There are two distinctly different definitions of the term land trust: the first refers to a non-profit organization’s stewardship over a piece of land for the purpose of preserving it, or to assist in its conservation. The second type of land trust is an agreement in which an individual (the “trustee”) agrees to hold title or ownership of a piece of real property for the benefit of another person (the “beneficiary”).
While the land owner beneficiary retains his rights to use, build on, rent, or sell the property, he can remain anonymous if he chooses. This is sometimes done to protect the land owner from tax consequences or legal proceedings. To explore this concept, consider the following land trust definition.
Definition of Land Trust
- An agreement placing real estate into the care and control of one or more trustees, whether for conservation purposes or financial purposes.
- A legal agreement in which a trustee holds the title to real estate, but all rights related to ownerships remain with the owner.
What is a Land Trust
A land trust has many purposes, the primary of which is to protect land by establishing legal agreements in which landowners limit the development or use of the land. Property placed in a land trust remains under ownership of the original owner, but an easement is created to protect the property in the future, even if it changes hands. There are a number of land trust types, the most common including:
- Conservation Land Trust – has the primary goal of protecting sensitive natural areas, water sources, farm or ranch land, cultural resources, or other notable landmarks. Such conservation trusts often target land adjacent to already protected areas, many of which are home to endangered wildlife and plant life.
- Community Land Trust – works toward a goal of ensuring affordable housing is available for low income residents in the community, and to encourage home ownership for low income residents.
- Corporate Land Trust – makes it possible for corporations to acquire large tracts of land without alerting the public to their intentions, which would cause a price hike.
A prime example of using a corporate land trust to amass a large amount of property is Disney’s use of such a trust to buy many small tracts of real estate near Orlando Florida for the planned construction of Walt Disney World. Had the public known of Disney’s intention, the asking price for real estate in the area would have skyrocketed.
Benefits of a Land Trust
A land trust is beneficial in that it can protect a person’s privacy. Once title to the property is transferred into a trust, the names of the individual owners cannot be disclosed unless a court order is obtained. A land trust also protects owners of the property in the event that a creditor obtains a legal judgment against one owner. Without a land trust, a lien could be placed against the property to satisfy a debt or judgment against only one owner. In addition, placing a property into a land trust can smooth transfer of ownership to an heir without going through probate court.
What is an Illinois Land Trust
The use of land trusts dates back centuries. During the reign of England’s King Henry VIII, individuals used land trusts to conceal their land ownership in order to avoid the requirement of serving in the military. In the 19th century, U.S. land owners began using land trusts to hide the fact that they owned land in a particular area, as it was illegal for individuals owning neighboring properties to vote on city projects.
This type of law remained in effect in the United States until the validity of land trusts was challenged in the Illinois Supreme Court in the late 19th century. The Court ruled that land trusts are valid, if the trustee is given even a minor duty regarding the property, such as deeding the property to the beneficiaries years later. This would mean that the trust could not be considered “passive,” which would invalidate it. Because of this ruling, American land trusts today are often referred to as “Illinois Land Trusts,” or “Illinois-type” land trusts.
Example of Land Trust
In 1955, Walt Disney opened Disneyland, his first theme park, in Anaheim, California. Within a few years, Disney began purchasing property to build a second location that would outdo the first park. Walt Disney himself took an airplane tour, spotting 27,000 acres near Orlando, Florida. This specific land was selling for $180 per acre at the time, but to prevent the price from spiking when the seller realized the person interested was one of the wealthiest men in the United States, Disney created land trusts to keep his identity a secret. The land trustees were able to purchase the desired property, which would eventually become Walt Disney World, for Walt Disney at the price he desired.
Related Legal Terms and Issues
- Contract– An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
- Creditor – A person or entity to whom money is owed by another person or entity.
- Probate Court – The division of the judicial system that deals with matters relating to wills, trusts, estates, guardianships, and conservatorships.