What is a Land Trust?
A land trust is a legal arrangement where a property is held by a trustee (often a title company or attorney) for the benefit of the beneficiary (the actual owner). The trust agreement is private and not recorded in public records. Only the trustee's name appears on the deed, providing the beneficiary with ownership privacy.
How land trusts work
The property owner (grantor) transfers the deed to the trustee, who holds title on behalf of the beneficiary. The beneficiary maintains full control: they can sell, mortgage, lease, or manage the property. The trustee acts only at the beneficiary's direction. The trust agreement, which names the beneficiary, is a private document not recorded with the county.
Benefits for investors
Privacy: Public records show the trust name, not the investor's name. This prevents tenants from looking up what other properties you own, protects against frivolous lawsuits (harder to target if they cannot identify your assets), and keeps competitors from tracking your acquisition patterns.
Simplified transfers: Selling a property held in a land trust can be done by changing the beneficiary of the trust rather than recording a new deed. This can reduce transfer taxes in some jurisdictions.
Due-on-sale clause: The Garn-St. Germain Act generally exempts transfers into a land trust where the borrower remains a beneficiary from triggering the due-on-sale clause. This is relevant for subject-to acquisitions.
Limitations
Land trusts do not provide liability protection. For that, you need an LLC or other entity. The best practice is to make the LLC the beneficiary of the land trust, combining privacy (trust) with liability protection (LLC).
Land trusts are recognized in most states but the legal framework varies. Illinois, Florida, and Virginia have specific land trust statutes. In other states, the trust operates under general trust law. Availability of title companies and attorneys willing to serve as trustees varies by market.