4.3 Estates in Trust

Estates in Trust

In an estate in trust, a property owner (trustor or grantor) transfers legal title to a trustee, who manages the property for the benefit of another party (the beneficiary). The trust can be created by deed, will, or trust agreement, and the trustee has fiduciary duties to both the trustor and beneficiary as set forth in the trust agreement.

Living Trust: The trustor conveys title to a trustee during their lifetime, for the benefit of a third party. The trustee manages the property, and the beneficiary receives income and proceeds. A testamentary trust is similar but takes effect after the trustor’s death, as provided in a will.

Land Trust: The trustor conveys the fee estate to a trustee but names themselves as the beneficiary. Land trusts apply only to real property. Key features:

• The beneficiary controls occupancy, rents, and sales proceeds
• The beneficiary controls the trustee’s actions, usually needing their approval for sales/encumbrances
• The beneficiary’s identity is not recorded in public records
• The trust has a limited term and must be renewed or the property is sold
• The beneficiary’s interest is considered personal property, which can be transferred or used as collateral by assignment

Check-In Questions

• Who manages the property in an estate in trust?
  Trustor
  Trustee
  Beneficiary
  Attorney
  Show Answer

  Correct Answer: Trustee
  The trustee manages the property for the benefit of the beneficiary.
• What is a key benefit of a land trust?
  The beneficiary’s identity is not public
  The trust lasts forever
  Only personal property can be placed in trust
  The trustee is always the beneficiary
  Show Answer

  Correct Answer: The beneficiary’s identity is not public
  Land trusts allow the beneficiary to remain anonymous in public records.