Understanding Land Trusts: Title-Holding Land Trusts

Cari Rincker Estate Planning, Food & Ag Law, Property Law Leave a Comment

What is a land trust?

The use of the phrase “land trust” can often lead to confusion, as it relates to a few completely distinct concepts.  On the one hand, a land trust may refer to an estate planning tool wherein title to the land is held by a trustee at the owner’s request.  On the other hand, a land trust may refer to a nonprofit organization that owns land or purchases an interest in land for conservational purposes.  In this blog, I discuss the former type of land trust, and further explain the intricacies of Illinois Land Trusts.

Using land trusts in estate planning

 In the estate planning world, a land trust is created when the grantor—who is the owner of the land—transfers title in the land to a trustee, and the then trustee holds the land for the benefit of certain beneficiaries.  A land trust is usually a revocable living trust, which means it can be amended or canceled during the lifetime of the grantor. While a land trust may be an ordinary estate planning trust where the trustee manages the property for the benefit of a distinct and separate beneficiary, in Illinois a land trust may also be created for the sole purpose of putting the title to land in a third party.  This type of trust is called a “title-holding trust” or an “Illinois Land Trust.”

 Explaining title-holding trusts (“Illinois Land Trusts”)

 A title-holding land trust (also known as an “Illinois Land Trust” because the instrument is largely unique to the state of Illinois) is a tool that aims to keep real property out of probate or preserve the anonymity of the owner of the land.  A title-holding land trust is unique for two reasons.  First, in a title-holding trust, the landowner is both the grantor and the beneficiary of the trust, whereas most often in estate planning, the grantor of the trust is forming the trust for the benefit of a separate beneficiary.  Second, in a title-holding trust, the trustee merely holds title to the property, and has no duty to manage it.  In fact, the trustee in a title-holding trust can only make transactions or significant decisions about the property when directed to do so in writing by the beneficiary.

What are the benefits of an Illinois Land Trust?

A title-holding land trust may be beneficial for the several reasons:

  • It preserves anonymity because the identity of the true owner of the land (i.e., the beneficiary of the land trust) is not made public record. Only the trustee is named on the title of the land.
  • If the owner of the land passes away, transfer to the beneficiaries can be carried out through the trust agreement. This means that the land does not need to go through probate.
  • If there are multiple beneficiaries or owners of the property, settling title in a single trustee makes it easier to mortgage or sell property.
  • A title-holding land trust converts the beneficiary’s interest in the property from real property to personal property, which means that the interest can be sold, assigned, or conveyed without the same formalities that are required for transacting in real estate.

If you are looking for assistance with estate planning or creating a trust, contact our law office and schedule a consultation.


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