how a land trust works
land trusts which are trusts tied to real estate are often used for estate planning they are revocable trusts meaning they can be terminated or changed and are meant to be used during your lifetime for managing properties 1land trusts can include real estate e g buildings or homes or property notes and mortgages 2 they are typically used for the land involved in conservation or wildlife purposes or for real estate development purposes 1land trusts have three key parts the grantor trustee and beneficiary the grantor is the person who creates the trust and transfers the property the trustee manages the trust and the beneficiary is the one that benefits from the land trust 3grantors handle the transferring of assets into the trust and set the terms of the trust while trustees handle the intimate details of the property for example if a rental property is held in a land trust a trustee might be responsible for overseeing maintenance and collecting rent payments types of land truststhere are two key types of land trusts title holding and conservation land trusts title holding trusts allow individuals or entities to hold land anonymously the big difference with a conservation land trust is that the owner must give up some land use and development rights a title holding trust allows the property owner to anonymously maintain all rights over the property and direct the actions of the land trust these trusts are also commonly called illinois land trusts because they were first popularized in chicago during the 1800s at that time property owners were not allowed to vote on city projects in the same places they owned land to circumvent this law wealthy businessmen and politicians would use land trusts to purchase land anonymously thereby protecting their voting rights 4not all 50 states have a legal structure in place for title holding land trusts however most states defer to the illinois land trust laws if they don t have their own 5in a title holding land trust the landowner signs a document called a deed in trust which transfers legal ownership of the property when setting up the trust the landowner who is both the trust grantor and the beneficiary can specify how the land is to be managed who has control over it and how any income it produces is distributed this means that while the trust is the title holder on paper the landowner maintains complete control over the property title holding trusts are used as a way for property owners to maintain anonymity and keep valuable assets out of probate they can also provide a number of other estate planning benefits and protect assets from judgments or liens this can be especially useful for the very wealthy celebrities and large companies who may want to keep development plans under wraps 6conservation land trusts require that the property owner give up some rights over land use and development the goal of a conservation land trust is to protect wildlife historical or cultural sites and natural resources from commercial development or other activities that may lead to disruption or pollution 7in a conservation land trust the trust doesn t necessarily take over the land title unless the property is donated in its entirety instead a landowner can enter into a legally binding agreement called a conservation easement thereby donating their development rights to the trust the trust is tasked with ensuring that the easement is enforced and in some cases managing the property conservation easements can be tailored so that the landowner retains ownership and usage rights such as the right to continue farming or raising livestock while still ensuring that the land remains undeveloped in perpetuity conservation easements follow the land which means that the terms of the easement remain in force even if the land is sold or passed to heirs 8the total number of acres of undeveloped land managed by private conservation land trusts throughout the u s 9examples of land trustsan example of a title holding land trust is the walt disney company s dis resort in florida the walt disney world resort in orlando florida was initially purchased in 1965 using a title holding land trust the original owners of the florida swamplands where the resort was built had no idea that disney already a household name at the time was behind the purchase had they been aware of the buyer s identity they likely would have increased their asking price 10meanwhile there are plenty of examples of conservation land trusts across the u s including the ozark land trust which covers dozens of projects across 28 000 acres through the ozark region the trust is a non profit organization that helps landowners preserve land in the ozark area and protect it from urban development the ozark land trust helps accomplish this with nature preserves and conservation easements 11advantages and disadvantages of land truststhe key advantage of land trusts is that they provide liability and privacy protections allowing real estate investors to keep property separate from personal finances using a land trust helps keep the details of net worth private real estate investors often use land trusts to keep property separate from other assets however there are downsides to a property trust firstly if you purchase the property under a land trust any redemption rights are lost that is the right to reclaim the property just before or after foreclosure second most land trusts are automatically disqualified from secondary market loans 12the other issue with land trusts is that they give the illusion that there is no liability land trusts still have liability even in illinois the real property owner and not just the trust or trustee can be found liable for things privacy isn t guaranteed either as court orders can pierce the privacy veil separate personal finances from real estateprivacy anonymous property ownershipcertain liability protectionsease of probate processlose redemption rightsmay not qualify for secondary market loansno foolproof liability protectionsprivacy veil can be pierced