Why physicians and other providers should consider a land trust for their next home purchase

To protect the privacy of their address and assets, medical providers should consider a land trust for their next home purchase.

Man handing over a pair of keys to a woman.

Setting up a “Land Trust” is simply another way of holding property, available in a some states, including Illinois.  This article will address owning your home in a Land Trust, but know that Land Trusts are available and valuable for investing and commercial ownership, as well.  Under a Land Trust arrangement, the recorded title to the property is held by a trustee but all the rights of ownership are exercised by the beneficiary, who is typically the homeowner. The beneficiary’s interest is not disclosed to the public.

How do medical providers benefit from a Land Trust?

Property ownership by Land Trust is a streamlined and cost-effective way for healthcare providers to address the privacy concerns that can stem from public property ownership records. Many physicians, psychiatrists, and other providers are concerned with the ability of their patients or the public to identify details about their assets, and in particular their home, from the public records.  These concerns also arise if a provider is contemplating a practice merger, sale, or dissolution, as their personal property information can give others insight into their financial health.

A properly established Land Trust will prevent your name from being affiliated with your home, such that individuals looking to determine where you live, how much you paid for your home, or whether you have collectiible assets will be forestalled. This is a crucial protection for individuals that are commonly the target of frivolous lawsuits or potentially at the mercy of unstable individuals.

What if I already have a trust?

A Land Trust is different from a traditional trust. A Land Trust does not address the client’s other assets and is not a comprehensive estate planning vehicle.  Further, if the “Sarah Smith Family Trust” owns a property, that does not necessarily provide the complete privacy protection that is available with a Land Trust.

A Land Trust can ensure that the home avoids the probate process and is left to the appropriate designees upon the death of the primary beneficiary.  Plus, it is much simpler to change the beneficiaries of a Land Trust than to deed the property to desired heirs. The Land Trust is not a replacement for traditional estate planning but can take care of an individual’s or family’s real estate for estate planning purposes.

Do I need a different Land Trust for every property that I own?

No – you can hold all of the properties you own under one Land Trust.  However, note that if you are required to assign the beneficial interest to a lender to secure a loan, that could potentially impact all of your properties held in that Trust. There may be reasons to hold properties in separate Land Trusts, so speak with us about the best structure for your situation.

Can’t I just establish an LLC?

LLCs are a common vehicle for property ownership, but they do not offer the same privacy protection available with a Land Trust.  Additionally, if you are borrowing with a traditional home loan to purchase your residence, a Land Trust allows you to obtain a loan on the same terms that you would if you were purchasing the property in your individual name; that might not be the case if you are establishing an LLC to hold your property.  Also, owning/establishing an LLC can have different tax consequences than owning property with a Land Trust. Consult with us and your accountant on these us issues.

How are property transfers handled?

This is one of the hallmark benefits of owning your home in a Land Trust.  If you want to change ownership of your home to, say, someone else in your family or engage in certain types of investment structures, it is simple to change the ownership of the trust by simply amending the trust.  You do not need to go through the “quit claim” or other processes of title transfer that could have a tax consequence. And, again, the true beneficial owners of the property stay out of the public records.

Does the Land Trust provide liability protection?

If the property is owned by more than one individual, title may be affected by death, legal disability, divorce, judgments or other types of litigation affecting one of the owners.  When the property is held in a Land Trust, a judgment against one of the beneficiaries does not automatically equal a lien on the real estate (although assets of a beneficiary may be subject to collection following certain additional efforts by the creditor).  So, there is an extra layer of protection. Speak with us for more information about liability protection.

Who is the Trustee?

As discussed above, the “Trustee” holds title to the property and you will be named as the beneficiary of the Trust.  Typically the Trustee is a corporate trustee affiliated with a company that is established for the purpose of holding multiple Land Trusts. This ensures professional handling and protection of your Land Trust.

Jackson LLP’s attorneys understand healthcare providers’ varied legal needs

Jackson LLP attorney Junilla Sledziewski is an experienced real estate attorney who routinely advises individuals about residential and commercial investments.

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