How to Protect Your Property with a Real Estate Trust

In Nigeria, a real estate trust is a legal arrangement where a person (the settlor) transfers ownership of real estate assets to a trustee, who manages these assets for the benefit of designated beneficiaries. 

This arrangement is commonly used for estate planning, ensuring that real estate assets are managed and distributed according to the settlor’s wishes, providing benefits such as asset protection, tax planning, and avoidance of probate.classic-attorneys.com.

A real estate trust is a legal way to hand over your property to someone you trust, so they manage or pass it down exactly how you want. It’s like setting up a “property plan” while you’re alive that continues to work for you, even when you’re gone.

Think of it like hiring a property caretaker with strict instructions— only this caretaker is bound by law to follow your exact wishes.

In contrast, this mechanism is distinct from Real Estate Investment Trusts (REITs), which are investment vehicles regulated by the Securities and Exchange Commission.

Why a Real Estate Trust Makes Sense

Clearly, setting up a Real Estate Trust gives you peace of mind. Here’s why it’s a smart move:

• Asset Protection: Safeguards assets from creditors and legal claims.

• Estate Planning: Ensures orderly transfer of assets to beneficiaries.

• Tax Efficiency: Potentially reduces estate taxes and other liabilities.
  
• Avoidance of Probate: Assets in a trust typically bypass the probate process, allowing for quicker distribution.
  
• The settlor can define exactly how to manage and distribute the assets, ensuring their wishes are followed even after death.
  

Who is Involved in a Real Estate Trust?

Every Real Estate Trust has three main roles:

• Settlor: That’s you— the person who creates the trust and owns the property.
  
• Trustee: This is the person (or company) you trust to manage the property.
  
• Beneficiaries: These are the people who will benefit from the trust. They could be family, friends, or even a charity.
  

Types of Trusts

• Public Trusts: Created for charitable or public purposes like education, religion, relief of poverty or community development. However, this type of trust is usually overseen by government officials like the Attorney-General, to ensure the trust serves the public interest.
  
• Private Trusts: Established for the benefit of specific individuals or groups, such as family members. In Nigeria, private trusts are common for estate planning and managing family issues.
  

We can further categorize private trusts into the following types:

• Inter Vivos (Living) Trusts: Created during the settlor’s lifetime. The settlor transfers the property to a trustee to manage for them or their beneficiaries.
  
• Testamentary Trusts: Established through a will and take effect upon the settlor’s death. It only takes effect after the settlor’s death.

• Revocable Trust: In this case, the settlor can change or cancel this trust while they are alive.

• Irrevocable Trust: Once created, the settlor will not be able to change it easily. This offers more protection but less control.

Although this article focuses on the main types of real estate trusts in Nigeria, it also introduces a few other trusts that occasionally apply.

Other Trust Types Related to Real Estate You Should Know

• Spendthrift Trusts protect beneficiaries from creditors or poor money management by restricting how trust assets are used.
  
• Nominee Trusts involve holding property titles in someone else’s name for privacy or convenience, but they don’t offer the full protections of a regular trust.
  
• Charitable Trusts allow property owners to donate land or real estate for public use or charity purposes, often with tax benefits.
  
• Asset-Protection Trusts help shield property from legal claims or debts, providing extra security for your assets.

These specialized trusts aren’t as common for everyday real estate planning but can be important depending on your personal or financial goals.

How to Set Up a Real Estate Trust in Nigeria

Here’s how to create a Real Estate Trust step by step:

1. Get Legal Advice: Speak with a property lawyer who understands trusts.
   
2. Write a Trust Deed: This legal document lists all the rules, names, and plans.
   
3. Choose a Trustee: Pick someone reliable who can handle responsibility.
   
4. Transfer Your Property: Legally move your land or house into the trust.
   
5. Register It Properly: Make sure it’s recorded at the land registry office.
   
6. Review Regularly: Update the trust if things change.
   

Legal Backing for Real Estate Trusts in Nigeria

Generally, Real Estate Trusts in Nigeria follow common law rules. The laws that support them include:

• The Trustee Investment Act (CAP T22 LFN 2004): Guides how trustees invest trust assets.
  
• Companies and Allied Matters Act (CAMA): Explains how corporate trustees should act.
  
• English Trust Law: Forms the base for most trust arrangements in Nigeria.

To make a valid trust, you need:

• Certainty of Intention: Clear intention by the settlor to create a trust.
  
• Certainty of Subject Matter: Clearly defined trust property.
  
• Certainty of Objects: Identifiable beneficiaries.

Common Questions About Real Estate Trusts

1. Is it better than a will?
Yes. A trust avoids court and reduces the risk of disputes.

2. Can I change the trust later?
Yes. As long as it’s a living trust (not one tied to your will), you can update it.

3. Who should I pick as trustee?
Pick someone honest and capable. You can also use a registered trust company.

4. Does it work if I have debts?
Yes, but creditors may still claim if the trust isn’t properly set up. That’s why you need legal advice.

Real Estate Trust vs. REITs: Know the Difference

Often, many people confuse Real Estate Trust with REITs (Real Estate Investment Trusts). Here’s the difference:

Conclusion

Owning property is great. But planning what happens to it is even smarter. A Real Estate Trust gives you the power to protect your land, help your loved ones, and avoid future problems. Whether you’re young or old, starting this today is one of the best decisions you can make for your future.

You’ve worked hard for your property. Now take the next step— build a Real Estate Trust that protects your legacy and gives you peace of mind.