Re: Why a Land Trust?? - Posted by Bill Gatten
Posted by Bill Gatten on April 02, 1999 at 21:04:22:
Don’t mean to be contradictory, but…some food for thought, relative to whether a land trust is an “asset protector” or not (in all fairness though, your post was before mine enumerating the befits of a land trust):
“Efforts to impose personal liability against the beneficiaries relative to notes signed by the trustee [of land trusts], even upon the express direction of the beneficiaries, have failed.” Kenoe on Land Trusts (Ill Inst. for Cont. Legal Ed. 1989 revised edition due this month): citing–Brockob Construction V. Trust Co. of Chicago, Brockob Construction vs. Illinois Nat. Bank; Conklin v. MacIntosh, 324 Ill. App. 292, 58 N.E.2d 304.
"It is firmly established that a judgment against a beneficiary of a land trust clearly does not create a lien against the title of real estate held in the [land] trust (Kerr vs. Kotz, 218 Ill.App.654 (1920); and from that point to the most recent decision, this has been a universal and consistent holding (Whittaker vs. Scherrer, Chicago Title and Trust Vs. Mercantile Trust, First Fed. S&L vs. Pogue; St. Charles S&L vs. Sundberg, etc., etc.)."
Bill, the Illinois statue which is considered the precedent in such matters for all other states (Ill Rev. Stat., c. 110 para. 12-105) specifically states: "As the beneficiary has no legal or equitable title or interest in the real estate [held by a land trust], it follows that judgments against beneficiaries of land trusts can in no way attach to the property’s title.
Its important to understand that where there are two or more beneficiaries in a land trust, no right to partition exists (Aaronsen v. Olsen, 348 Ill.26, 180N.E., 565 (1932). It is imperative, however, that careful effort be made in structuring the transaction so as to avoid characterization of the overall transaction as a partnership, corporation or association, in that doing so could invalidate the protection of non-partitionability (re. Harmon v. Martin, 395 Ill.595., 71 N.E.2d 74-1947).
Further. Quote (Kenoe): Since partition is not available among beneficiaries to a land trust, this characteristic protects a multiple ownership from litigation instituted at the instance of dissident participants (i.e., as well as from judgement creditors). The unavailability of partition remedies highlights the importance of a well-drafted agreement.
And, once again: The title to real estate held in a land trust is NOT subject to the personal lives of the owners… re. death, insanity, bankruptcy, marital dispute, etc. Even IRS and state tax liens against an individual beneficiary in a co-beneficiary land trust will not result in a lien against the corpus (the property) of the trust. (Kenoe, Sec. 1.8, p1-10 and Sec. 3.7, citing Hargrove v. Gerill Corp., 124ILL.App.3d924, 464 N.E.2d 1226, 80Ill.Dec 243 (1984)