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Illinois Land Trusts Explained

In Illinois, individuals have a unique option for holding title to real estate not otherwise available to individuals in the vast majority of other states. The Illinois Land Trust is a creation of common law, though now is governed by a number of Illinois statutes. While less common these days than it has been at times in the past, Illinois Land Trusts can be effective estate planning tools in certain situations.

What is an Illinois Land Trust?

Basically, an Illinois land trust is a mechanism used to handle ownership in real estate. Similar to a revocable living trust, with a land trust, title to the real estate is held by a trustee while the beneficiary (i.e. owner) of the property retains the ability to enjoy all the rights and responsibilities of owning the property. When property is placed into a land trust, the interest is essentially converted to personal property. The consequences of that characterization are that the property becomes simpler to manage and convey than an interest in real property.

The beneficiary of a land trust retains the right to end the trust at any time and transfer the property out of the land trust as well as the ability to direct the trustee when to act and what actions to take in relation to the property.

How is a Land Trust Created?

While setting up a land trust can often be a relatively simple procedure, it's imperative to involve an attorney experienced with them. A small seemingly inconsequential error in its set up and create the potential for headaches down the road.

Generally, a land trust is set up with these basic steps:

a) A contract known as a trust agreement is prepared by an attorney. Under the terms of the trust agreement you, the owner, instruct a trustee to hold title to your real estate. Among other things, the trust agreement also informs the trustee who has the authority to manage and control the property and who will become the new owner of the property upon your death. Land trust trustees are corporate entities that have a wealth of experience in their management.

b) A Deed in Trust is drafted by your attorney and signed by you. The Deed in Trust is recorded with the Register of Deeds in the county in which the property is located and indicates the property has been transferred to the land trust.

c) The trust agreement is filed with the corporate trustee and necessary fees are paid.