Florida land trusts have been part of Tampa real estate practice for decades. An investor buys a duplex in Seminole Heights, and the deed is recorded in the name of a trustee “as trustee” under a trust agreement that never gets recorded. The investor’s name does not appear in the Official Records. Tenants, neighbors and nosy people searching the property appraiser’s site see a trustee, not the owner.

That privacy has value. What it does not have is any power against the Internal Revenue Service. I meet people who were told otherwise, usually by someone selling a seminar. Here is how a land trust actually looks to the IRS.

How a Florida land trust works

Florida regulates land trusts in two statutes. Fla. Stat. 689.073 gives a trustee named in a recorded instrument full power to deal with the property, and protects people dealing with the trustee from having to inquire into the unrecorded trust agreement or its beneficiaries. Fla. Stat. 689.071, the Florida Land Trust Act, defines a land trust as an arrangement where title is vested in a trustee by a recorded instrument and the trustee’s duties are essentially limited to dealing with the property as directed by the beneficiaries.

The beneficiary keeps the economic ownership: the right to direct the trustee, the right to the income, the right to the proceeds of sale. The trustee holds bare legal title.

One detail matters for lien purposes. Under Fla. Stat. 689.071(6), if the recorded instrument or the trust agreement declares the beneficiaries’ interests to be personal property only, that declaration controls. If there is no such designation, the interests are real property.

The federal tax lien reaches what you actually own

Under IRC 6321, the federal tax lien attaches to all property and rights to property belonging to the taxpayer. The Supreme Court has explained that state law defines what rights a taxpayer has, and federal law decides whether those rights are property for purposes of the lien. In Drye v. United States, 528 U.S. 49 (1999), the Court applied that framework to hold that a taxpayer’s state-law disclaimer of an inheritance did not defeat the federal tax lien, because the right to accept or direct the inheritance was itself property.

A land trust beneficiary has a valuable bundle of rights: control over the property through the power of direction, the income, and the proceeds. That is property under any reasonable reading of 6321. The lien attaches to it. Calling the interest “personal property” under Florida law may change how it is classified, but it does not make it disappear.

How the IRS gets to land trust property

The IRS has several tools, and a Revenue Officer will pick the one that fits the facts.

  • A lien notice against the beneficiary. The Notice of Federal Tax Lien is filed under Florida’s Uniform Federal Lien Registration Act, Fla. Stat. 713.901. For an individual, notices against personal property are filed with the clerk of the circuit court in the county where the person resides, and notices against real property are filed in the county where the property is located. My guide on where federal tax liens are filed in Florida covers the details.
  • A nominee lien naming the trustee. IRM 5.17.2.5.7.2 describes a nominee as a third party holding legal title while the taxpayer enjoys full use and benefit of the property. A land trust trustee is a textbook example of a title holder who is not the real owner. The IRS can file a lien notice naming the trustee as nominee of the taxpayer, usually identifying the specific property. Area Counsel approval is required, and in a land trust case it is not hard to justify.
  • A levy on the beneficial interest. The IRS can serve a levy on the trustee directed at the taxpayer’s rights, including rents or sale proceeds the trustee would otherwise pay to the beneficiary.
  • A foreclosure suit. Under IRC 7403, the United States can sue in the Middle District of Florida to foreclose its lien on the property, naming the trustee and everyone else with an interest. See IRS foreclosure suits in Tampa.

Privacy does not survive a collection investigation

The privacy of a land trust works against casual searchers. It does not work against an investigator with legal tools.

Revenue Officers follow IRM 5.1.18, Locating Taxpayers and Their Assets. That section treats real property records as a critical source and points employees to courthouse records, the IRS’s national asset locator tool, and other databases. Information returns also leave trails: a land trust that collects rent and pays a mortgage generates records, and the beneficiary reports the income. If the IRS needs more, it has summons authority. I describe that process in how Revenue Officers find assets in Hillsborough County.

And then there is the form you sign. Form 433-A asks about real property and other assets you own or have an interest in, and you sign it under penalties of perjury. A land trust beneficial interest is an interest. Leaving it off is not privacy. It is a false statement, and IRC 7206(1) makes willfully signing a false return or statement under penalties of perjury a felony.

Land trusts formed after the tax debt

A land trust that has held a property for fifteen years, for privacy reasons, is one thing. A land trust created the month after the IRS sent a final notice is another.

When a taxpayer moves property into a land trust after a tax debt arises, the IRS will look at it as a possible nominee arrangement and a possible fraudulent transfer. Florida’s Uniform Fraudulent Transfer Act in Chapter 726 allows a creditor to avoid transfers made with intent to hinder, delay or defraud. The Federal Debt Collection Procedures Act, 28 U.S.C. 3304, gives the United States its own remedy. In an offer in compromise, IRM 5.8.5.18 lets the IRS count dissipated assets in your reasonable collection potential. The move gains nothing and creates a record of intent. My guide on retitling property after a tax debt covers these rules.

Land trusts and homestead

Some Tampa homeowners hold their residence in a land trust. Florida generally allows a beneficiary with the right to occupy to qualify for homestead benefits. But as with any homestead, Florida’s constitutional protection does not bind the IRS. Treas. Reg. 301.6334-1(c) says state homestead exemptions do not exempt property from federal tax levy. The federal protection for a principal residence, the requirement of a federal judge’s written approval under IRC 6334(e), still applies. Holding title through a trustee does not change that analysis.

What land trusts are good for

None of this means land trusts are bad. They can simplify transfers, keep personal names off public records, and make estate planning easier. Those are legitimate reasons. Just do not mistake privacy for protection.

If you hold property in a land trust and owe the IRS:

  • Disclose the beneficial interest on every collection information statement.
  • Expect the IRS to treat the property as yours for collection purposes.
  • If you are selling, plan for the lien. The title company will ask about the beneficiary, and the IRS will expect to be paid.
  • If the trust was created after the debt, talk to a lawyer before you talk to the Revenue Officer.

GetIRSHelp.com has more information on federal tax liens.

A land trust hides your name from the neighbors. The IRS already knows your name.