A land trust, or what they call a Title Holding Trust in Illinois, is a trust that a person, or grantor, creates to put his or her real estate property, personal property, or assets in another person's name. This grantor, uses a land trust to protect his or her property or assets from creditors. Once the property or assets is in another person's name, creditors cannot touch the real owner's property and assets. When naming a land trust, you can either choose an individual you trust or a bank or other institution to hold on to your property and assets for you.
If you were to ask your attorney from a state that doesn't use land trusts about them, they wouldn't know what you were talking about. This is because land trusts are only in certain states. We will discuss two of them now and they include California and Illinois. Here are the differences between the California land trust and the Illinois land trust.
Does California recognize land trusts? Yes, but they use land trusts a little different than they do in Illinois and other states. What they use them for is to conserve land that no one else is using. The land trusts are rooted in local communities in California and work with the public (residents of the state, land owners, and different agencies) to conserve these properties for the benefit of everyone in the state. These properties, under land trusts, are used to educate the public, entertain them, and help improve the health of the public. The state of California has more than 150 land trusts that protect and enhance more than 2.5 million acres of land.
Land trusts were first started in the state of Illinois and are also called Title Holding Trusts. Land trusts in Illinois work a lot different than those in California but much the same as the land trusts in the few other states they exist in.
In Illinois, they work to protect the landowner, versus protecting the land itself (like in California). These trusts go in someone else's name to protect the property owner to keep creditors off his or her back for good. Although the owner of the land trust signs his or her property and assets over to someone else using a land trust, they still maintain all rights to their property and assets. The land trust must do what the land trust owner tells them to do.
As you see, there is a big difference between a California land trust and an Illinois land trust. One conserves the property for everyone to enjoy while the other just holds the property and assets in another person's name for the protection of the landowner.
You can form a land trust even if you don’t live in these states. Most states without the legal structures in place defer to the Illinois Land Trust statutes to determine validity and case law. Apart from Louisiana, you can hold land in trust in any of the other 49 states and the District of Columbia. This has to be done in accordance with the law of any of the foregoing states given that the beneficiary, trustee, or the property is based there.
The states of California, Colorado, Missouri, and Nevada have trust laws that allow trustees to hold title to property for a NAMED TRUST (note that it’s just a trust, not a land trust).
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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