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Land Trust versus Living Trust – What’s the Difference

Many people wonder what’s the differences are of a land trust versus living trust.

A “living trust”, by definition, is a trust created while you are alive. Living trusts can be revocable (changeable or amendable) or irrevocable. When using a living, revocable trust for avoiding probate, this popular type of trust is often referred to as a \”living trust\”. A living trust vests legal title in a trustee, equitable title remaining in the beneficiary. The trustee has broad powers to manage the trust property as he sees fit for the benefit of the beneficiary.

A land trust is also a revocable, living trust, but it vests both equitable AND legal title in the trustee, leaving a \”personal property\” interest in the beneficiary. What does this mean? Basically that the beneficiary can transfer his interest in the trust like a shareholder in a corporation, without affecting title to the property. This makes transfers of ownership very simple, and not recorded on public records. In some states, this may avoid transfer tax normally due on the transfer of ownership of the property.

Also, the trustee in a land trust is not authorized to anything except that which the beneficiary directs him to do (called a \”power of direction\”, which is vested in the beneficiary).

While similar, a land trust agreement is drafted dramatically different than a typical living trust.

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