An Illinois land trust, governed by numerous Illinois statutes, offers a real estate title option that is not available to individuals in most other states. As a creation of common law, a land trust is not as prevalent today as in previous years, but it provides Illinois homeowners many real estate benefits. A real estate attorney who understands the facts can provide legal advice on title options for purchases and investments.
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What is an Illinois Land Trust?
An Illinois land trust is a simple, inexpensive method for handling real estate ownership. Similar to a revocable living trust, a real estate land trust title is held by a trustee, but the owner (beneficiary) still has all the rights of ownership without disclosing his/her identity. When a property is placed into a land trust, the interest is converted to personal property. This makes the property simpler to manage and eliminates many difficulties often encountered in buying, selling and owning real estate.
The owner or beneficiary of an Illinois land trust retains all rights to the property. He/she can end the trust or transfer property out of the trust at any time. He/she can also direct the trustee to take certain actions related to the property at any time. The beneficiary of a land trust changes his/her interest in the property from a real estate title to beneficial interest. Since beneficial interest is considered to be personal property, it is treated in much the same way as tangible personal property like a car or bank account. Even though the beneficiary retains complete control and management of the property, he/she is not burdened with the normal legal issues that often occur when dealing with real estate property.
How is a Land Trust Created?
A land trust can be created by an individual; a group of individuals involved in a business partnership or association; or two or more individuals purchasing a property as a joint real estate venture. The beneficial interest can be assigned, pledged or sold through a real estate attorney much easier than a conveyance on real property. Consequently, the owner or beneficiary is not burdened with legal real estate issues.
An Illinois land trust can be set up through a real estate attorney with three simple steps: 1) establish a trust agreement to appoint a trustee; 2) draft and sign a Deed in Trust which is recorded with the Register of Deeds in the county where the property is located; 3) file the trust agreement with the corporate trustee and pay necessary fees.
What are the Benefits?
- Privacy of Ownership – Under a land trust, the real owner’s identity is never disclosed to the public. Legal title is passed to the trustee, and the recorded Deed in Trust shows that the property is held by a land trust rather than a private individual. Privacy can be important to protect owners or investors from public inquiries about the property.
- Legal Protection – A land trust offers protection when a property has multiple owners. If legal issues arise against one owner, a judgment against that owner will not affect other owners or create a lien on the property held in the land trust. Legal proceedings against any of the beneficiaries will not cloud the title on the property, but creditors may assert claims against the trustee on the property.
- Succession of Ownership – The party that creates the land trust can retain sole control over the property during his/her lifetime. Upon death, the desired succession in ownership becomes effective without the expense and delay of probate proceedings. This can be especially beneficial to owners who live out of state. They can have the land trust property administered by a real estate attorney in the state where they live without separate probate proceedings.
- Ease of Conveyance – A land trust provides a convenient way to buy and sell property with multiple owners. Since all interests are transferred to the trust, it is not necessary to obtain deeds or homestead waivers from each owner or their spouses. Since beneficial interest is considered personal property, it can be pledged as collateral for a loan without the formal restrictions of most mortgages, title reports and other real estate documents.
- Disposal of Partial Interest – Since interests in real estate held in a land trust are designated as personal property interests, they can be assigned, partially or entirely, to other individuals without a transfer deed. Although assignment may trigger a transfer tax, the adaptability of a land trust offers benefits when property is owned by multiple parties or if owners hold unequal shares of the property.