What is a 'Land Trust'

A land trust is a legal agreement in which a property owner transfers the title to a property to a trustee. The property owner is typically the beneficiary and directs the trustee in all matters relating to the management of the property, as outlined in the trust agreement or deed. The property owner also retains all property rights including the freedom to develop, rent and sell the property.

One of the main advantages of this type of trust is that the actual property owner remains anonymous. In public records, the name of the trust is the holder of the property. This type of arrangement can not only bring some legal protection, but it can also help the property owner negotiate prices if he or she is particularly wealthy. 

BREAKING DOWN 'Land Trust'

One land trust example is known as a real-estate land trust. Corporations and other institutional buyers sometimes use these trusts to purchase large tracts of land to discreetly avoid publicity. Publicity might cause the price of future land purchases to increase and potentially disrupt the firm's plans for developing or profiting from the land. Individuals usually use land trusts for privacy and to avoid probate. In both cases, the trust itself is the buyer. 

In fact, the world-famous Walt Disney resort in Orlando, Fla., was initially purchased by a trust. The original landowners of the Florida swamplands, where the resort now stands, had no idea, Disney, already a burgeoning company at the time, was behind the purchase. 

These types of trusts are often called "Illinois Land Trusts," because businessmen and politicians in 1800s Chicago were the first to establish the vehicle. Several politicians used these trusts to purchase land in the area and protect their roles as a city alderman because they would have been barred from voting in local city development projects as landowners in the same area. 

An Illinois Land Trust is not legal in all 50 states. States that currently recognize them are Hawaii, Illinois, Indiana, Florida, Georgia, Montana, South Dakota and Virginia.

Types of Land Trusts

A different kind of land trust is called a conservation trust or conservation easement. In some cases, a non-profit organization may purchase or take the donation of a piece of land. The aim is to protect the land's natural resources from commercial development or other activities that may lead to disruption or pollution. The trust agreement can detail the use of the property. For example, an organization may deem that use of the land be limited to recreation but not for any development. 

A community land trust is another type of land trust. Certain non-profit organizations can establish this type of trust to set up low-income housing. Typically, a homeowner will pay for the building structure as well as the land it sits on. In the case of a community land trust, they would pay for only the structure itself. 

Land trusts are typically revocable trust, meaning the trust grantor may amend or terminate the trust or its terms at any time.

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