Land Trusts in Illinois
Land Trust Primer
Note: The Illinois land trust is only available for real property within the State of Illinois. Other states may recognize and may grant legal status to the Illinois Land Trust, but this page deals only with land trusts for real property within the State of Illinois and governed by Illinois law. We have received numerous inquiries from people in other states looking for help with an “Illinois Land Trust”. We cannot help with these requests. We are licensed to practice law only in the State of Illinois. If you have a land trust issue outside of Illinois, consult with an estate planning or real estate attorney in your own State.
In Illinois, land trusts have been around, in some form or another since 1868. From the first case recognizing the validity of these trust instruments in Kerr v. Kotz in 1920, Illinois Courts have upheld the entity as a legal manner of holding real estate. In essence, a land trust is a simple trust which vests in a trustee the title to the property and the power to convey or deal with the property at the direction of the trust beneficiary. The beneficiary, on the other hand, retains the power to use, convey, or manage the land and holds any other number of rights.
In the typical scenario, a landowner will transfer title in property to a bank or another person as trustee of the property by way of a deed in trust. At the same time, the landowner will enter into a trust agreement with the trustee which basically reserves to the landowner, as beneficiary, most of the rights in the land. In essence, the trustee ends up with the right to hold title to the land in the land trust and to convey that land at the direction of the beneficiary.
The next most important aspect of the land trust is the beneficiary designation. Upon the death of the primary beneficiary (or there may be more than one beneficiary who may hold title as joint tenants with the right of survivorship or as tenants in common), the trust agreement will designate a successor beneficiary or co-beneficiaries. As such, title to land will pass quite easily and outside of probate.
Finally, the trust agreement will designate the person or persons who hold the power of direction. This is the ability to tell the trustee to convey the land or make changes to the trust agreement. As such, a landowner may designate another person as his or her co-beneficiary but still retain sole power to direct the sale of the property without the consent of the co-beneficiary.
Advantages of the Land Trust
There are many benefits to holding title to your land in a land trust. The most obvious reason is probate avoidance for land. Because the trust agreement governs the ownership of the property and not a will, the property will not be included in your probate estate (although it will be included in your estate for estate tax purposes). As such, the long time delay inherent in probate will not apply and title to the land vests immediately upon the death of the beneficiary. In the same vein as probate avoidance is the ability of a landowner to easily designate the property to the heirs of his or her choice upon death. Because the bank or other trustee must act according to the trust agreement, there can be no heir contest in probate. Barring some technical trouble with the trust agreement itself (which has not changed much since the decision in Kerr v. Kotz), the property will pass to those whom the landowner has decided it should pass.
Because the power of direction may be vested in only one or many individuals, depending upon your situation and the structure of the trust agreement, a land trust provides convenience and security. A landowner may grant beneficiary status to another person, but still maintain the sole right to direct the sale of the property. In other cases, a group of owners may designate one person as the sole decision maker for ease and convenience in making transactions regarding the property. In either case, depending upon the factual situation, a land trust can facilitate the transfer of the property in the trust.
Finally, because the land is deeded to a trustee, the beneficiary is not disclosed to the public. This privacy can be of immense value to a landowner. Any information related to the property is a private matter between the trustee and the beneficiary.
What a Land Trust Will Not Do
A land trust does not have the flexibility of a living trust. Living trusts are often much more complex, containing additional terms and provisions and holding title to property other than land. Living trusts are usually much more costly because of their increased scope. In addition, living trusts may contain various provisions dealing with estate tax minimization and other estate, gift, and property tax issues. However, the land trust is the perfect estate planning vehicle for the transfer of land outside of probate and is an excellent tool for most persons holding less than the estate tax unified credit amount ($3,500,000 in 2009 – ie. those who do not require estate tax planning).
Services and Fees
We provide full service for the drafting of land trust agreements and deeds in trust. We can work with you to find a suitable banking or other institution to act as trustee, such as Marquette Bank, Chicago Title, or any bank or land trustee of your choice which offers trustee services or can assist in the drafting of a “private” land trust with a non-institutional land trustee. Land Trust Drafting Services are provided like our other estate planning services (prices will vary depending on your situation) and usually involve some fees and costs related to drafting deeds and ancillary documents to record the deed into the trust such plus any recording costs, trustee acceptance fees, the cost of a simple tract search, and any municipal transfer taxes (varies based on your city’s rules).
Please note, that many people will use a land trust as part of a larger plan for some form of asset protection or as a means to transfer title to real estate via some form of “creative financing”. We do not handle those sorts of cases. We can help with land trusts that are part of an estate plan. We do not handle other uses related to the land trust.
How to Get Started
The first step to the land trust drafting process is to give us a call. We are generally willing to have a short (5 to 15 minutes) initial discussion over the telephone to determine if we can assist in your situation and to determine if we might be an appropriate match to work with you. Face to face Initial consultations are by appointment only and a consultation fee is generally charged. Please note, we cannot assist with land trusts located outside of Illinois. To get this process started, please feel free to contact Richard Magnone via email or by phone at 773-399-1122.