When it comes to holding title to real property, you have many options. One option is to use a land trust. Similar to a revocable living trust, which we covered in our previous blog, a land trust involves a trustee (typically a corporation) who holds the title to the property. Meanwhile, the beneficiary(ies) of the land trust use the property and hold all responsibility for it. Also like a revocable living trust, the beneficiary(ies) of a land trust can revoke the land trust at any time.
With all these similarities to a revocable living trust, how do you know if a land trust is right for you? Understanding the benefits and drawbacks of land trusts is an important first step. You can also contact us, and we’ll walk you through your options.
Benefits of a Land Trust
Privacy – A land trust is held by the trustee who is often a corporation (such as Chicago Title Land Trust Company) and not by the owner or beneficiary. This means that you’re left off of public records as the actual owner or beneficiary of the property.
Protection against claims and creditors – If a judgment is placed against one of the individual beneficiaries, a lien cannot be placed against the property.
Avoid probate – Perhaps the most compelling reason for a land trust is that, like a revocable trust, the property automatically passes to contingent beneficiaries upon death. This means you don’t have to pay probate fees and wait the 6-9 months that probate takes.
Drawbacks to a Land Trust
While there are benefits to holding real property in a land trust, there are also reasons why a land trust may not be right for you.
Fees – There are fees associated with land trusts – both for the creation of the land trust and the annual maintenance fees.
Redemption rights – Redemption rights allow a homeowner to take back their property during or even after a foreclosure if they are able to come up with the money to pay what is owed. But if property is titled in a land trust, there are no redemption rights offered to the homeowner.
Homeowner’s exemption – Finally, when someone owns and occupies real estate as their primary residence, they may qualify for the homeowner’s exemption which can save hundreds or thousands of dollars in property taxes. If property is held in a land trust, since the title owner is not an individual, the homeowner’s exemption cannot be claimed.
Should You Pursue a Land Trust for Your Property?
Each situation is unique and it’s important to understand which option is right for you when purchasing property.
We would be happy to answer any questions you have about land trusts or other real estate-related issues. Send us your questions here and we’ll walk you through your options.
