{"id":45555,"date":"2023-01-15T00:09:00","date_gmt":"2023-01-15T00:09:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=45555"},"modified":"2023-02-09T11:29:10","modified_gmt":"2023-02-09T11:29:10","slug":"what-is-a-land-trust","status":"publish","type":"post","link":"https:\/\/businessyield.com\/real-estate\/what-is-a-land-trust\/","title":{"rendered":"What Is a Land Trust? How To Set Up One","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n
A land trust is a form of trust that is tied to real estate. This is a form of a living trust, which means it can be used to manage land and property ownership during your lifetime. A land trust’s terms can be tailored to your specific needs and the type of real estate it holds. Here we’ll see all about a land trust and how to set it up.<\/p>\n\n\n\n
A land trust is a legal institution made up of three parties: a grantor, a trustee, and a beneficiary. These are the same parties as in any other trust. The grantor is the landowner, and the beneficiary of a land trust is usually also the landowner. The trustee is the person or firm that acquires legal possession of the property, at least on paper.<\/p>\n\n\n\n
A land trust might have several beneficiaries and co-owners. There is an extra benefit for grantors when a land trust involves numerous owners. If one of the owners is sued, the trust can protect the other owners.<\/p>\n\n\n\n
Our present idea of this fiduciary connection can be traced back to England during the Crusades. Feudal lords who traveled abroad would entrust their landed property to a trustee, who would handle it in their absence. Unfortunately, returning crusaders were frequently met with trustees who were unwilling to surrender the land. Many instances were presented before the royal courts, and a legal precedent based on the notion of trust was formed over time.<\/p>\n\n\n\n
While feudalism and the crusades have come and gone, real estate land trusts have remained of particular interest to real estate investors and anybody looking to reduce some of the legal constraints and obligations associated with property ownership.<\/p>\n\n\n\n
The operation of a land trust is determined by the conditions of the agreement.<\/p>\n\n\n\n
In an Illinois land trust, for example, the property owner can be both the trustor and the beneficiary, but this is not usually the case. In most circumstances, the trustor retains authority over the property’s usage, although there are some exceptions. Furthermore, Illinois land trusts are only legal in a few states.<\/p>\n\n\n\n
In contrast, community land trusts and conservation land trusts are legal in all 50 states. Although these forms of land trusts are legal, the IRS has cautioned of abusive tax avoidance strategies by those who use community and conservation land trusts.<\/p>\n\n\n\n
In fact, in 2019, Congress revived the Charitable Conservation Easement Program Integrity Act<\/a> to combat the exploitation of conservation land trusts as tax shelters.<\/p>\n\n\n\n When establishing any sort of land trust, such schemes emphasize the importance of seeking advice from knowledgeable legal practitioners.<\/p>\n\n\n\n Land trusts are classified into two types: title-holding and conservation land trusts. Individuals or entities can hold land anonymously through title-holding trusts. The main distinction with a conservation land trust is that the owner must give up some land use and development rights.<\/p>\n\n\n\n A title-holding trust allows the property owner to preserve full rights to the property while remaining anonymous and directing the land trust’s actions. Because they were popularized in Chicago throughout the 1800s, these trusts are sometimes known as “Illinois land trusts.” Property owners were not authorized to vote on civic projects in areas where they held land at the time. To get around this law, affluent merchants and politicians would form land trusts to buy land secretly, preserving their voting privileges.<\/p>\n\n\n\n There is no legal structure in place in all 50 states for a title-holding land trust. Most states, however, defer to Illinois land trust rules if they do not have their own, which means that with adequate legal counsel, any individual can organize an “Illinois-style” land trust in any state.<\/p>\n\n\n\n Conservation land trusts need the property owner to relinquish some control over land usage and development. A conservation land trust’s mission is to safeguard animals, historical or cultural places, and natural resources against commercial development or other activities that could cause disruption or contamination.<\/p>\n\n\n\n The landowner in a title-holding land trust executes a document known as a Deed in Trust, which transfers legal ownership of the property. The landowner (who is both the trust grantor and the beneficiary) can describe how the land will be administered, who will have control over it, and how any money generated will be dispersed when the trust is established. This means that, while the trust is the legal owner of the property, the landowner retains complete authority over it.<\/p>\n\n\n\n Property owners employ title-holding trusts to retain anonymity and keep significant assets out of probate. A land trust can also provide a variety of other estate planning benefits, such as asset protection from judgments or liens. This is especially advantageous for the ultra-wealthy, celebrities, and major corporations, who may wish to keep growth plans private.<\/p>\n\n\n\n The trust does not necessarily take over the land title in a conservation land trust unless the property is donated in its whole. Instead, a landowner might engage in a legally enforceable arrangement known as a conservation easement, in which they “donate” their development rights to the trust. The trust is in charge of enforcing the easement and, in some situations, maintaining the property.<\/p>\n\n\n\n Conservation easements can be adjusted to ensure that the landowner keeps ownership and usage rights\u2014for example, the right to continue farming or raising livestock\u2014while also assuring that the land remains undeveloped in perpetuity. Conservation easements “follow the land,” which implies that the provisions of the easement<\/a> continue to apply even if the land is sold or passed down through generations.<\/p>\n\n\n\n The first step in setting up a land trust is to select a trustee for the property. Landowners must be vigilant in selecting qualified, reputable trustees, given the fiduciary responsibility of a land trust and the legal and financial repercussions of a land trust that does not adhere to state statutes.<\/p>\n\n\n\nTypes of Land Trust<\/h2>\n\n\n\n
#1. Title-holding Land Trusts<\/h3>\n\n\n\n
#2. Conservation Land Trust <\/h3>\n\n\n\n
Title-Holding Land Trust Requirements<\/h3>\n\n\n\n
Conservation Land Trust Requirements<\/h3>\n\n\n\n
How to Set Up a Land Trust<\/h2>\n\n\n\n