Is a Land Trust Right for You?

Find Out if a Land Trust is Right for You

Real estate — including your family home — is the most valuable asset in many investment or retirement portfolios. Rather than own real estate in their own names, a number of individuals transfer ownership of property to a land trust. A land trust places title to the property in the name of one or more trustees, while allowing the beneficiary of the trust — generally the one who initiated the trust — to retain control over management of the property.

Land trusts date back to the mid-1800s. Although they are used in several states, they originated in Illinois, which is why they are often referred to as "Illinois Land Trusts" even outside of the state.

There are numerous benefits associated with using a land trust, including privacy of ownership, efficient succession of ownership upon death, and protection from liens or judgments. At Zaba Law Group, PC, in Downers Grove, our experienced real estate attorneys provide comprehensive legal guidance regarding the establishment and effective use of land trusts.

How a Land Trust Works

The owner of a land trust (the beneficiary) designates a corporate fiduciary to hold title to the property. The beneficiary of a land trust can be an individual, a group of individuals (such as husband and wife) or a corporate entity. The beneficiary spells out who has authority to manage and control the property, as well as whether the property can be sold and under what conditions. It also stipulates who becomes the owner of the property upon the beneficiary's death. Often, this may be more than one person.

The Benefits of Land Trusts

There are many benefits to placing real property into a land trust, including:

Privacy — The ownership of property held within a land trust is never disclosed by name. In fact, it may be several individuals. Developers appreciate this anonymity if they are purchasing several pieces of property in stages and wish to maintain a low profile throughout. In the event that property in a land trust is sold, the trust also keeps the price confidential.
Protection — If property is owned by two or more individuals, placing it in a land trust protects it from being seized or sold off to resolve judgments, liens or other legal claims against one or more beneficiaries. (However, it is important to note that the interest of a beneficiary can be subject to a claim.)
Succession — Many individuals place property in a land trust so it can avoid probate and be passed to heirs upon the beneficiary's death. This is especially helpful if a beneficiary lives out of state but owns real estate in Illinois. The land trust property can be administered in the beneficiary's home state without the need for a separate probate proceeding.
Management — When more than one party owns property, a land trust can make it easier to settle disputes regarding the real estate. It also is easier to transfer fractional interests in a property when it is in a land trust. At the same time, a land trust helps prevent a disgruntled partner from forcing the property to be sold.