Land Trusts versus Business Trusts
Investors focused on title privacy have two options. So they seek out real estate brokers, lawyers, escrow agents, online sources, etc. for solutions.
Because of the Internet many are seeking privacy or anonymity – available with these two trust formats:
- Land Trust
- Business Trust
We omit LLCs for this page. Go HERE to see that comparison. That is because although LLCs offer shareholder privacy, they do not offer privacy for the LLC itself. In contrast, Trusts offer privacy.
Safety From Personal Liens & Judgments
Personal financial problems such as tax liens and civil judgments will not attach to property title owned by a land or business trust. This is because the legal owner is a trustee. If you want to buy, hold or sell real estate without impact from your personal financial problems then use a land or business trust.
County Recorder
The County Recorder’s office will list your Land or Business Trust on the deed of any property you own. But there is no cross reference to Secretary of State records. Using a Trust (properly) fraudsters have a tough time dissect true ownership.
Silent Ownership Transfers
Use a land or business trust for confidential transfers of ownership interest without a recorded deed. For example, you can gift half shares to two heirs. Or you can quietly sell the entire interest to a buyer. There is no need to record a deed. Depending upon circumstances, this might give you an opportunity to prevent value reassessment and higher property taxes.
Land Trust
Land Trusts originated a hundred years ago as a financing device for homebuyers to purchase their property. Privacy was a non-issue back then. Illinois is where it all began.
But you can use a land trust to keep certain ownership data private. But you have zero asset protection and there is unlimited personal liability. Very risky for rental property.
Some lawyers claim that combining an LLC with a Land Trust is sufficiently safe. But remember the LLC itself remains a permanent digital record on the internet. And this combination increases the complexity of buy/sale transactions plus requires Secretary of State government obligations.
Land trusts operate in ‘reverse’ compared to all other trusts. Normally the trustee operates and functions as a fiduciary with control for the beneficiaries. In reverse, with a land trust the beneficiary is in control. This can create confusion and additional complexity to a transaction.
Business Trust
Business Trusts originated hundreds of years ago in England. In the US they were ideal for holding real estate because state statutes prohibited corporations from owning real estate.
You do not necessarily need government permission to create a business trust. You might do it yourself. Unlike a land trust, a business trust offers you limited liability, asset protection and privacy for the beneficiaries.
If you operate a business trust without state registration they’re unlisted on the Secretary of State’s Business Search portal. There’s no record found on an Internet search. So unlike LLCs there is no public database for unregistered Business Trusts. This is a huge advantage for those sensitive to cybersecurity for their assets.
Key Differences Between Business Trusts and Land Trusts
- Control
- Business Trust: Control lies with the trustee who manages all operations from buying to leasing properties.
- Land Trust: Control is with the beneficiaries who direct the trustee on all matters, ensuring the trustee has no autonomous power.
- Safety and Liability
- Business Trust: Offers limited liability and asset protection, suitable for a for-profit setup.
- Land Trust: Lacks in providing asset protection and limited liability, posing potential risks.
- Legal & Equitable Title
- Business Trust: Trustees hold legal. Beneficiaries hold equitable.
- Land Trust: Trustees hold legal and equitable. Beneficiaries only entitled to avails.
The business trust was originally designed to operate a for-profit business and could hold various types of assets, including real and personal property. On the other hand, the land trust was specifically designed for holding title to real property, not for personal property or operating as a for-profit business.
Grant or Warranty Deed:
The way you get untraceable anonymity for a land or business trust depends upon language written in the grant or warranty deed. How you do and how you do not fill it out makes a world of difference. These are little known secrets. Garden variety lawyers, real estate brokers and escrow agents have absolutely no knowledge or expertise.
| Asset Protection | Limited Liability | Privacy | Internet Anonymity | Resident Agent | Deed Secrets | County Recorder | Control | |
| Land Trust | N | N | Y | N | N | N | N | Bene |
| Business Trust | Y | Y | Y | Y | N | Y | N | Trustee |
Summary:
When setup properly, private Land Trusts are rarely found on the Internet. Business Trusts are absent from the Secretary of State Business Search and the Internet.
Land Trust – Privacy Only
Business Trust – Privacy, Asset Protection & Limited Liability
Get the book asset title
Get the e-sem
