How to Create a Land Trust

A land trust is one of the best ways to leave large pieces of land to your heirs, especially since trusts aren't subject to inheritance tax. You can also use a land trust to hide property or to specify a particular use for land that you don't want left up in the air. If you've decided to create a land trust, here's how to go about it.

Choose a Parcel of Land

If you already own the property that you want included in the land trust, you'll simply need to specify the boundaries on paper. If, however, you have yet to acquire the property, you'll need to choose a parcel of land and purchase the property to be included in the land trust. Since these things are difficult to change, make sure you've picked the right plot and know exactly what you want to give to your heir or protect for your business.

Draft the Mission Statement

In order for the land trust to serve its purpose, you'll need to draft a mission statement that describes exactly the purpose for which the land should be used. For example, if you are leaving 45 acres to your children, you might want to specify that the land be kept in the family. This means that it cannot be sold after your death, and must be used for personal reasons rather than commercial. These orders have to be observed once you've created the land trust.

Assemble a Board of Directors

When you create a land trust, you'll name a person or group of people to serve as the trustees, or Board of Directors. These people will be responsible for ensuring that the land is bequeathed to whomever you name, and that the land is used the way you specified in the trust. Most people choose trustees who are not going to inherit the property for additional security, but it is entirely up to you.

Apply for Non-Profit Status

When you create a land trust, it is considered its own entity, and cannot benefit from any money it generates. For example, if the land is used for farming, the proceeds can go to the trustees or even to you, but it cannot be held in the name of the trust. You can contact the IRS for more specific information to your particular case, but you'll probably have to submit an application for non-profit status.

File a Creation of Trust