What is a land trust and how does it work????

Correct me if I’m wrong, but is a land trust suppose to be used when the seller has no equity in their home?

Can someone break down what exactly is a land trust and how it works?

Any feedback will be appreciated!!!


Land trusts are misunderstood and people are suspicious that those of us who use them claim they are the “end-all” product. Well, if you are going to buy and hold, then it is. You can accomplish any of the goals of any other type of “holding” tool – “subject to”, lease option, land contract, all of which I have used in the past, and all, by the way, which subject you to claims of “equitable interest” and/or violate the DOSC.

A Land Trust has been in use throughout the United States for more than 100 years after being introduced in Illinois in 1891. It was streamlined for Al Capone who wanted to acquire properties privately by none other than Chicago Title Company, and has been a favorite tool of the rich and famous in keeping their real property dealings and holdings from prying eyes. It has the effect of converting ownership of real property to ownership of personal property, even though such ownership is characterized by the IRS for income tax purpose as ownership in real estate. Most important, because you now own personal property, your asset is no longer governed by Mortgage law, but by the Uniform Commercial Code (UCC), and as personal property, enjoys all the related privacy protections – no public filings.

The primary purpose of the trust is to provide its beneficiaries a practical, economical (and anonymous) alternative form of real estate ownership and use. For years it was used to pass down real estate from generation to generation.

A land trust is easy to establish and inexpensive to maintain. It is a method of real estate ownership whereby a trustee holds legal title to real estate, while the trust’s beneficiary(s) have complete control over its management and the power to dispose of the property.

Since the passage of the Garn-St. Germain Act in 1982, which authorized banks to invoke a Due-on-Sale-Clause on mortgages, it has become a favorite tool of small investors because it is exempt under the same law (Banks had to keep their biggest depositors happy).

In recent years the land trust has become an innovative and yet simple arrangement, method and/or system whereby a real estate investor can acquire or dispose of real estate ownership without the necessity of new financing or particular down payment requirements. Once your property is placed in a trust, you can use the trust through its various permutations to effectively accomplish the purpose and all the objectives of:
Lease Options,
Lease Purchases,
Contracts for Deed,
Land Contracts,
Wrap-Around Mortgage schemes,
Equity Sharing,
and even wholesale “flipping” and assignments, without the associated risks of triggering the DOSC, without the risks of your tenant claiming an “equitable interest”, and with all the asset protection afforded by an inter-vivos trust.

I use them for investing, alone and with partners – and to answer your next question, No, I don’t sell them or receive commissions from referrals. Good luck to you.

Da Wiz