A land trust is not a real trust. Legal title is transferred to the trustee, but the trust has no active duties with respect to the land. The owner of the land can transfer title to a land trustee and designate who will be the beneficial owner and who will have the power of direction over the trust. The beneficial owner gets to use the land. The holder of the power of direction has the right to direct the trustee in title transactions, i.e., can tell the trustee to give a deed to someone or a mortgage to someone else. Usually the original owner retains the beneficial interest and power of direction. Unlike a regular trustee who acts according to the rules set forth in the trust, the land trustee acts only according to the direction of the holder of the power of direction.

Land trusts exist in only a few states. Illinois is one. Usually banks act as trustees for a fairly low fee each year. They also charge fees for opening the trust and doing transactions with respect to the land in the trust.

Land trusts can be used to conceal ownership. To do this the owner must take title in the land when the property is acquired.

Land trusts can be used to avoid probate because, like a regular trust, they can specify who gets the beneficial interest and power of direction when the original owner dies.

Land trusts can be used to avoid a co-owner's right to partition. All co-owners of real estate have the right to have the property divided into separate parcels under sole ownership or to have the property sold and the proceeds divided. A land trust beneficial interest is classified as personal property so the right to partition does not apply.

Donald M. Thompson * 55 W. Monroe #3950; Chicago, IL 60603
Ph: 312-782-0844 * Fax: 312-201-1436 * Email: donthompsonlaw@sbcglobal.net