Can You Sell Your Beneficial Interest in a Tennessee Land Trust?
- Jeremiah McGuire
- May 23
- 3 min read
If you’re a beneficiary of a land trust in Tennessee and thinking about selling your beneficial interest, you’re not alone. Many property owners use land trusts for privacy, estate planning, or asset protection. What’s not always clear is how the rights you hold as a beneficiary can be transferred or sold.
What is a Beneficial Interest?
In a land trust, the trustee holds the legal title to the property, but the beneficiary enjoys the benefits - whether it’s living on the land, collecting rent, or selling their interest. The key point is that a beneficiary’s interest is considered personal property, not real estate. That distinction opens the door to more flexible ways of selling or transferring that interest.
Can You Sell Your Interest?
Yes, in most cases, beneficiaries can sell or assign their beneficial interest. However, this depends heavily on the specific language in the land trust agreement. Some agreements might limit your transfer rights, require you to give notice to other beneficiaries, or require you to ask for trustee approval.
Steps to Sell Your Beneficial Interest
Check the Trust Agreement First
Before doing anything, read through the trust agreement carefully. Look for clauses about "assignment" or "sale" of the beneficial interest. Some trusts may require trustee approval or impose restrictions on who can become a beneficiary.
Draft an Assignment of Interest
If the agreement allows it, the next step is to draft a legal document called an “Assignment of Beneficial Interest.” This document details the transfer of your interest to another person or entity. It doesn’t have to be recorded with the county, but having it notarized is a good idea to avoid future disputes.
Notify the Trustee
Once the assignment is complete, provide a copy to the trustee. The trustee needs to know who holds the beneficial interest, since they’re responsible for managing the trust property according to the instructions in the agreement.
Address Tax and Legal Implications
Selling your beneficial interest might have tax consequences, such as capital gains. It’s wise to consult with a tax advisor or attorney before finalizing the sale to understand your obligations and avoid surprises.
Benefits of Selling Beneficial Interest
Discreet Transactions
Because the trust holds title and the transaction isn’t recorded in public records, the sale remains private. This is often one of the key advantages of land trusts.
Simple Transfer Process
Unlike selling real estate, you don’t need to deal with title companies, deeds, or property records when transferring a beneficial interest. The process is generally quicker and less expensive.
Continued Property Protection
Even after selling your interest, the property stays in the trust, maintaining the asset protection and privacy benefits for the new beneficiary.
Things to Watch Out For
Lender Concerns
Some mortgages contain a due-on-sale clause, which allows the lender to call the loan if ownership changes. While transferring a beneficial interest doesn’t change the legal title, you should review your mortgage terms and talk to your lender if necessary.
Multiple Beneficiaries
If there’s more than one beneficiary, everyone involved needs to be on the same page. Some trust agreements may require unanimous consent for any transfer.
Legal and Financial Advice is a Must
Because every trust is different, and laws can vary by location, always get professional advice before making a move.
Final Thoughts
Selling your beneficial interest in a land trust in Tennessee is completely possible—and often simpler than selling the property itself. Still, it’s not something to rush into. Make sure you understand your rights under the trust agreement, and get the right legal and financial guidance to ensure a smooth and valid transfer.
Whether you’re cashing out, stepping back from a family arrangement, or restructuring your assets, knowing how to navigate this process gives you more control over your real estate investments.
As an attorney with years of experience working with contract and real estate related matters, I am here to help answer your questions and ensure your closings go smoothly.
I hope that you found this informative. If you feel that this information may help you or a client, please reach out. It is my mission to help others.
Jeremiah L. McGuire
Attorney
Memphis, TN
901-494-1622
Your Past. Your Future. Our Priority.
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