The Advantages of Owning Real Estate in a Trust

Retirement and the security of our future is a major concern to most today and at a much younger age than in the past. There are many options individuals and couples are choosing as a way to ensure a financial future. Some are still choosing to keep their money in savings accounts and certificates of deposit while others are investing in stocks and bonds. While each of these options gives the investor some sort of income, many are also choosing to invest in real estate. One of the most common forms of real estate investments are real estate trusts. The advantages of owning real estate in a trust are numerous. There are also different types of real estate trusts you can participate in.

One type of real estate investment is an irrevocable living trust. When a homeowner dies, real estate must generally go through the probate court in the state where it's located. This can often take months. Putting real estate in an irrevocable living trust helps to avoid this sometimes long probate. When real estate is in an irrevocable living trust, the owner can live in the home until s/he dies but the real estate is titled in the name of the trustees of the trust, which are usually the survivors. By using an irrevocable living trust, the property is deeded to the survivors without having to go through probate. There is also a $25,000 ad-valorem property tax exemption on an irrevocable living real estate trust. This is just one of the advantages of owning real estate in a trust.

Another form of a real estate trust is real estate investment trust, also known as REITs. REITs are a tax shelter for corporations that own real estate because while they are earning income, the REIT helps them to eliminate or decrease the corporate income taxes. In addition, the trust is required to give 90 percent of its income to the investors of the real estate. Real estate investment trusts can be held privately or publicly.

There are three types of real estate investment trusts: mortgage REITS, equity REITS, and hybrid REITS, which is a combination of the two. The most common type of real estate trust is the equity trust, which owns real estate in the trust and provides trustees income through proceeds from rental payments. REITs offer a steady source of income for the trustees. This is why more and more individuals are choosing some form of real estate trust as a main investment source.

Yet another advantage of owning real estate in a trust is that real estate trusts add diversity to your portfolio. If all you have in your portfolio are stocks and bonds, which can go up and down, the addition of real estate increases the returns while decreasing the risks.