How a Florida Land Trust Works
Short answer: a Florida land trust is a trust in which a trustee holds title to real property under a recorded deed, while the beneficial owners direct what the trustee does and keep their names off the deed. Florida has a statute written for the structure, the Florida Land Trust Act, section 689.071 of the Florida Statutes, supported by section 689.073. It gives owners privacy and clean title. It does not make them immune from their own creditors.
The parties and the terms
A land trust has three roles. The trustee holds title. The beneficiary, who may be one person or several, owns the beneficial interest, which the Act defines as any interest in the land trust, however small. The power of direction is the authority, set out in the trust agreement, to tell the trustee to convey the property, sign a lease or mortgage, distribute the proceeds of a sale or financing and sign related documents (s. 689.071). A trustee may also be a beneficiary of the land trust.
What the trustee holds and can do
When a recorded instrument transfers real property to a trustee and gives the trustee the powers described in section 689.073, the instrument vests in the trustee both legal and equitable title and full rights of ownership, whether or not it mentions the beneficiaries or the trust agreement (s. 689.071). Those powers include the power to protect, conserve, sell, lease, encumber and otherwise manage and dispose of the property (s. 689.073). A buyer, lender or other party dealing with the trustee does not have to inquire who the beneficiaries are, what the unrecorded agreement says or whether the trustee has authority to act, and takes its interest free of the beneficiaries' claims, although a beneficiary can enforce the unrecorded terms against the trustee (s. 689.073).
The trustee's role is deliberately narrow. To be a land trust under the Act, the trustee must have no duties beyond dealing with the property as the beneficiaries or the holder of the power of direction direct, selling it at termination and performing ministerial and administrative functions (s. 689.071). If the trust agreement for a trust created on or after June 28, 2013 gives the trustee greater duties, it is not a land trust under the Act. A land trust governed by the Act is also outside the Florida Trust Code, chapter 736, except as the Act provides (s. 689.071).
The beneficial interest: personal property or real property
The trust agreement can declare the beneficial interests to be personal property, and if it does, that declaration controls for all purposes under Florida law and in Florida courts. If it says nothing, the interests are real property (s. 689.071). The choice has consequences. A security interest in a beneficial interest classed as personal property is perfected under chapter 679 of the Florida Statutes. If the interest is real property, a mortgage or similar security document must be recorded in the proper county. Either way, a lien against the beneficial interest does not attach to the trustee's title, and a lien against the trustee's title does not attach to the beneficial interest, unless the lien by its terms or by other law reaches both (s. 689.071).
The classification does not avoid documentary stamp tax. Florida charges the tax at 70 cents per $100 of consideration on deeds that transfer real property, and consideration includes the amount of any mortgage whether or not the debt is assumed (s. 201.02). The tax also applies to documents that transfer a beneficial interest in a land trust even if the interest is designated personal property (s. 201.02).
Privacy: what a land trust hides and what it does not
A land trust keeps beneficiaries off the recorded deed. The Act provides that a land trust does not fail because the beneficiaries are not named in the recorded instrument (s. 689.071), and the unrecorded trust agreement stays out of the public record. The limits are real. The deed still names the trustee and the trustee's mailing address, because Florida requires the name and post-office address of each grantee on a recorded deed (s. 695.26). If neither the recorded instrument nor the trust agreement provides for a successor trustee, the holders of the power of direction appoint one by a declaration recorded in the county where the property sits, and a beneficiary must sign it (s. 689.071). Lenders and title insurers typically ask who the beneficiaries are, and a court can order disclosure in litigation. Privacy from the public record is not secrecy.
Homestead
Homestead is where owners most often assume too much. The Act says the principal residence of a beneficiary is entitled to the homestead tax exemption even if the trustee holds it in a land trust, provided the beneficiary qualifies under chapter 196 (s. 689.071). That provision covers the property tax exemption only. Florida's protection from forced sale is a different benefit. Article X, section 4(a) of the Florida Constitution exempts a homestead from forced sale under court process, and it describes the property as "owned by a natural person." Because the Act vests legal and equitable title in the trustee, whether that protection reaches a home titled in a land trust is a separate question to analyze on your facts before you move a home into one. Do not assume the answer.
What a land trust does not protect
A land trust is not a shield against your own creditors. The Act sets out how a lender perfects a lien or security interest against a beneficial interest (s. 689.071), so a creditor of a beneficiary can pursue that interest. What the Act says is narrower: beneficiaries are not liable, solely by being beneficiaries, for the land trust's own debts, obligations or liabilities (s. 689.071). A mortgage still binds the property.
Moving a mortgaged home into a land trust can also raise a due-on-sale question. Federal law bars a lender from calling a residential loan on fewer than five dwelling units due because of a transfer into an inter vivos trust, meaning a trust created during life, in which the borrower remains a beneficiary and which does not transfer occupancy rights (12 U.S.C. § 1701j-3). Loans outside that rule follow their own terms. Real asset protection usually comes from combining a land trust with other structures, planned before any claim exists.
To see whether a land trust fits your property, start with our Land Trusts practice. Aaron Bedy, who is admitted to The Florida Bar, advises owners on Florida titling and trust questions. Outcomes depend on your facts, and no structure can promise protection.
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Land Trusts in Florida: How the Florida Land Trust Act Works