . . . . . . . . . . . . . . . .8

appendix a: index of cases ◆ 113

Randolph v. Reed, 129 Ark. 485, 196 S.W. 133 (1917) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Robinson v. Walker, 211 N.E.2d 488 (1965) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Saeed v. Bank of Ravenswood, 427 N.E.2d 858, 101 Ill.App.3d 20 (1981) . . . . . . . . . . . . . . . . .61

Santo v. Santo, 497 N.E.2d 492, 146 Ill.App.3d 774 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . .39

In re Estate of Schaaf, 312 N.E.2d 348, 19 Ill.App.3d 662 (1974) . . . . . . . . . . . . . . . . . . . . . . .44

Schneider v. Pioneer Trust and Savings Bank, 168 N.E.2d 808 (1960) . . . . . . . . . . . . . . . . . . . . .65

Southeast Village Associates v. Health Management Association, 416 N.E.2d 325 (1980) . . . . . . . .51

Teeple v. Hunziker, 454 N.E.2d 1174 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

In re Tutules Estate, 204 Cal. 2d 481, 22 Cal. Rptr. 427 (1962) . . . . . . . . . . . . . . . . . . . . . . . . .43

Wachta v. First Federal, 430 N.E.2d 708 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

FEDERAL

In re Argonne Construction Co., 10 B.R. 570 (N.D.Ill. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . .21

In re Arehart, 52 B.R. 308 (Fla. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Chrysler Credit Corp. v. Louis Joliet Bank and Trust Co., 863 F.2d 534 (1988) . . . . . . . . . . . . . . .22

In re Dolton Lodge Trust No. 35188, 22 B.R. 918 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Hubert Rutland, 36 T.C.M. (CCH) 40 (1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72

Landsdown Realty Trust v. Commissioner, 50 F.2d 56 (1930) . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

In re Matter of Maidman, 2 B.R. 569 (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Mayo v. Barnett Bank of Pensacola, 448 F.Supp. 250 (1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

McClure v. United States, 608 F.2d 478 (Ct.Cl. 1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73


In re Metro Palms I Trust, 153 B.R. 922 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Pieroni Building Trust v. Commissioner, 45 B.T.A. 157 (1941) . . . . . . . . . . . . . . . . . . . . . . . . . .69

Pommier v. Commissioner, 52 T.C.M. (CCH) 766 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

In re Povia, 224 B.R. 209 (M.D.Fla. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

In re Steven S. Saber, 233 B.R. 547 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

SEC v. W. J. Howey Co., 328 U.S. 293 (1946) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

In re Star Trust, 237 B.R. 827 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Tick v. Cohen, 787 F.2d 1490 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

United Housing Foundation, Inc. v. Forman, 421 U.S. 837 (1975) . . . . . . . . . . . . . . . . . . . . . . .83

United States v. Aronson, 610 F. Supp. 217 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

United States v. Fleet Factors Corp., 901 F.2d 1550 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93

Williamson v. Tucker, 645 F.2d 404 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

appendix a: index of cases ◆ 115

Florida Statutes §689.071

Land trusts transferring interests in real estate;ownership vests in trustee.

(1) Every conveyance, deed, mortgage, leaseassignment, or other instrument heretofore orhereafter made, hereinafter referred to as "therecorded instrument," transferring any interestin real property in this state, including but notlimited to a leasehold or mortgagee interest, to

any person, corporation, bank, trust company,or other entity qualified to act as a fiduciary inthis state, in which recorded instrument theperson, corporation, bank, trust company, orother entity is designated "trustee," or "astrustee," without therein naming the benefici-aries of such trust, whether or not reference ismade in the recorded instrument to any sepa-rate collateral unrecorded declarations oragreements, is effective to vest, and is hereby

Appendix B:Statutes & Regulations

This appendix contains the following Florida statutes and Administrative CodeRegulations:Florida Statutes (F.S.):

Section 689.071 (Land Trust Statute)Section 689.07 (Deeds Designating Trustee)Section 737.306 (Nonliability of Trustee)Section 201.02 (Documentary Stamp Tax)Section 895.07 (RICO Disclosures)

Florida Administrative Code (F.A.C.):Section 12B-4.013Section 12D-7.011

NOTE: The Symbol “§” means section, as in the section number of the statute orregulation.

declared to have vested, in such trustee full rights of owner-ship over the real property or interest therein, with fullpower and authority as granted and provided in therecorded instrument to deal in and with the property orinterest therein or any part thereof; provided, the recordedinstrument confers on the trustee the power and authorityeither to protect, conserve and to sell, or to lease, or toencumber, or otherwise to manage and dispose of the realproperty described in the recorded instrument.

(2) Any grantee, mortgagee, lessee, transferee, assignee, orperson obtaining satisfactions or releases or otherwise inany way dealing with the trustee with respect to the realproperties held in trust under the recorded instrument, ashereinabove provided for, is not obligated to inquire intothe identification or status of any named or unnamed ben-eficiaries, or their heirs or assigns to whom a trustee may beaccountable under the terms of the recorded instrument, orunder any unrecorded separate declarations or agreementscollateral to the recorded instrument, whether or not suchdeclarations or agreements are referred to therein; or toinquire into or ascertain the authority of such trustee to actwithin and exercise the powers granted under the recordedinstrument; or to inquire into the adequacy or dispositionof any consideration, if any is paid or delivered to suchtrustee in connection with any interest so acquired fromsuch trustee; or to inquire into any of the provisions of anysuch unrecorded declarations or agreements.

(3) All persons dealing with the trustee under the recordedinstrument as hereinabove provided take any interest trans-ferred by the trustee thereunder, within the power andauthority as granted and provided therein, free and clear ofthe claims of all the named or unnamed beneficiaries ofsuch trust, and of any unrecorded declarations or agree-ments collateral thereto whether referred to in the recordedinstrument or not, and of anyone claiming by, through, orunder such beneficiaries including, and without limitingthe foregoing to, any claim arising out of any dower or cur-tesy interest of the spouse of any beneficiary thereof;provided, nothing herein contained prevents a beneficiaryof any such unrecorded collateral declarations or agree-ments from enforcing the terms thereof against the trustee.

(4) In all cases in which the recorded instrument, as here-inabove provided, contains a provision defining anddeclaring the interests of beneficiaries thereunder to be per-sonal property only, such provision shall be controlling forall purposes when such determination becomes an issueunder the laws or in the courts of this state.

(5) In addition to any other limitation on personal liabil-ity existing pursuant to statute or otherwise, the provisionsof §737.306 apply to the trustee of a land trust created pur-suant to this section.

(6) This act is remedial in nature and shall be given a lib-eral interpretation to effectuate the intent and purposeshereinabove expressed.

(7) This act does not apply to any deed, mortgage, or otherinstrument to which §689.07 applies.


"Trustee" or "as trustee" added to name of grantee, trans-feree, assignee, or mortgagee transfers interest or createslien as if additional word or words not used.

(1) Every deed or conveyance of real estate heretofore orhereafter made or executed, in which the words "trustee" or"as trustee" are added to the name of the grantee, and inwhich no beneficiaries are named nor the nature and pur-poses of the trust, if any, are set forth, shall grant and ishereby declared to have granted a fee simple estate with fullpower and authority in and to the grantee in such deed tosell, convey, and grant and encumber both the legal andbeneficial interest in the real estate conveyed, unless con-trary intention shall appear in the deed or conveyance;provided, that there shall not appear of record among thepublic records of the county in which the real property issituate at the time of recording of such deed or conveyance,a declaration of trust by the grantee so described declaringthe purposes of such trust, if any, declaring that the realestate is held other than for the benefit of the grantee.

(2) Every instrument heretofore or hereafter made or exe-cuted transferring or assigning an interest in real property inwhich the words "trustee" or "as trustee" are added to thename of the transferee or assignee, and in which no benefi-ciaries are named nor the nature and purposes of the trust,if any, are set forth, shall transfer and assign,and is herebydeclared to have transferred and assigned, the interest of thetransferor or assignor to the transferee or assignee with fullpower and authority to transfer, assign, and encumber suchinterest, unless a contrary intention shall appear in theinstrument; provided that there shall not appear of recordamong the public records of the county in which the realproperty is situate at the time of the recording of suchinstrument, a declaration of trust by the assignee or trans-feree so described declaring the purposes of such trust, ifany, or declaring that the interest in real property is heldother than for the benefit of the transferee or assignee.

(3) Every mortgage of any interest in real estate or assign-ment thereof heretofore or hereafter made or executed inwhich the words "trustee" or "as trustee" are added to thename of the mortgagee or assignee and in which no bene-ficiaries are named nor the nature and purposes of the trust,if any, are set forth, shall vest and is hereby declared to havevested full rights of ownership to such mortgage or assign-ment and the lien created thereby with full power in suchmortgagee or assignee to assign, hypothecate, release, sat-


isfy, or foreclose such mortgage unless a contrary intentionshall appear in the mortgage or assignment; provided thatthere shall not appear of record among the public recordsof the county in which the property constituting security issituate at the time of recording of such mortgage or assign-ment, a declaration of trust by such mortgagee or assigneedeclaring the purposes of such trust, if any, or declaringthat such mortgage is held other than for the benefit of themortgagee or assignee.

(4) Nothing herein contained shall prevent any personfrom causing any declaration of trust to be recorded beforeor after the recordation of the instrument evidencing titleor ownership of property in a trustee; nor shall this sectionbe construed as preventing any beneficiary under anunrecorded declaration of trust from enforcing the termsthereof against the trustee; provided, however, that anygrantee, transferee, assignee, or mortgagee, or personobtaining a release or satisfaction of mortgage from suchtrustee for value prior to the placing of record of such dec-laration of trust among the public records of the county inwhich such real property is situate, shall take such interestor hold such previously mortgaged property free and clearof the claims of the beneficiaries of such declaration of trustand of anyone claiming by, through or under such benefi-ciaries, and such person need not see to the application offunds furnished to obtain such transfer of interest in prop-erty or assignment or release or satisfaction of mortgagethereon.

(5) In all cases in which tangible personal property is or hasbeen sold, transferred, or mortgaged in a transaction in con-junction with and subordinate to the transfer or mortgage ofreal property, and the per sonal property so transferred ormortgaged is physically located on and used in conjunctionwith such real property, the prior provisions of this sectionare applicable to the transfer or mortgage of such personalproperty, and, where the prior provisions of this section infact apply to a transfer or mortgage of personal property,then any transferee or mortgagee of such tangible personalproperty shall take such personal property free and clear ofthe claims of the beneficiaries under such declaration of trust(if any), and of the claims of anyone claiming by, through, orunder such beneficiaries, and the release or satisfaction of amortgage on such personal property by such trustee shallrelease or satisfy such personal property from the claims ofthe beneficiaries under such declaration of trust, if any, andfrom the claims of anyone claiming by, through, or undersuch beneficiaries.


Personal liability of trustee.

(1)(a) Unless otherwise provided in the contract, a trusteeis not personally liable on contracts, except contracts for

attorneys' fees, properly entered into in the trustee's fiduci-ary capacity in the course of administration of the trustestate unless he or she fails to reveal his or her representa-tive capacity and identify the trust estate in the contract.

(b) A trustee is personally liable for obligations arisingfrom ownership or control of property of the trustestate or for torts committed in the course of adminis-tration of the trust estate only if the trustee ispersonally at fault.

(c) Claims based on contracts, except contracts forattorneys' fees, entered into by a trustee in his or herfiduciary capacity, on obligations arising from owner-ship or control of the trust estate, or on tortscommitted in the course of trust administration maybe asserted against the trust estate by proceedingagainst the trustee in his or her fiduciary capacity,whether or not the trustee is personally liable.

(2) Issues of liability between the trust estate and the trusteeindividually may be determined in a proceeding foraccounting, surcharge, or indemnification, or in any otherappropriate proceeding.

(3) A successor trustee is not personally liable for any actiontaken or omitted to be taken by any prior trustee; nor doesany successor trustee have a duty to institute any actionagainst any prior trustee, or file any claim against any priortrustee's estate, for any of the prior trustee's acts or omis-sions as trustee under any of the following circumstances:

(a) The successor trustee succeeds a trustee who wasalso the grantor of a trust that was revocable during thetime that the grantor served as trustee;

(b) As to any beneficiary who has waived any account-ing required by §737.303, but only as to the periodsincluded in such waiver;

(c) As to any beneficiary who has released the succes-sor trustee from such duty to institute any action orfile any claim;

(d) As to any person who is not a beneficiary withinthe meaning of §737.303(4)(b); or

(e) As to any beneficiary described in §737.303(4)(b):

1.If a super majority of the reasonably ascertainablecurrent income or principal beneficiaries describedin §737.303(4)(b) and a super majority of the rea-sonably ascertainable remainder beneficiariesdescribed in §737.303(4)(b)2 have released the suc-cessor trustee;

2. If the beneficiary has not delivered a writtenrequest to the successor trustee to institute an actionor file a claim against the prior trustee within 6

appendix b: stautes & regulations ◆ 119

months after the date of the successor trustee'sacceptance of the trust,if the successor trustee hasnotified the beneficiary in writing of its acceptancein accordance with §737.303(1), and such writingadvises the beneficiary that, unless the beneficiarydelivers such written request within 6 months afterthe date of acceptance, his or her right to proceedagainst the successor trustee will be barred pursuantto this section; or

3. For any action or claim that the beneficiary isbarred from bringing against the prior trustee.

(4)(a) Two years after the death of a settlor, neither a trustdescribed in §733.707(3) as established by the settlor, thetrustee of the trust, nor any beneficiary may be held liable forany claim or cause of action against the settlor by a creditorwho seeks to recover from the trust, trustee, or beneficiary.

(b) This subsection does not apply to a creditor whohas timely filed a claim against the settlor's estateunder §733.702 within 2 years after the settlor's deathand whose claim has not been paid or otherwise dis-posed of, even if the settlor's estate proceedings havebeen closed or otherwise completed.

(c) This subsection does not affect the lien of a dulyrecorded mortgage or security interest or the right toforeclose and enforce the mortgage or lien.

(5) For the purposes of this section, a super majority ofbeneficiaries means at least two-thirds in interest of thebeneficiaries if the interests of the beneficiaries are reason-ably ascertainable; otherwise, it means at least two-thirds innumber of the beneficiaries. A release or waiver under thissection may be exercised by a legal representative or naturalguardian of the beneficiary without the filing of any pro-ceeding or approval of any court. Nothing in subsection (3)affects any liability of the prior trustee or the right of thesuccessor trustee or any beneficiary to pursue an action orclaim against the prior trustee.


Tax on deeds and other instruments relating to real prop-erty or interests in real property.

(1) On deeds, instruments, or writings whereby any lands,tenements, or other real property, or any interest therein,shall be granted, assigned, transferred, or otherwise con-veyed to, or vested in, the purchaser or any other person byhis or her direction, on each $100 of the considerationtherefor the tax shall be 70 cents. When the full amount ofthe consideration for the execution, assignment, transfer, orconveyance is not shown in the face of such deed, instru-ment, document, or writing, the tax shall be at the rate of70 cents for each $100 or fractional part thereof of the con-sideration therefor. For purposes of this section,

consideration includes, but is not limited to, the moneypaid or agreed to be paid; the discharge of anobligation;and the amount of any mortgage, purchasemoney mortgage lien, or other encumbra n c e, hether ornot the underlying indebtedness is assumed. If the consid-eration paid or given in exchange for real property or anyinterest therein includes property other than money, it ispresumed that the consideration is equal to the fair marketvalue of the real property or interest therein.

(2) The tax imposed by subsection (1) shall also be payableupon documents by which the right is granted to a tenant-stockholder to occupy an apartment in a building ownedby a cooperative apartment corporation or in a dwelling onreal property owned by any other form of cooperative asso-ciation as defined in §719.103.

(3) The tax imposed by subsection (2) shall be paid by thepurchaser, and the document recorded in the office of theclerk of the circuit court as evidence of ownership.

(4) The tax imposed by subsection (1) shall also be payableupon documents which convey or transfer, pursuant to§689.071, any beneficial interest in lands, tenements, orother real property, or any interest therein, even thoughsuch interest may be designated as personal property,notwithstanding the provisions of §689.071(4). The taxshall be paid upon execution of any such document.

(5) All conveyances of real property to a partner from apartnership which property was conveyed to the partner-ship after July 1, 1986, are taxable if:

(a) The partner receiving the real property from thepartnership is a partner other than the partner whoconveyed the real property to the partnership; or

(b) The partner receiving the real property from thepartnership is the partner who conveyed the real prop-erty to the partnership and there is a mortgage debt orother debt secured by such real property for which thepartner was not personally liable prior to conveyingthe real property to the partnership.

For purposes of this subsection, the value of the considera-tion paid for the conveyance of the real property to thepartner from the partnership includes, but is not limited to,the amount of any outstanding mortgage debt or otherdebt which the partner pays or agrees to pay in exchangefor the real property, regardless of whether the partner waspersonally liable for the debts of the partnership prior tothe conveyance to the partner from the partnership.

(6) Taxes imposed by this section shall not apply to anyassignment, transfer, or other disposition, or any docu-ment, which arises out of a transfer of real property from anonprofit organization to the Board of Trustees of theInternal Improvement Trust Fund, to any state agency, to


any water management district, or to any local govern-ment. For purposes of this subsection, "nonprofitorganization" means an organization whose purpose is thepreservation of natural resources and which is exempt fromfederal income tax under §501(c)(3) of the InternalRevenue Code. The Department of Revenue shall provide aform, or a place on an existing form, for the nonprofitorganization to indicate its exempt status.

(7) Taxes imposed by this section do not apply to adeed,transfer, or conveyance between spouses or formerspouses pursuant to an action for dissolution of their mar-riage wherein the real property is or was their marital homeor an interest therein. Taxes paid pursuant to this sectionshall be refunded in those cases in which a deed, transfer, orconveyance occurred 1 year before a dissolution of marriage.This subsection applies in spite of any consideration asdefined in subsection (1). This subsection does not apply toa deed, transfer, or conveyance executed before July 1, 1997.


RICO lien notice.

(1) Upon the institution of any civil proceeding, the inves-tigative agency, then or at any time during the pendency ofthe proceeding, may file a RICO lien notice in the officialrecords of any one or more counties. No filing fee or othercharge shall be required as a condition for filing the RICOlien notice, and theclerk of the circuit court shall, upon thepresentation of a RICO lien notice, immediately record itin the official records.

(2) The RICO lien notice shall be signed by the head of theDepartment of Legal Affairs or her or his designee or by astate attorney or her or his designee. The notice shall be insuch form as the Attorney General prescribes and shall setforth the following information:

(a) The name of the person against whom the civilproceeding has been brought. In its discretion, theinvestigative agency may also name in the RICO liennotice any other aliases, names, or fictitious namesunder which the person may be known and any cor-poration,partnership, or other entity that is eithercontrolled or entirely owned by the person.

(b) If known to the investigative agency, the presentresidence and business addresses of the person namedin the RICO lien notice and of the other names setforth in the RICO lien notice.

(c) A reference to the civil proceeding, stating: that aproceeding under the Florida RICO Act has beenbrought against the person named in the RICO liennotice;the name of the county or counties in which theproceeding has been brought; and, if known to the

investigative agency at the time of filing the RICO liennotice, the case number of the proceeding.

(d) A statement that the notice is being filed pursuantto the Florida RICO Act.

(e) The name and address of the investigative agencyfiling the RICO lien notice and the name of the indi-vidual signing the RICO notice. A RICO lien noticeshall apply only to one person and, to the extent appli-cable, any other aliases, names, or fictitious names,including names of corporations, partnerships, orother entities, to the extent permitted in paragraph (a).A separate RICO lien notice shall be filed for each per-son against whom the investigative agency desires tofile a RICO lien notice under this section.

(3) The investigative agency shall, as soon as practicableafter the filing of each RICO lien notice, furnish to the per-son named in the notice either a copy of the recordednotice or a copy of the notice with a notation thereon ofthe county or counties in which the notice has beenrecorded. The failure of the investigative agency to furnisha copy of the notice under this subsection shall not invali-date or otherwise affect the notice.

(4) The filing of a RICO lien notice creates, from the timeof its filing,a lien in favor of the state on the followingproperty of the person named in the notice and against anyother names set forth in the notice:

(a) Any real property situated in the county where thenotice is filed then or thereafter owned by the personor under any of the names; and

(b) Any beneficial interest situated in the county wherethe notice is filed then or thereafter owned by the personor under any of the names. The lien shall commence andattach as of the time of filing of the RICO lien noticeand shall continue thereafter until expiration, termina-tion, or release of the notice pursuant to §895.08. Thelien created in favor of the state shall be superior andprior to the interest of any other person in the real prop-erty or beneficial interest if the interest is acquiredsubsequent to the filing of the notice.

(5) In conjunction with any civil proceeding:

(a) The investigative agency may file without priorcourt order in any county a lis pendens under the pro-visions of §48.23; in such case, any person acquiringan interest in the subject real property or beneficialinterest,if the real property or beneficial interest isacquired subsequent to the filing of lis pendens, shalltake the interest subject to the civil proceeding and anysubsequent judgment of forfeiture.


(b) If a RICO lien notice has been filed,the investiga-tive agency may name as a defendant, in addition to theperson named in the notice, any person acquiring aninterest in the real property or beneficial interest subse-quent to the filing of the notice. If a judgment offorfeiture is entered in the proceeding in favor of thestate, the interest of any person in the property that wasacquired subsequent to the filing of the notice shall besubject to the notice and judgment of forfeiture.

(6) A trustee who acquires actual knowledge that a RICOlien notice or a civil proceeding or criminal proceeding hasbeen filed against any person for whom the trustee holdslegal or record title to real property shall immediately fur-nish to the investigative agency the following:

(a) The name and address of the person,as known tothe trustee.

(b) The name and address, as known to the trustee, ofeach other person for whose benefit the trustee holdstitle to the real property.

(c) If requested by the investigative agency, a copy ofthe trust agreement or other instrument pursuant towhich the trustee holds legal or record title to the realproperty. Any trustee who fails to comply with theprovisions of this subsection is guilty of a misde-meanor of the second degree, punishable as providedin §775.082 or §775.083.

(7) Any trustee who conveys title to real property forwhich, at the time of the conveyance, a RICO lien noticenaming a person who, to the actual knowledge of thetrustee, holds a beneficial interest in the trust has been filedin the county where the real property is situated is liable tothe state for the greatest of:

(a) The amount of proceeds received directly by theperson named in the RICO lien notice as a result ofthe conveyance;

(b) The amount of proceeds received by the trustee asa result of the conveyance and distributed to the per-son named in the RICO lien notice; or

(c) The fair market value of the interest of the personnamed in the RICO lien notice in the real property soconveyed; however, if the trustee conveys the real prop-erty and holds the proceeds that would otherwise bepaid or distributed to the beneficiary or at the directionof the beneficiary or her or his designee, the trustee'sliability shall not exceed the amount of the proceeds soheld for so long as the proceeds are held by the trustee.

(8) The filing of a RICO lien notice shall not constitute alien on the record title to real property as owned by thetrustee except to the extent that the trustee is named in the

RICO lien notice. The investigative agency may bring a civilproceeding in any circuit court against the trustee to recoverfrom the trustee the amount set forth in subsection (7), andthe state shall also be entitled to recover investigative costsand attorney's fees incurred by the investigative agency.

(9) The filing of a RICO lien notice shall not affect the useto which real property or a beneficial interest owned by theperson named in the RICO lien notice may be put or theright of the person to receive any avails, rents, or other pro-ceeds resulting from the use and ownership, but not thesale, of the property until a judgment of forfeiture isentered.

(10)(a) The provisions of this section shall not apply to anyconveyance by a trustee pursuant to a court order, unlesssuch court order is entered in an action between the trusteeand the beneficiary.

(b) Unless the trustee has actual knowledge that a per-son owning a beneficial interest in the trust is namedin a RICO lien notice or is otherwise a defendant in acivil proceeding, the provisions of this section shall notapply to:

1. Any conveyance by the trustee required underthe terms of the trust agreement, which trustagreement is a matter of public record prior to thefiling of the RICO lien notice; or

2. Any conveyance by the trustee to all of the per-sons who own beneficial interests in the trust.

(11) All forfeitures or dispositions under this section shallbe made with due provision for the rights of innocent per-sons.

Florida Administrative Code §12B-4.013

Conveyances Subject to Tax.

[unrelated material omitted]

(29) Assignment of Beneficial Interest in Land Trust:Effective July 3, 1979, any document which conveys anybeneficial interest in a land trust agreement is subject to tax,and the tax is to be paid upon execution of the docu-ment.The provision in §689.071(4), F. S., which defines theinterest of a beneficiary under a trust agreement to be per-sonal property only, does not exempt a transfer of thebeneficial interest in the trust from documentary stamp tax.

[unrelated material omitted]

(32) Trusts Pursuant to Chapter 689, F.S.: A deed to orfrom a trustee conveying real property is taxable to theextent that the deed transfers the beneficial ownership ofthe real property and to the extent that there is considera-tion for the transfer. The following are examples of taxableand exempt conveyances to or from a trustee.


(a) No change in Beneficial Ownership: A deed fromX to a trustee is exempt from the stamp tax to theextent of X's beneficial ownership interest as a trustbeneficiary, whether or not the real property isencumbered by a mortgage. For example, if X ownsencumbered or unencumbered real property and con-veys it to the trustee of a trust of which X is the solebeneficiary, the conveyance is exempt from the stamptax.

(b) Change in Beneficial Ownership: If persons otherthan X are trust beneficiaries, then a deed from X to atrustee is taxable to the extent of the consideration, ifany, for the beneficial interest in the real propertytransferred to such other persons. The stamp tax isbased on any cash, note, release or other considerationfrom the trust beneficiaries other than X, includingtheir proportionate share of any mortgage encumber-ing the real property. For example, if X ownsunencumbered real property valued at $100 and Xconveys the property to the trustee of a trust of whichX and Y are each 50% beneficiaries, and Y pays $50cash for the conveyance to the trustee, then stamp taxwould be due based on a consideration of $50.

(c) Gift in Trust: A deed from X to a trustee is exemptfrom the stamp tax if persons other than X are trustbeneficiaries, the transfer is a gift from X to those ben-eficiaries, and the real property is not encumbered byany mortgage. If the real property is encumbered byany mortgage, then the stamp tax is based on the otherbeneficiaries' proportionate share of the mortgageindebtedness allocated according to their respectivepercentage beneficial interest. For example, if X ownsreal property valued at $100 which is encumbered bya mortgage of $50 and X conveys the property to thetrustee of a trust of which X and X's daughter are each50% beneficiaries, and there is no consideration otherthan the mortgage, then stamp tax would be due basedon a consideration of $25 (one-half of the mortgageindebtedness).

(d) Successor or Substitute Trustee: A deed from atrustee to a successor or substitute trustee of the sametrust is not subject to the stamp tax.

(e) Trustee's Deed to Beneficiary: A deed of real prop-erty from a trustee to X is not subject to the stamp taxto the extent of X's beneficial ownership interest as atrust beneficiary immediately before the conveyance,whether or not the real property is encumbered by amortgage. Except as provided in paragraph (f ) of thisrule below, however, the stamp tax applies to theextent that the trustee transfers to X an ownershipinterest in the real property greater than X's percentagebeneficial ownership interest as a trust beneficiary

immediately before the transfer, based on the consid-eration, if any, for the transfer of the additionalinterest, including the proportionate share of anymortgage indebtedness encumbering the additionalpercentage interest in the real property transferred to Xby the trustee. For example, if X and X's spouse areeach beneficiaries of a trust of which X owns 60%interest and X's spouse owns 50% interest and thetrustee conveys to X real property valued at $100which is encumbered by a mortgage of $50, and thereis no consideration other than the mortgage, thenstamp tax would be due based on a consideration of$20 (40% of the mortgage indebtedness).

(f ) Trustee's Power to Apportion: When trust benefici-aries hold undivided percentage interests in the corpusof the trust rather than specific interests in each parcelof real property held in the trust, and a trust instru-ment grants the trustee the power to apportion anddistribute the various assets of the trust among thebeneficiaries, then stamp tax is due on the conveyanceof real property from the trustee to a beneficiary onlyto the extent that the value of that real propertyexceeds the value of the beneficiary's undivided per-centage interest in the trust. For example, a grantorconveys Blackacre and Whiteacre to a trustee for thebenefit of the grantor's two children, X and Y, whoeach have an undivided 50% interest in the trust. Theterms of the trust provide that when both X and Yreach 21 years of age, the trustee will liquidate thetrust and distribute the assets of the trust between Xand Y as the trustee shall determine provided that eachbeneficiary shall receive property of approximatelyequal value. Blackacre and Whiteacre are equal invalue when X and Y reach 21, and the trustee conveysBlackacre to X and Whiteacre to Y. Stamp tax is dueon the initial conveyance from the grantor to thetrustee to the extent of any taxable consideration, suchas a mortgage on the property (see foregoing para-graph (c) of this rule), but no stamp tax is due on thesubsequent conveyances from the trustee to X and Y,regardless of whether any mortgage then encumbersthe property.

(g) Trustee's Deed to Non-Beneficiary: The stamp taxapplies to a trustee's deed of real property to granteesthat are not beneficial owners as trust beneficiariesimmediately before the conveyance, to the extent ofthe consideration given, if any, for the interest in thereal property transferred to the non-beneficiarygrantees. The stamp tax is based on any cash, note,release or other consideration from the non-benefici-ary grantees, including their proportionate share ofany mortgage encumbering the real property. Forexample, if X is the sole beneficiary of a trust and the


trustee conveys to X and Y, as 50% tenants-in-com-mon, real property valued at $100 which isencumbered by a mortgage of $60, and Y pays $20cash for Y's 50% interest in the property, then stamptax would be due based on the consideration of $50($20 cash plus 50% of the mortgage indebtedness).

(h) Identity of Parties; Nature of Trust: All con-veyances to or from a trustee are equally taxable orexempt as provided in this rule, regardless of:

1. Whether the trustee is the same person asgrantor, grantee, or beneficiary,

2. Whether the trustee or grantor or grantee orbeneficiary is a natural person or an entity, and

3. Whether a recorded instrument confers on thetrustee the powers and authority specified inSection 689.071(1), F.S., or declares the interestof the beneficiaries is personal property as speci-fied in Section 689.071(4), F.S.

(i) Revocable Trust: A deed to a trustee from a grantorwho has the power to revoke the trust instrument, anda deed back to the grantor from the trustee upon rev-ocation of the trust, are not transfers of ownershipsubject to the stamp tax.

Florida Administrative Code §12D-7.011

Homestead Exemptions - Trusts.

The beneficiary of a passive or active trust has equitabletitle to real property if he is entitled to the use and occu-pancy of such property under the terms of the trust;therefore, he has sufficient title to claim homestead exemp-tion. AGO 90-70. Homestead tax exemption may not bebased upon residence of a beneficiary under a trust instru-ment which vests no present possessory right in suchbeneficiary.


Appendix C:Checklists

The following checklists are provided for your use. As you complete each task,check it off to ensure that you comply with all procedures.

Checklist 1: Land Trust Formation Checklist . . . . . . . . . . . . . . 126

Checklist 2: Land Trust Mortgage Checklist . . . . . . . . . . . . . . 127

Checklist 3: Land Trust Pledge of Beneficial Interest Checklist . . . . . . . . . . . . . . . . 128

Checklist 4: Sale of Beneficial Interest Checklist . . . . . . . . . 129

Checklist 5: Land Trust Termination Checklist . . . . . . . . . . . . 130

Land Trust Formation Checklist(Forming a Land Trust)

❒ Complete Land Trust Data Sheet❒ Check beneficiary for RICO liens❒ Check property for possibility of environmental contamination❒ Check mortgage for due-on-sale clause

❒ Obtain approval for transfer if necessary

❒ Deed to Trusteeprepared ❒executed ❒recorded ❒

❒ Form DR-219prepared ❒executed ❒

❒ Trustprepared ❒executed ❒

❒ Beneficiary Agreementprepared ❒executed ❒

❒ Trust certificatesprepared ❒executed ❒

❒ Statement of registered agent for ABO (if foreign beneficiary)prepared ❒executed ❒

filed ❒

❒ IRS Form 56-Aprepared ❒executed ❒

filed ❒

❒ Copies distributed to all parties

126 ◆ checklist 1

Land Trust Mortgage Checklist(Mortgaging real estate held by a Land Trust)

❒ Direction to Trusteeprepared ❒executed ❒

❒ Promissory noteprepared ❒

executed by beneficiary ❒

❒ mortgageprepared ❒

executed by trustee ❒recorded ❒

checklist 2 ◆ 127

Land Trust Pledge of Beneficial Interest Checklist

(Pledging beneficial interest of a land trust by a beneficiary as security for a loan.)

❒ Security Agreementprepared ❒executed ❒

❒ Promissory noteprepared ❒executed ❒

❒ UCC-1prepared ❒executed ❒recorded ❒

128 ◆ checklist 3

Sale of Beneficial Interest Checklist

(Selling beneficial interest in land trust and taking a collateral assignment of the beneficial interest ascollateral for money owed by buyer.)

❒ Assignment of beneficial interestprepared ❒executed ❒

❒ DR-219prepared ❒executed ❒

filed ❒

❒ Collateral assignment of beneficial interestprepared ❒executed ❒

❒ UCC-1prepared ❒executed ❒recorded ❒

❒ IRS Form 56 (terminate old beneficiary)prepared ❒executed ❒

filed ❒

❒ IRS Form 56 (add new beneficiary)prepared ❒executed ❒

filed ❒

checklist 4 ◆ 129

Land Trust Termination Checklist(Terminating a Land Trust)

❒ Direction to trusteeprepared ❒executed ❒recorded ❒

❒ Check that trustee fees are current

❒ Obtain RICO search

❒ Deedprepared ❒executed ❒recorded ❒

❒ Form DR-219prepared ❒executed ❒

❒ IRS Form 56prepared ❒executed ❒

filed ❒

130 ◆ checklist 5

These forms are provided for your use. You can tear them out, copy them, anduse them. You may want to check with your county clerk to see if the forms youneed to file are acceptable. Some forms have instructions with them, and if youneed further explanation, refer to the text of the chapters that explain each form.

form 1: Land Trust Data Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133

form 2: Warranty Deed to Trustee . . . . . . . . . . . . . . . . . . . . . . . . .135

form 3: Land Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137

form 4: Quit Claim Deed to Trustee . . . . . . . . . . . . . . . . . . . . . . . .143

form 5: Directions to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145

form 6: Assignment of Beneficial Interest . . . . . . . . . . . . . . . . . .146

form 7: Trustee’s Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147

form 8: Notice Concerning Fiduciary Relationship(IRS Form 56) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149

form 9: Notice Concerning Fiduciary Relationship Illinois Type Land Trust (IRS Form 56-A) . . . . . . . . . . . . .150

Appendix D:Blank Forms

form 10: Co-Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151

form 11: Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153

form 12: Designation of Registered Agent and Registered Office for Alien Business Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .157

form 13: Statement of Change of Registered Agent and/or Registered Office for Alien Business Organization(Transmittal Letter) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159

form 14: Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161

form 15: Guaranty of Promissory Note by Beneficiaries . . . . . . . . . . . . . . . . . . . . . .162

form 16: Conditional Assignment of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . .163

form 17: Security Agreement (Chattel Mortgage) . . . . . . . . . . . . . . . . . . . . . . . . . . . .164

form 18: State of Florida Uniform Commercial Code Financing Statement (UCC-1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165

form 19: Documentary Stamp Tax Return for Nonregistered Taxpayers’ Unrecorded Documents (DR-228) . . . . . . . . . . .169

form 20: Trust Participation Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171

form 21: Memorandum of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .172

form 22: Affidavit Regarding Status Under Internal Revenue Code, Section 1445 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173

form 23: Assignment of Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174

form 24: Return for Transfers of Interest in Real Property (DR-219) . . . . . . . . . . . . .175

form 25: State of Florida Uniform Commercial Code Financing Statement Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .179

form 26: Amendment to Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .183


LAND TRUST DATA SHEET

Beneficiaries:_____% Name_______________________________________SS#_______________________Address_____________________________________________Phone_____________________Successor____________________________________________SS#_______________________Address_____________________________________________Phone_____________________

_____% Name_______________________________________SS#_______________________Address_____________________________________________Phone_____________________Successor____________________________________________SS#_______________________Address_____________________________________________Phone_____________________

_____% Name_______________________________________SS#_______________________Address_____________________________________________Phone_____________________Successor____________________________________________SS#_______________________Address_____________________________________________Phone_____________________

_____% Name________________________________________SS#______________________Address_____________________________________________Phone_____________________Successor_____________________________________________SS#______________________Address_____________________________________________Phone_____________________

Street address of property _________________________________________________________Legal description ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Tax parcel #________________________________________County______________________

Mortgagee__________________________________________Loan #_____________________Address____________________________________________Balance_____________________Second mortgagee____________________________________Loan #______________________Address____________________________________________Balance_____________________

I/we certify that the above information is true, that the land trust is not being set up for any illegalor criminal purpose, and that we are U.S. residents for tax purposes, and we agree to indemnify thetrustee for any liability with regard to this trust._____________________________________ ______________________________________

form 1 ◆ 133

This page intentionally left blank.

Grantee’s Tax I.D. No.____________________________/__________________________TOGETHER with all the tenements, hereditaments and appurtenances thereto belonging or in anywise apper-

taining.TO HAVE AND TO HOLD, the same in fee simple forever.AND THE GRANTOR hereby covenants with said Grantee that the Grantor is lawfully seized of said land in fee

simple; that the Grantor has good right and lawful authority to sell and convey said land; that the Grantor hereby fully warrantsthe title to said land and will defend the same against the lawful claims of all persons whosoever; and that said land is freeof all encumbrances, except taxes accruing subsequent to December 31, ________.THE INTEREST of the beneficiaries under said Trust is personal property. Persons dealing with Trustee are not obligatedto look to the application of purchase monies. The interest of the beneficiaries is solely in the rights, proceeds and avails ofTrust Property, not in the title, legal or equitable, of said real estate. The liability of the Trustee under this deed and thetrust Agreement is limited to the assets of the trust and the Trustee hereunder has no personal liability whatsoever.

IN THE EVENT of death of the Trustee the following persons are nominated successor trustees in order of theirlistings. The filing of a death certificate of the original Trustee, along with an Affidavit of Acceptance by the First SuccessorTrustee shall be effective to vest title to him. Filing of a death certificate of a Successor Trustee or an Affidavit of Acceptanceby an Alternate Successor Trustee, along with an Affidavit of Acceptance by an Alternate Successor shall be effective to vesttitle in such Alternate Successor Trustee.

SUCCESSOR TRUSTEE:ALTERNATE SUCCESSOR TRUSTEE:

IN WITNESS WHEREOF, the said Grantor has signed and sealed these presents the day and year first above written.SIGNED, SEALED & DELIVERED:_______________________________________________ ______________________________________L.S.Print Name____________________________________________________________________________________ ______________________________________L.S.Print Name_____________________________________STATE OF FLORIDA )COUNTY OF ___________________ )

I HEREBY CERTIFY that on this day, before me, an officer duly authorized in the state and county aforesaidto take acknowledgments personally appeared ____________________________________________________________________________who is personally known to me or who has produced ________________________________as identification and who executed the foregoing instrument and _____ acknowledged before me that ____ executed same.

WITNESS my hand and official seal in the county and state aforesaid this ____ day of ___________________,_______.This instrument was _________________________________________________prepared by: Notary Public

Print Name___________________________My Commission expires:

form 2 ◆ 135

WARRANTY DEED TO TRUSTEETHIS WARRANTY DEED Made this ______ day of______________, ________ by ________________________________________________________________ Grantor, to______________________________________ as Trustee under________________________________________ dated________________ with full power and authority, to protect,conserve sell, lease, encumber or otherwise manage and dispose ofsaid property pursuant to Florida Statute 689.071, Grantee, whosepost office address is ____________________________________________________________

WITNESSETH:That the Grantor, for and in considerationof the sum of $10.00 and other valuable consideration, receiptwhereof is hereby acknowledged hereby grants, bargains, sells, aliens,remises, releases, conveys and confirms unto the Grantee all the cer-tain land situated in ___________________________ county,Florida viz:

Tax Parcel I.D.No.________________________________________

LAND TRUST AGREEMENT

THIS TRUST AGREEMENT dated this ______ day of __________________, _________, andknown as Trust No. ______________ by and between _________________________________ asTrustee, and the following beneficiaries in the percentages set opposite their names:

1. TRUST. The Trustee is about to take title to real estate under the provisions of Section 689.071,Florida Statutes, and he agrees to hold it and the proceeds, profits, and avails thereof, if any, whichmay come into his possession, in Trust for the uses and purposes and under the terms herein set forth.

2. LAND. The Trustee will take title to the following land located in ___________________County, Florida:

3. BENEFICIARIES’ INTEREST. The interests of the beneficiaries hereunder and of any personwho becomes entitled to any interest under this Trust shall consist solely of a power of direction todeal with the title to said property and to manage and control said property as hereinafter providedand the right to receive the proceeds from rentals, mortgages, sales or other dispositions shall bedeemed to be personal property and may be treated, assigned and transferred as such. No beneficiarynow has, or shall hereafter at any time have, any right, title or interest in or to any portion of said realestate as such, either legal or equitable, but only an interest in the earnings, avails and proceeds asaforesaid; it being the intention of this instrument to vest the full legal and equitable title to saidpremises in the Trustee.

4. DEATH OF BENEFICIARY. Except as herein otherwise specifically provided, the right and inter-est of any beneficiary hereunder shall pass at death to his Personal Representative and not to his heirsat law. The death of any beneficiary hereunder shall not terminate the Trust or in any manner affectthe powers of the Trustee hereunder.

5. OWNERSHIP. Upon request each beneficiary hereunder shall be issued a Trust ParticipationCertificate in a form approved by the Trustee, which shall indicate the beneficiary’s percentage inter-est in the Trust and the land held by the Trustee.

6. ASSIGNMENT. If Trust Participation Certificates have been issued, no assignment of any benefi-cial interest hereunder shall be binding on the Trustee until the Trust Participation Certificaterepresenting the assigned shares is surrendered to the Trustee with the assignment noted thereon anda new Certificate or Certificates are issued by the Trustee. If no Trust Participation Certificates havebeen issued, assignment shall be by an assignment form approved by the Trustee and shall not bebinding until signed by the Trustee.

form 3 ◆ 137

138 ◆

7. LOST CERTIFICATES. In the event a beneficiaries’ Trust Participation Certificate is lost, stolenor destroyed, the Trustee shall cancel it on the records of the Trust and issue a new Certificate afterreceiving an affidavit as to the circumstances of the loss.

8. PURCHASERS. It shall not be the duty of the purchaser of the trust property or any part thereofto see to the application of the purchase money paid therefor; nor shall anyone who may deal withthe Trustee be privileged or required to inquire into the necessity or expediency of any act of theTrustee, or as to the provisions of this instrument.

9. DUTY OF TRUST. While the Trustee is sole title holder of the real estate held by him hereunderso far as the public is concerned and has full power to deal with it, it is understood and agreed by thepersons in interest hereunder, and by any persons who may hereafter become interested, that theTrustee will deal with it only when authorized to do so in writing and that he will, on the writtendirection of all of the beneficiaries hereunder at the time, make contracts or deeds for the sale of orotherwise deal with the said real estate or any part hereof. Unless so directed by the beneficiaries, thetrustee has no power to control or influence the real property or any use of it.

10. TERMINATION BY TRUSTEE. If the trust property or any part thereof remains in the trusttwenty (20) years from this date, the Trustee shall, unless otherwise agreed by all parties in writing,convey and deliver the same to the beneficiaries in accordance with their respective interests.

11. LIMITATION ON BENEFICIARIES. No beneficiary hereunder shall have any authority tocontract for or in the name of the Trustee, or use the name of the Trustee in any advertising or otherpublicity or to bind the Trustee personally.

12. LIMITATION OF TRUSTEE’S LIABILITY. The liability of the Trustee hereunder shall be lim-ited to the assets of the Trust. All obligations incurred by the Trustee hereunder shall be theobligations of the Trust only and not the individual Trustee. The Trustee shall not be required to enterinto any personal obligation or liability in dealing with the Trust property nor to expend any personalsums to defend or protect the Trust property.

13. NOTIFICATION OF CLAIMS. In the event the Trustee shall receive notice of claims or actionsagainst the Trust, he shall notify the beneficiaries at their last known addresses.

14. TRUSTEE’S COMPENSATION. The Trustee shall receive for his services in accepting this Trustand title hereunder the sum of $___________ for the first year or fraction thereof and the sum of$____________ for each succeeding year or fraction thereof as long as any property remains in thisTrust. Trustee may raise or lower his annual fee upon giving 60 days notice to the beneficiaries. Also,he shall receive reasonable compensation for making deeds or other instruments, performing addi-tional services, or retaining attorneys or agents. The beneficiaries hereunder jointly and severally agreeto pay the fees hereunder, and the Trustee shall have a lien on the property of the Trust therefor.

◆ 139

15. LIMITATIONS ON AGREEMENTS. This Agreement shall not be deemed to be, create, or evi-dence the existence of a corporation de facto or de jure, or a Massachusetts Trust, or any other typeof business trust, or an association in the nature of a corporation or a general or limited partnership,or a joint venture by or between the Trustees and the beneficiaries.

16. TAXES. Nothing herein contained shall be construed as imposing any obligation on the Trusteeto file any income, profit or other tax reports or schedules, it being expressly understood that the ben-eficiaries hereunder from time to time will individually make all such reports and pay any and all taxesgrowing out of their interest under this Trust Agreement.

17. REPLACEMENT OF TRUSTEE. The Trustee may be replaced in any of the following manners:

a. Resignation. The Trustee may resign at any time by mailing a notice of his intention to do soto each of the beneficiaries at each’s last known address. In the event of such resignation the ben-eficiaries may appoint a successor trustee, by lodging an instrument with the Trustee signed by allthe beneficiaries and accepted by the Successor Trustee. If no Successor Trustee is appointedwithin thirty (30) days, the Trustee may convey the Trust property to the beneficiaries accordingto their interests and this Trust shall terminate. If, in the opinion of the Trustee, the Trustee maybe subjected to embarrassment, litigation, insecurity, liability or hazard, the Trustee may at anytime and without notice resign as to all or part of the trust property and convey such trust prop-erty directly to the beneficiaries.

b. Replacement. The beneficiaries may at any time replace the Trustee by lodging with him aninstrument naming a Successor Trustee, signed by all beneficiaries and accepted by the SuccessorTrustee. Upon receipt of said instrument and if there shall be no fees due and owing to him, theTrustee shall quit claim the property to the Successor Trustee.

c. Death. In the event of the death of the Trustee hereunder the following in order of their list-ing (able and willing to act) is appointed Successor Trustee:

_________________________________

_________________________________

If said person is unable or unwilling to act, or if no person is named herein, the beneficiaries here-under or any of them by mutual agreement, are appointed successor trustee. Recording of an affidavitreciting this paragraph shall be effective to vest title in said Successor Trustee.

Any successor trustee under this Trust shall have all of the powers, properties and duties of the origi-nal Trustee. Any replacement of the Trustee shall not effect his first lien on the Trust property, for hiscosts, expenses, attorney’s fees and reasonable compensation.

18. RECORDING. This Trust shall not be recorded except as herein provided or required by law.

19. DISCLOSURE. The Trustee shall not release information regarding this Trust except as requiredby law. In making a disclosure required by law, the Trustee shall supply beneficiaries with copies ofany reports filed and shall be subject to no liability for the filing of such reports. The Trustee shall notbe liable for inadvertent disclosure of the identity of any beneficiary.

20. FLORIDA RICO ACT. Notwithstanding any provision of this Trust to the contrary, the Trusteeshall have no obligation to convey title to real property held by the Trustee pursuant to this Agreementuntil it has performed or caused to be performed, at the expense of the beneficiaries of this TrustAgreement, a search of the official records of all counties in which such real property is located. If suchsearch discloses that no RICO lien notices have been filed against any person for whom the Trusteeholds legal or record title to real property pursuant to this Trust Agreement, then the Trustee may con-vey its legal or record title to such real property in accordance with the written instructions of thebeneficiary. If such search discloses that one or more RICO lien notices have been filed against any per-son for whom the Trustee holds legal or record title to real property pursuant to this Trust Agreementthen the Trustee shall not convey its legal or record title to such real property unless:

a. All such RICO lien notices have been released or terminated or such real property has beenreleased from all such RICO lien notices, or

b. Such persons named in the RICO lien notice agree in writing that the total amount of all pro-ceeds that would otherwise be received directly by such person as a result of the conveyance, willbe paid directly to the Trustee, and that the Trustee shall have the right to hold such proceeds,together with the total amount of all such proceeds that would otherwise be paid or distributed tosuch person or at the direction of such person or his designee, until such time as the provisions ofsubsection a. above have been satisfied, and also agrees, in writing, that at the request of theDepartment of Legal Affairs of the State of Florida, or the office of any state attorney of the Stateof Florida, the Trustee, without any liability to the person named in the RICO lien notice, maypay the total amount of such proceeds held by the Trustee pursuant to the provisions of this sub-section b. to the Department of Legal Affairs of the State of Florida or the office of any stateattorney of the State of Florida

21. PARTITION. The remedy of partition shall not be available to the beneficiaries of this Land Trust.

22. PARTIES BOUND. This Agreement shall extend to and be obligatory upon the heirs, adminis-tration and assigns of the respective parties.

23. GENDER.Any references to he or him in this Agreement shall apply to parties of either gender.

140 ◆

24. PARAGRAPH TITLES. The title of paragraphs are for convenience only and shall in no way beused for the purpose of construing the meaning of this Agreement.

25. GOVERNING LAW. This Agreement shall be construed under the laws of the State of Florida.

26. ADDRESSES. The addresses of the parties as of the date of this Agreement for the purpose ofnotices are:

Trustee:

Beneficiaries:

IN TESTIMONY WHEREOF, said Trustee accepted the duties of Trustee the day and yearfirst above written and on said day the said beneficiary has signed this Declaration of Trust and saidTrust Agreement in order to signify his assent to the terms hereof.

WITNESSES: BENEFICIARIES:

________________________________________ ____________________________________

Print Name__________________________

_________________________________________ ____________________________________

Print Name__________________________

◆ 141

STATE OF __________________________ )

)

COUNTY OF _______________________ )

I HEREBY CERTIFY that on this day before me, an officer duly qualified to take acknowl-edgements, personally appeared

who is personally known to me or who has produced ________________________ and who exe-cuted the foregoing instrument and _____ acknowledged before me that _______ executed the same.

WITNESS my hand and official seal in the County and State aforesaid this _______ day of____________________, 20______.

_________________________________________Notary Public

Print Name_______________________________My commission expires:

ACCEPTED BY TRUSTEE:

____________________________________

142 ◆

Tax Parcel I.D. No.________________________________________Grantee’s Tax I.D. No.____________________________/______________________________

TO HAVE AND TO HOLD the same together with all and singular the appurtenances thereunto belonging orin anywise appertaining, and all the estate, right, title, interest, lien, equity and claim whatsoever of said first party, eitherin law or equity, to the only proper use, benefit and behoof of the said second party forever.

THE INTEREST of the beneficiaries under said trust is personal property. Persons dealing with the Trustee are notobligated to look to the application of purchase monies. The interest of the beneficiaries is solely in the rights, proceeds andavails of trust property, not in the title, legal or, equitable, of said real estate. The liability of the Trustee under this deedand the trust agreement, is limited to the assets of the trust and the Trustee hereunder has no personal liability whatsoever.

IN THE EVENT OF the death of the trustee the following persons are nominated successor trustees in order oftheir listing. The filing of a death certificate of the original Trustee, along with an Affidavit of Acceptance by the FirstSuccessor Trustee shall be effective to vest title to him or her. Filing of a death certificate of a Successor Trustee or anAffidavit of NonAcceptance by a Successor Trustee, along with an Affidavit of Acceptance by an Alternate SuccessorTrustee shall be effective to vest title in such Alternate Successor Trustee.

SUCCESSOR TRUSTEE:ALTERNATE SUCCESSOR TRUSTEE:IN WITNESS WHEREOF, the said first party has signed and sealed these presents the day and year first above written.

SIGNED, SEALED & DELIVERED:__________________________________________________________________________Print Name_________________________________

___________________________________________ ___________________________________________Print Name_________________________________

STATE OF _______________________)COUNTY OF _______________________)

I HEREBY CERTIFY that on this day, before me, an officer duly authorized in the state and county aforesaid totake acknowledgments personally appeared ____________________________________________________ who ispersonally known to me or who has produced _____________________________ as identification and who executedthe foregoing instrument and _____ acknowledged before me that ____ executed same.

WITNESS my hand and official seal in the county and state aforesaid this ____ day of __________________,20________.This instrument wasprepared by:___________________________________________

Notary PublicPrint Name_________________________________My Commission expires:

form 4 ◆ 143

QUIT CLAIM DEED TO TRUSTEETHIS QUIT CLAIM DEED executed this ____ day of

__________________, 20 _____, by ________________________________________ first party, to__________________________________________________ as Trustee under_____________________________________ dated _____________ with fullpower and authority to protect, conserve, sell, lease, encumber orotherwise manage and dispose of said property pursuant to FloridaStatute 689.071, second party, whose post office address is:

WITNESSETH, that the said first party, for and in consid-eration of the sum of $10.00 in hand paid by the said second party,the receipt whereof, is hereby acknowledged does hereby remise,release and quitclaim unto the said second party forever, all the right,title, interest, claim and demand which the said first party has in andto the following described lot, piece, or parcel of land, situate lying andbeing in the County of ________________, State of Florida, to wit:

DIRECTIONS TO TRUSTEEThe undersigned, being all of the beneficiaries of __________________________

_________________________dated ______________________ hereby authorize and direct theTrustee thereunder to:

We hereby certify that we have examined the above documents and have found them to be satisfac-tory. It is understood that the Trustee executes these documents not personally, but only as Trusteeaforesaid, in the exercise of the power and authority conferred upon and vested in the Trustee as suchand pursuant to this direction. The undersigned agrees to indemnify and save harmless said Trusteeas to any claim or litigation arising from compliance with this direction.

Date:______________________ ______________________________________

______________________________________

______________________________________

______________________________________

form 5 ◆ 145

ASSIGNMENT OF BENEFICIAL INTEREST_________________________, FloridaDated, __________________________

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfersunto__________________________________________________________________ whose taxidentification number(s) is/are _________________________________________________________% of all rights, powers, privileges and beneficial interests in and to that certain TrustAgreement known as ______________________________________ dated __________________including all interest to the property subject to said Trust Agreement.

______________________________________

______________________________________

Acceptance by AssigneeThe undersigned hereby accept the foregoing Assignment subject to all of the

provisions of said Trust Agreement, acknowledge receipt of a copy thereof and of this Assignment and name ____________________________________________________________as successor beneficiaries in the event of our death. Notices, inquiries and other matters regarding thetrust property should be directed to ________________________________________________ at_____________________________________________________________________________.

______________________________________

______________________________________

______________________________________

______________________________________

Acceptance by TrusteeI hereby accept the foregoing Assignment subject to all of the provisions of the Trust

Agreement._____________________________________________________

Trustee

146 ◆ form 6

Tax Parcel I.D. No.________________________________________Grantee’s Tax I.D. No.____________________________/______________________________

TO HAVE AND TO HOLD the same together with all and singular the appurtenances thereunto belonging orin anywise appertaining, and all the estate, right, title, interest, lien, equity and claim whatsoever of said Grantor, eitherin law or equity, to the only proper use, benefit and behoof of the said Grantee forever.

THIS DEED is executed pursuant to and in the exercise of the power and authority granted to and vested insaid Trustee by the terms of said deed or deeds in trust delivered to said Trustee in pursuance of the Trust agreement abovementioned. This deed is made subject to the lien of every trust deed or mortgage (if there be any) of record in said countygiven to secure the payment of money, remaining unreleased at the date of the delivery hereof, and covenants, conditions,restrictions, and easements of record.

IN WITNESS WHEREOF, the said Grantor has hereunto set ________ hand and seal this day and year firstabove written.SIGNED, SEALED & DELIVERED:___________________________________________ __________________________________________Print Name_________________________________

___________________________________________ __________________________________________Print Name _________________________________

STATE OF ________________________ )COUNTY OF _____________________ )

I HEREBY CERTIFY that on this day, before me, an officer duly authorized in the state and county aforesaidto take acknowledgments personally appeared ______________________________________________________who is personally known to me or who has produced _________________________________________ as identifica-tion and who executed the foregoing instrument and _____ acknowledged before me that ____ executed same.

WITNESS my hand and official seal in the county and state aforesaid this ____ day of __________________, 20________.

This instrument was prepared by: __________________________________________Notary PublicPrint Name_________________________________My Commission expires:

form 7 ◆ 147

TRUSTEE’S DEEDTHIS INDENTURE executed this ______ day of

____________, 20 ___, between________________________________________________________ as Trustee underTrust No. _________________ dated ___________________with full power and authority to protect, conserve, sell, lease,encumber or otherwise manage and dispose of said propertypursuant to Florida Statute 89.071, GRANTOR,and____________________________, as GRANTEE, whoseaddress is: ________________________________________

WITNESSETH, that the said Grantor, for and inconsideration of the sum of $10.00 and other good and valuableconsiderations to said Grantor in hand paid by the said Grantee,the receipt whereof is hereby acknowledged, does hereby remise,release and quitclaim unto the said Grantee forever, all the right,title, interest, claim and demand which the said Grantor has inand to the following described lot, piece, or parcel of land, sit-uate lying and being in the County of______________________________, State of Florida, to wit:

form 8 ◆ 149

150 ◆ form 9

CO-VENTURE AGREEMENT

THIS AGREEMENT made this _____ day of ________________, _______, by and between

IN CONSIDERATION of the mutual covenants herein contained the parties hereto agreeas follows:1. That they will form and enter into a Florida Land Trust under Section 689.071,Florida Statutes.2. That their interests in said Trust shall be as follows:

3. That they agree to contribute funds as necessary to the maintenance of said trust in propor-tion to their interests. In the event one beneficiary has paid more toward necessary maintenanceexpense than other beneficiaries, he or she shall be reimbursed at the time subject property is sold.4. That they agree to share in the management of the property in said Trust.

5. That they will share in the proceeds of said Trust in proportion to their interests.

6. That no beneficiary shall sell his or her beneficial interest without first offering it, at an equalprice to the other beneficiaries of this trust.

7. That in the event of death or incapacity of one of the beneficiaries, the remaining beneficiar-ies shall have the right to acquire said beneficiary’s interest at fair market value.

8. That no party shall have the authority to obligate the other parties and no party shall incurany obligation on behalf of the trust without the consent of all other parties.

9. That no party shall be personally liable for any act or debt of the trustee unless that party shallagree in writing to assume such liability.

IN WITNESS WHEREOF, the parties hereto have signed this agreement the day and year first abovewritten.

____________________________________

____________________________________

____________________________________

____________________________________

form 10 ◆ 151

PARTNERSHIP AGREEMENT OF_____________________________________

a Florida General Partnership

THIS PARTNERSHIP AGREEMENT is made this ________________________day of____________________, _______, by and between the parties listed on Schedule “A” who havesigned this agreement.

IN CONSIDERATION of the mutual covenants herein contained, the undersigned partnershereby form a general partnership under the Uniform Partnership Act of the State of Florida on theterms and conditions as follows:

1. PURPOSE. The purpose of the partnership is to invest in real estate for profit.

2. NAME. The name of the partnership shall be ____________________________________________________________________________________________________________.

3. PLACE OF BUSINESS. The principal place of business of the partnership shall be_____________________________________________________________________________and each other place as may be agreed on by the partners.

4. DURATION. The partnership shall commerce on ______________________,________, and continue until dissolved pursuant to paragraph 18. of this Agreement.

5. INITIAL CAPITAL. The initial capital of the partnership shall be $_____________andconsist of the payments from each partner as indicated on Schedule “A”.

6. SUBSEQUENT CAPITAL. Upon a vote of _____% of the Partnership, each partner shallcontribute additional capital as needed, in proportion to the present ownership of the Partnership. Inthe event any partner fails to make such subsequent capital contribution, the partners who have con-tributed may consider the sums so advanced as loans to the Partnership at _______% interest, or aspurchases of additional Partnership interests.

7. PARTNERSHIP PROPERTY. All property originally paid or brought into the Partnershipas contributions to capital by the partners, or subsequently acquired by purchases or otherwise onaccount of the Partnership shall be Partnership property and held in the name of the Partnership.

8. PARTNERSHIP REAL ESTATE. All interests in real property owned or held by thePartnership shall be held by a Trustee for the Partnership in a Florida Land Trust under Florida Statute689.071

form 11 ◆ 153

9. PARTNERSHIP FUNDS. All funds of the Partnership shall be deposited in an account ina bank designated by a majority in interest of the partners. All withdrawals shall be made by checksto be signed as authorized by such majority in interest.

10. PARTNERSHIP RECORDS. Books of account and partnership records shall be main-tained at the principal office of the Partnership and shall be open to inspection by any of the partnersor their agents at any time, including determination of value for purposes of this Agreement, whichshall be made by the regular accountants selected by the partners.

11. PARTNERSHIP INTERESTS. Each initial partner shall have an interest in the partner-ship in proportion to his or her capital contribution as listed on Schedule "A." New partners shallhave an interest in proportion to their contribution as determined from the previous contributionsand the intervening appreciation of the assets of the Partnership. All contributions shall be made inunits of $100.

12. MANAGEMENT. The affairs of the Partnership shall be managed by all of the partners.Decisions shall be made by a majority vote of the partners. Each partner shall at all times inform theothers of all work for and transactions on behalf of the Partnership. The Partnership may, upon priorapproval, make payments to any partners for work done on behalf of the Partnership.

13. PROHIBITIONS. During the continuance of the Partnership, no partner shall, withoutthe written consent of all the partners, do any of the following:

a. Assign the Partnership property in trust for creditors or on the assignee’s promise to pay thedebts of the Partnership;

b. Dispose of the good will of the business;

c. Submit a Partnership claim or liability to arbitration or reference;

d. Confess judgment against the Partnership;

e. Do any act which would make it impossible to carry on the ordinary business of thePartnership;

f. Make, execute or deliver in the name of the Partnership any bond, trust deed, mortgage,indemnity bond, guarantee, surety bond or accommodation paper or accommodationendorsement;g. Borrow money in the name of the accommodation or use as collateral any accommodationproperty;

154 ◆

h. Assign, pledge, transfer, release or compromise any debt owing to, or claim of, the accom-modation except for full payment.

If any partner violates any of the provisions hereof and, after written notice thereof to him orher by any partner, fails to remedy the violation within ten (10) days after receipt of such notice, theother partners shall have the right within ninety (90) days after acquiring notice of such violation toterminate this Agreement and purchase such partner’s interests, at its then value as determined byParagraph 15, making payment therefore as provided in Paragraph 15.

Any partner who shall violate any of the provisions of this Agreement, in addition to beingsubject to other remedies, liabilities and obligations herein or by law imposed therefore, shall keepand save harmless the Partnership property and shall also indemnify the other partners from any andall claims, demands and actions of every kind whatever which may arise from such violation.

14. ASSIGNMENT. No partner shall have the right to transfer all or any interest in thePartnership unless all other partners agree to accept the assignee as a partner and such assignee shallaccept this Agreement in writing.

15. WITHDRAWAL OR DEATH. In the event any partner dies, is declared incompetent,files for bankruptcy or desires to withdraw from the Partnership, the Partnership shall purchase suchpartner’s interest. Such interest shall be purchased at a price based upon the following schedule:

16. PROPERTIES. The properties purchased by the Partnership shall be determined by amajority vote, but shall conform to the parameters outlined in Schedule "B." If a vote determines aproperty will not be acquired by the Partnership, those voting in favor of the acquisition are free toacquire the property on their own outside of this Partnership.

17. PROFITS. The profits of the Partnership shall be distributed upon a majority vote of thepartners according to the proportional interest of the Partners.

18. DISSOLUTION. This Partnership shall be dissolved upon a vote of a majority of thepartners, or in any event, by _________________, 20 _____. Upon any voluntary dissolution, thePartnership shall immediately commence to wind up its affairs. The proceeds from liquidation ofPartnership assets shall be applied as follows:

a. Debts of the Partnership, other than to partners;

b. Amounts owed to partners for loans, unpaid salaries, and for the credit balances in theirrespective drawing accounts;

◆ 155

c. The equity of the partners as reflected in the books of accounts. Any gain or loss on depre-ciation of Partnership properties in the process of liquidation shall be credited or charged tothe partners in the proportion of their interests in profit and loss. Any property distributed inkind in the liquidation shall be valued and treated as though the property were sold and thecash proceeds were distributed.

19. LIABILITY. No partner shall be personally liable for any act or debt of the trustee unlessthat partner shall agree in writing to assume such liability.

20. AMENDMENTS. This Agreement except with respect to vested rights of the partnersmay be amended at any time by a majority vote of the partners.

21. NOTICES. All notices given under this Agreement shall be sent by Certified Mail.

22. SUCCESSORS. This Agreement shall be binding upon the successors, heirs and assignsof any partner.

23. DIRECTION TO TRUSTEE. All direction to Trustees for the Partnership shall be effec-tive upon signing by a majority of interest of the partners.

IN WITNESS WHEREOF, the parties have executed the foregoing Partnership Agreement.

________________________________________

________________________________________

________________________________________

________________________________________

________________________________________

156 ◆

form 12 ◆ 157

form 13 ◆ 159

PROMISSORY NOTE$_____________________ ____________________________,Florida

Date:__________________________FOR VALUE RECEIVED, the undersigned, jointly and severably promise to pay to_______________________________________________________________ the principal sumof _______________________________________________________ Dollars ($___________)together with interest from date at the rate of ______________ percent (______%) per annum onthe balance from time to time remaining unpaid. Said principal and interest shall be payable in law-ful money of the United States of America at __________________________________________or at such place as may be designated by written notice from the holder to the maker of this note. Payment shall be made as follows:

This note with interest is secured by a security agreement pledging the beneficial interest in aland trust and a UCC financing statement, of even date herewith, made by the maker hereof in favorof the above payee. The terms of the security agreement are by this reference made a part hereof.

If default be made in the payment of any sums or interest herein payable, or in the terms ofsaid security agreement, then the entire balance due hereunder shall, at the option of the holder, beimmediately due and payable, without notice, time being of the essence. From default, all sums dueshall bear interest at the highest rate allowed by law. Failure to exercise this option shall not consti-tute a waiver of the right to exercise the same in the event of a subsequent default.

Each person liable hereunder, whether maker or endorser, hereby waives presentment,protest,notice, notice of protest and notice of dishonor and agrees to pay all costs of collection, including areasonable attorney’s fee whether suit be brought or not.

_______________________________________

_______________________________________

form 14 ◆ 161

GUARANTY OF PROMISSORY NOTE BY BENEFICIARIES

GUARANTY given by _____________________________ and __________________________,the undersigned, to induce the acceptance of the Promissory Note payable to____________________________________________ dated _______________________ in theamount of _____________________________________________________________________Dollars ($____________).

1. Obligation. In consideration of the loan made upon such note, the undersigned hereby uncondi-tionally guarantee to ___________________________________________________________,its successors and assigns and to every subsequent holder of such note that all sums stated therein tobe payable on such note shall be promptly paid in full, in accordance with the terms thereof, at matu-rity, by acceleration or otherwise, and in the case of any extension of time of payment or renewal inwhole or in part, all sums shall be promptly paid when due according to such extensions or renewals,at maturity or otherwise.

2. Consent. The undersigned hereby consent that at any time, without notice to the undersigned,payment of any sums payable on such note, or of any of the collateral therefore, may be extended, orsuch note or collateral may be exchanged, surrendered, or otherwise dealt with as the holder of suchnote may determine, and that any of the acts mentioned in such note may be done, without affect-ing the liability of the undersigned.

3. Endorsement. The signature of the undersigned hereto shall constitute an endorsement ofsuch note.

4. Waiver. The undersigned hereby waives presentment, demand for payment by the maker or any-one else, protest, and notice of nonpayment, dishonor, or protest of such note and all other noticesand demands.

Date:______________________

______________________________________

______________________________________

162 ◆ form 15

CONDITIONAL ASSIGNMENT OF BENEFICIAL INTEREST_____________________________, FloridaDated, __________________________

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto______________________________________________________________________________________________________________________________ whose tax identification number(s)is/are_________________________________________________________________________,_____________% of all rights, powers, privileges and beneficial interests in and to that certain TrustAgreement known as ________________________________________________________ dated_____________________ including all interest to the property subject to said Trust Agreement.

SAID ASSIGNMENT, however, is for collateral security only, for a promissory note executed todayin the amount of $__________________ and the assignee by acceptance of this assignment does notassume or become liable for any obligations or liabilities of the assignor.

______________________________________

______________________________________

Acceptance by AssigneeThe undersigned hereby accept the foregoing Assignment subject to all of the provisions of said TrustAgreement. Notices, inquiries and other matters regarding the trust property should be directed tome at ______________________________________________________________________________________________________________________________________________________.

______________________________________

______________________________________

Acceptance by TrusteeThe trustee hereby accepts the foregoing Assignment subject to all of the provisions of the TrustAgreement and agrees not to accept further assignments without the consent of both parties.

________________________________________________Trustee

form 16 ◆ 163

SECURITY AGREEMENT (CHATTEL MORTGAGE)______________________________,FloridaDate:__________________________

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, the undersigned debtor herebygrants a security interest in the beneficial interest of the Florida land trust known as___________________________________________________________________________ to__________________________________________________________as secured party.

This security agreement is to secure indebtedness in the amount of __________________________Dollars ($______________) evidenced by a promissory note of even date.

The undersigned warrants that he/she is the owner of ___________________ per cent (_____%) inter-est in said land trust and that such interest is subject to no other liens, charges encumbrances or claims.

This agreement shall be secured with a UCC financing statement. A copy of this security agreementand the UCC financing statement shall be lodged with the trustee of said land trust and the under-signed consents that no further pledge of the beneficial interest shall be made, or conveyance orencumbrance of the real property of the trust without the consent of the secured party.

Upon default the secured party shall have all the rights and remedies provided a secured party underthe Florida Uniform Commercial Code, including the right to sell the beneficial interest at a publicor private sale, with or without advertising. The undersigned agrees that the requirements of the UCCshall be met if notice is mailed to the undersigned address at the address below not less than five daysprior to the sale or other disposition.

Default shall be any failure to pay principal or interest under the promissory note as it comes due,breach of any warranty made by the debtor, attachment, seizure, foreclosure, forfeiture or levy on thebeneficial interest of the trust or the real property held by the trust, institution of any action in bank-ruptcy by or against debtor, or any reasonable insecurity of the secured party.

The undersigned acknowledges receipt of a completed copy of this security agreement.

Secured party: Debtor:_________________________________ _________________________________

_________________________________ _________________________________

Address: Address:_________________________________ _________________________________

_________________________________ _________________________________

164 ◆ form 17

form 18 ◆ 165

166 ◆

◆ 167

form 19 ◆ 169

170 ◆

TRUST PARTICIPATION CERTIFICATE

THIS IS TO CERTIFY that

is(are) entitled to participate to the extent of ______% of the profits and avails of the land trustknown as:

and the interest represented by this Certificate is an undivided interest in said trust.

THE REAL PROPERTY of the trust consists of the property described on the reverse side of thisCertificate.

THIS CERTIFICATE is transferable only upon the books of the Trustee by the holder hereof in per-son or by duly authorized attorney, upon surrender hereof properly endorsed, and by paying to theTrustee his or her transfer fee. No assignment shall be recognized until notification in writing isreceived by the Trustee and acknowledged.

__________________________________________Trustee

form 20 ◆ 171

IN WITNESS WHEREOF the Trustee has executed this Memorandum of Option.___________________________________Trustee

STATE OF FLORIDA ))

COUNTY OF __________________)

I HEREBY CERTIFY that on this day, before me, an officer duly authorized in the state andcounty aforesaid to take acknowledgments personally appeared ____________________________,trustee who is personally known to me or who has produced _________________________ as iden-tification and who executed the foregoing instrument and _____ acknowledged before me that ____executed same.

WITNESS my hand and official seal in the county and state aforesaid this ______ dayof __________________, 20________.

This instrument was prepared by: _________________________________________Notary Public

Print Name___________________________

My Commission expires:

172 ◆ form 21

MEMORANDUM OF OPTIONThis Memorandum of Option is made this ____ day of ______________________, _________.Notice is hereby given that _____________________________________ a s trustee of _______________________________________________________________________ has granted anoption, for good and valuable consideration, to________________________________________whose address is__________________________________________________________________.The option is on the following described real propertylocated in _________________ county, Florida:

AFFIDAVIT REGARDING STATUS UNDER INTERNAL REVENUE CODE, SECTION 1445

STATE OF FLORIDA ))

COUNTY OF __________________)

BEFORE ME this day personally appeared _______________________________, who afterfirst being duly sworn deposes and says:

1. That the purpose of this affidavit is to inform the buyer and closing agents of my status underSection 1445 of the Internal Revenue Code of 1954 regarding property described as:

2. That the undersigned, as seller of the property is not a foreign person, foreign corporation, foreigntrust or foreign estate as defined in the Internal Revenue Code and the Income Tax Regulations.

3. That the undersigned is not a nonresident alien for U. S. income tax purposes.

4. That the taxpayer identification number (or employer identification number) of the undersignedis: ________________________.

5. That the address of the undersigned is: ______________________________________________________________

6. The the undersigned understands that this affidavit may be disclosed to the Internal RevenueService and that any false statement herein may be punishable by fine or imprisonment or both.

7. That the undersigned, under penalty of perjury, declares that he/she has read this affidavit, that itis true and correct to the best of his/her knowledge and belief and that the undersigned has fullauthority to sign.

FURTHER AFFIANT SAYETH NOT.

Sworn to and subscribed before me this ____ day of __________________, 20________.

_______________________________________Notary PublicMy Commission expires:

form 22 ◆ 173

Said Mortgage encumbers the following described parcel of property:

THE INTERESTS of the beneficiaries under said Trust is personal property. Persons dealing withTrustee are not obligated to look to the application of purchase monies. The interest of the benefici-aries is solely in the rights, proceeds and avails of Trust Property, not in the title, legal or equitable, ofsaid real estate. The liability of the Trustee under this deed and the trust Agreement is limited to theassets of the trust and the Trustee hereunder has no personal liability whatsoever. IN WITNESS WHEREOF, the undersigned has executed this assignment this ______ day of________________________, 20_____.

__________________________________________________________________________

STATE OF FLORIDA ))

COUNTY OF __________________)I HEREBY CERTIFY that on this day, before me, an officer duly authorized in the state and

county aforesaid to take acknowledgments personally appeared _____________________________who is personally known to me or who has produced _________________________________ asidentification and who executed the foregoing instrument and _____ acknowledged before me that____ executed same.

WITNESS my hand and official seal in the county and state aforesaid this ____ day of__________________, _______.

_________________________________________Notary PublicPrint Name ___________________________My Commission expires:

174 ◆ form 23

ASSIGNMENT OF MORTGAGEFor value received, _________________________________,the holder(s) of that certain Mortgage dated ______________,_______, executed by _______________________________and recorded at O. R. Book ___________, Page _________,of the Public Records of ________________________County, Florida, hereby assigns and transfers unto________________________________________________as Trustee under Trust No. _________________________dated ____________________, __________ with full powerand authority, to protect, conserve sell, lease, encumber or oth-erwise manage and dispose of, as well as to satisfy and assignsaid property pursuant to Florida Statute 689.071, all of theundersigned’s right, title and interest in said mortgage.

form 24 ◆ 175

176 ◆

form 25 ◆ 179

180 ◆

◆ 181

AMENDMENT TO TRUST

The undersigned, being the trustee and all of the beneficiaries of the trust known as_____________________________________________________________________________dated ____________________________ hereby agree to amend the terms of the trust as follows:

All other terms of said trust to remain in full force and effect.

Effective date: _____________________________

Beneficiaries: Trustee:________________________________ _______________________________

________________________________

________________________________

________________________________

form 26 ◆ 183

Aacceleration, 40additional insured, 41Affidavit Regarding Status Under Internal

Revenue Code Section 1445, 68agency law, 26agreement, 24, 27, 36, 38, 46, 53, 54Agricultural Foreign Investment Disclosure

Act, 45alien business organization, 88amending, 52amendments, 44, 52ancillary administration

avoiding, 7annual exclusion, 73as trustee, 20assessments, 12, 30Asset Conservation, Lender Liability, and

Deposit Insurance Protection Act, 93asset protection, 9assignments, 64, 65associations, 71Attorneys Title Insurance Fund, 22

Bbankruptcy, 14, 60beneficial interests, 8, 11, 13, 38, 66

assigning, 64, 65assignment, 15, 30

conditional assignment of, 48, 50foreclosure, 49pledge, 48under UCC, 49

beneficiary, 1, 5, 19, 25agreement, 38changing, 10contingent, 7death of, 53foreign, 45, 88liability, 27, 41ownership, 21personal problems, 14status, 71successor, 7, 25, 37, 52

changing, 52benefits, 5bill of sale, 28brokerage laws, 16brokers, 16

commissions, 67Business Corporation Act, 45

Ccapacity to influence, 93certificates, 83charging order, 61charities, 25chattel mortgage, 11, 48, 50co-venture agreement, 15, 24, 38, 72

Index

codicils, 7collateral, 11Comprehensive Environmental Response Compensation

and Liability Act (CERCLA), 89, 92contract for sale, 63, 65, 66control, 9, 38costs, 96creditors, 9, 40, 61

Ddata sheet, 37death, 14debt ratio, 13deeds, 20, 31, 63, 77

preparing, 35trustee’s, 53, 64, 66warranty, 53

deficiency judgments, 13direction, 63, 64directions to trustee, 10director, 26divorce, 14documentary stamp tax, 12, 78documentary tax stamps, 30, 31documentation, 24double taxation, 71DR-219, 37, 46drawbacks, 95due-on-sale clauses, 39, 40, 41

Eejectment, 11equitable title, 19, 21, 22, 57estate by the entireties, 38estate taxes, 73estoppel certificate, 50, 51evictions, 12, 59, 66exculpatory language, 52

Ffeudal system, 1fictitious names, 33fiduciary obligations, 89fiduciary relationship, 24financial statements, 13financially astute, 85forced share, 7, 17foreclosure, 11, 30, 57

buying, 16Foreign Investment in Real Property Tax Act (FIRPTA),

73, 74Form 1099, 74Form 56, 70Form 56-A, 70Form W-9, 74full and fair disclosure, 85fund title notes, 22

GGarn-St. Germain Act, 39gift tax, 10

Hhazardous waste, 92homestead exemption, 76, 77, 96, 97hybrid trusts, 26

Iincompetency, 14insurance, 41inter vivos trusts, 26International Investment Survey Act, 45intrastate offering exemption, 85Investment Advisor Act, 82IRS, 24, 46, 55, 68, 70, 72

Jjudges, 15judgments, 8, 27

KKenoe, 28

Lland trust agreement, 14landlord license, 79lawsuits, 6, 57. See also litigationlease option agreements, 66leases, 11, 51legal forms

form 1, 37form 2, 24form 3, 14, 24, 36, 38, 46form 4, 24form 5, 10, 44, 64form 6, 15, 64form 7, 64form 8, 70form 9, 38, 70form 10, 15, 24, 38, 72form 11, 15, 24, 72form 12, 88form 13, 88form 14, 47, 48form 15, 47form 16, 48form 17, 11, 48form 18, 11, 48, 50form 20, 37form 21, 96form 22, 68form 23, 32


form 24, 37, 46form 25, 50form 26, 44, 52

legal title, 19, 21, 22, 57lenders, 40liability, 27, 41, 60, 65, 90liens, 8

governmental, 54RICO, 8, 63, 67, 87

life estate, 77limited liability companies, 3, 24, 27, 33, 35, 53, 72, 74,

78, 79limiting liability, 13litigation, 57, 58.

avoiding, 9joining the trustee, 59

living trusts, 26

Mmanaging, 51merger, 19, 22, 23mortgages, 47, 48, 79

assignment of, 32equitable, 49putting into trusts, 32

Motion to Amend Judgment, 58multiple owners, 9

Nnegotiations, 14notary, 7, 46notice of fiduciary capacity, 70

Ooption agreements, 11oral agreements, 66organized crime, 6ownership, 21

Pparties

necessary, 24optional, 25

partition, 14partnership agreement, 15, 24, 38, 72party in interest, 41, 44passive income, 27passive investments, 16passive investors, 83passive trusts, 2perjury, 8personal property, 10pledges, 49power of attorney, 51power of direction, 10, 44

privacy, 1, 5, 12, 30, 31, 32, 33, 41, 77private placement exemption, 84probate, 26

avoiding, 7promissory notes, 47, 48, 50promoters, 82property

buying into trust, 29deeding, 63financing, 47multiple, 42out-of-state, 42personal, 28putting into trust, 31selling, 63types, 26

property management, 15

Qqualified intermediary, 72quitclaim deed to trustee, 24

RRacketeer Influenced Corrupt Organizations Act (RICO),

6, 67, 87, 88real estate taxes, 75registered agents, 88registration, 82Regulation D, 85rental license taxes, 79requirements, 20Return for Transfers of Interest in Real Property in Real

Property, 37, 46right of redemption, 49rights of first refusal, 39Rule Against Perpetuities, 36

SS corporations, 27safe harbor exemptions, 83sale and mortgage back, 42sale of residence, 72sales and use taxes, 79sales price, 12sanctions, 60seasoning, 17secrecy. See privacySection 1031 exchanges, 72securities, 81, 82

avoiding, 82, 83exemptions, 83, 84, 85opinions, 86

Securities Act, 82Securities and Exchange Commission rules, 85Securities Exchange Act of 1934, 82security agreement, 48, 50

index ◆ 187

small offering exemption, 85Statute of Frauds, 67Statute of Uses, 1, 2straw man, 30, 31

Ttax forms, 68taxation, 69

documentary stamp tax, 78estate, 73identification numbers, 70, 74intangible personal property, 77real estate, 75rental license, 79returns, 69sales and use, 79state, 75

Taxpayer’s Relief Act, 72tenants, 15termination, 55third parties, 22title, 21title insurance, 15tort actions, 60transferability, 10transfers, 78trust certificates

Participation Certificate, 37preparing, 37

trustees, 1, 2, 19, 25, 48attorneys, 32, 33changing, 53choosing, 32, 96concerns, 89corporate, 93death of, 54directions to , 44duties, 23, 90fees, 33identification of, 58liability, 2, 27, 90, 91successor, 53

Truth in Millage, 75

Uunfamiliarity, 95Uniform Commercial Code, 11

financing statement, 11, 48, 50statement of change, 50

use and benefit, 76

Vvalidity, 21, 49vested interest, 37

Wwarranty deed to trustee, 24wills, 7, 53writ of execution, 8


✔ Details on Uses and Benefits of Land Trusts

✔ Tips for Setting UpLand Trusts

✔ Explanations on Managing LandTrusts Effectively

✔ Florida Forms



7th edition

SPHINX LEGAL

Sphinx® PublishingAn Imprint of Sourcebooks, Inc.®

www.SphinxLegal .com

UPC

EAN

Mark Warda received his J.D. from the University of Illinois inChampaign. Licensed in Florida, he has written or co-authoredover sixty self-help law books, including How to Form Your OwnCorporation in Florida and The Most Valuable Personal LegalForms You’ll Ever Need.

20 years

your #1 sourcefor

for real world

legal information

Real Estate$29.95 U.S.$44.95 CAN

Land trusts are some of the best vehicles to protect your assets, keep youraffairs private and execute your estate plan. They provide numerous benefitsand are both easy and inexpensive to create.

Land Trusts in Florida gives you all the agreements, forms, notices and direc-tions necessary to create a land trust, transfer property into it, manage it anduse it for privacy and savings. Everything you need to take advantage of thiswonderful tool is right here in one place.

• • • • •

The Complete Guide to Florida Land Trusts


Land

Tru

sts inFlo

rid

a

✪ Keeping Your Assets Secret

✪ Dealing withSecurities Laws

✪ Complying withRICO Laws

✪ TransferringProperties

✪ Avoiding Gift Taxes

✪ Land trust formation checklist

✪ Plain-Englishglossary of terms

✪ Land trust termination checklist

✪ Step-by-stepinstructions

✪ Ready-to-use, blank forms

Ready-to-Use Formswith Instructions:

✔ Land TrustAgreement

✔ Trustee’s Deed

✔ Directions to Trustee

✔ Promissory Note

✔ Assignment ofMortgage

✔ and many more…

Written by Attorneys

A Simple English Explanation of the Law

Ready-to-Use Forms withDetailed Instructions

LandTrusts

in

FloridaWarda

7th

Edition

“Easy to understandguides—an

excellent sourcefor readers.”

—Library Journal