Overview of the Title Holding Trust (Land Trust)
What is a Title Holding Trust (Land Trust)?
The Title Holding Trust, often referred to as a Land Trust or Illinois Land Trust, is a simple method for holding legal title to real estate or personal property. The Title Holding Trust is a fully revocable grantor trust designed and drafted specifically to acquire and hold legal title to real estate or personal property on a confidential, private basis to better protect your assets.
The Title Holding Trust (Land Trust) is very similar to a regular family living trust, but has some very important legal differences that provide some significant benefits and advantages. Its roots come from the Illinois Land Trust long used to hold legal title to real property in the State of Illinois.
There are many reasons for, and benefits of, acquiring and holding title to property in a Title Holding Trust. The most common include the need or desire to acquire and hold legal title to real estate or personal property in a confidential or private manner in order to keep the Beneficiary's (owner's) name out of the public records.
Exeter Trust Company, as Trustee of the Title Holding Trust, acquires and holds legal and equitable title to the real property or personal property pursuant to the terms of an unrecorded Title Holding Trust Agreement.
Who Can Set-up a Title Holding Trust or Land Trust?
The Title Holding Trust can be established by an individual, a group of individuals, a general partnership, a limited partnership, another trust, another trustee or trust services provider such as an out-of-state trust company, a limited liability company, a corporation, or any other type of business entity. The person or entity that sets-up the Title Holding Trust is called the Trustor, Grantor or Settlor ("Trustor").
Who Serves as Trustee of the Title Holding Trust or Land Trust?
Exeter Trust Company, Cheyenne, Wyoming is named or appointed as Trustee of the Title Holding Trust under the terms of the Title Holding Trust Agreement. Exeter Trust Company merely serves as Trustee of the Title Holding Trust and has no authority to act without specific written authorization and direction from the Beneficiary(ies) of the trust.
Exeter Trust Company
Exeter Trust Company is a trust company that is licensed, regulated and audited by the Wyoming Division of Banking. Exeter Trust Company provides specialty trust services to real estate investors and property owners, including the Title Holding Trust (Land Trust), and is a wholly-owned subsidiary of The Exeter Group, LLC.
Who Owns the Title Holding Trust or Land Trust?
The Beneficiary(ies) own the Title Holding Trust. All ownership rights, often referred to as the benefits and burdens of ownership, are retained by the Beneficiary(ies) of the Title Holding Trust. The Beneficiary(ies) retain the power of direction over the trust unless they choose to delegate the power of direction to another individual or entity.
Who Owns the Real Estate or Personal Property?
Exeter Trust Company serves as Trustee of the Title Holding Trust and owns the property under its name in its fiduciary capacity as Trustee of the trust. Public records, including the County Recorders', County Assessors' and County Tax Collectors' public files and records, would reflect the legal title and ownership of the real estate or personal property as follows:
Exeter Trust Company, as Trustee for Trust No. XXXXXXXX
The Beneficiary(ies) of the Title Holding Trust is not reflected on any public record, and the Beneficiary's information is not disclosed to any party unless authorized by the Beneficiary, the Trust Agreement, or required under local law or by court order.
Power of Direction
The Beneficiary(ies) retain the power of direction over the trust unless they choose to delegate the power of direction to another individual or entity. The Trustee merely holds legal and equitable title to the real property or personal property subject to the direction of the Beneficiary(ies).
How Does the Title Holding Trust or Land Trust Work?
The Trustor enters into a standardized Title Holding Trust Agreement with Exeter Trust Company, Cheyenne, Wyoming. The Trustor appoints or names Exeter Trust Company as Trustee of the trust, designates one or more Beneficiaries (owners) of the trust and can also appoint or name one or more Successor Beneficiaries under the trust. The initial Beneficiary is generally the Trustor and the Successor Beneficiaries are generally the Trustor's children, but could be anyone designated by the Trustor.
The Beneficiary(ies) of the Title Holding Trust retain complete control over the real estate or personal property held in the trust. They manage the property or retain agents to manage the property on their behalf. They collect and distribute any income and pay any and all expenses. They insure, develop, finance, lease or sell the real estate as they see fit.
The trust may be modified, updated or terminated at anytime. Additional real estate or personal property can be added to the trust at anytime. The Trustee executes grant deeds, promissory notes, deeds of trust, leases and otherwise deals with the property held in the trust only upon specific written authorization and direction from the Beneficiary(ies) of the trust.
When title to real estate is held in a Title Holding Trust, courts have held that the beneficial interest(s) in the trust is personal property. This beneficial interest includes the right to receive any income and any proceeds from the sale or mortgage of the property. The Beneficiary(ies) reserve the right to live on or otherwise possess and use the real estate. Their beneficial interest in the trust, as personal property, can be easily assigned to another party without the need to prepare, sign, notarize and record a grant deed.
When Should the Title Holding Trust or Land Trust be Set-Up?
The most effective way to take advantage of the benefits of the Title Holding Trust, especially when confidentiality or privacy of ownership is a concern, is to have the trust take and hold legal title to the real estate or personal property when it is first acquired. This way the Beneficiary(ies)'s name never appears on any public record. However, the Title Holding Trust can be set-up at any point in time.
What Does the Title Holding Trust or Land Trust Not Do?
Title Holding Trusts or Land Trusts provide many benefits to real estate investors and property owners, but they are not designed for, and should never be used for, getting around various statutory, regulatory or contractual (legal) requirements including, but not limited to:
- Income taxes on ordinary income such as rental income (not reporting income)
- Capital gain tax on the sale of property
- Gift taxes due from gifting property to others
- Property reassessments for property tax purposes
- Lender due on sale clauses
- Lender title seasoning requirements
Title Holding Trusts or Land Trusts protect real estate investors and property owners, especially through the ability to negotiate, acquire, hold, manage and sell real or personal property in a confidential and private manner, as well as liens, judgments and clouds against legal title to the property.
Unfortunately, individuals have used the Title Holding Trust to get around some of items listed above, which has made obtaining title insurance on real property held in Title Holding Trusts (Land Trusts) more difficult to obtain. Individuals should always consult with their legal, tax and financial advisors before entering into any transaction using a Title Holding Trust to ensure they are not inadvertently straying into the areas of lender fraud, tax fraud or tax evasion.