Illinois Land Trust - Trusts Lawyers Chicago - Land Trusts for estate planning - land trusts chicago

WILLS, TRUSTS, AND ESTATE PLANNING

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Illinois Land Trusts

An Illinois land trust is not a real trust. In a real trust a trustee takes title to assets and exercises all the rights of an owner over the assets. The trustee is responsible for managing and maintaining the assets. In a land trust this is not the case. The land trustee takes and holds title to land and does nothing else. The beneficiary or beneficiaries of the trust exercise all the other aspects of ownership.

The land trust is created by deeding land to the trustee. The deed is usually called a deed in trust. The former owner and the trustee enter into an agreement usually called a land trust agreement. The trustee is usually a bank with trust powers and the bank's standard forms are used. The trustee charges a fee to set up the trust and also a yearly fee.

The Illinois type of land trust exists in only a few other states. Of course in Illinois and all other states land can be held in a regular trust where the trustee exercises the full rights of ownership. That type of trust usually is created with customized documents and as a result of individualized planning and is usually much more expensive.

The land trust in the past was used to conceal ownership. The land records show only the trustee as the owner. The trustee will not tell anyone who the real owner it. The identity of the real owner can be obtained through legal process after a suit is filed or, in some cases, by government agencies. However, the owner's identify is much harder to find out when a land trust is used. Of course if someone who owns real estate transfers it to a land trust, the real estate records will reveal his or her prior ownership so it is best to take title in the land trust to begin with if you want to conceal your ownership. Also, the name and address on the tax bills are public information so a name and address that will not identify the owner should be selected.

The land trust can be used as a will substitute since the persons who will be the beneficial owners after the death of the original owner can be identified in the land trust agreement. As with a will, this can be amended from time to time.

This also allows the land trust property to be removed from probate. If the land trust agreement says who gets it, no will or statute of descent and distribution is needed. The property no longer exists in the decedent's estate since his or her interest ended on death.

A regular trust can serve as a will substitute and keep the property in it out of probate too. So is a land trust a substitute for a regular trust? No. In a regular trust the trustee has active management duties. This feature is absent in the land trust. The land trust also requires that someone have the power of direction over the trustee. This includes the right to revoke or amend the trust.

While the beneficiary of a regular trust could have the unrestricted right to revoke or amend it, trusts are hardly ever set up this way. You might just as well give the assets to the beneficiary outright and leave it to him or her to hire a manager.

Of course the beneficiary of a land trust could be a regular trust. However, in that case you would not use the land trust at all. It would just be added complication, unless you wanted to conceal the ownership of the regular trust.

Joint tenancies and certain other devices can be used as will substitutes also and they result in avoiding probate. The advantage the land trust has over those devices is that you do not have to give the takers after death a present interest. A joint tenant has a present interest and must consent to any sale or mortgage of the property. In a land trust the beneficial owner can designate people to take on his or her death and can retain the right to change or revoke the designation and can retain sole control over the property during his or her life.

Land trusts convert the beneficial owner's interest from real estate to personal property. The land trustee holds legal title to the real estate. One consequence of this is that the beneficial owners have no right to partition. Partition is the right of co-owners to have real estate divided or sold and the proceeds divided by court order.

 

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