What Are the Advantages & Disadvantages of L Trusts?

A land trust, sometimes referred to as an L trust, is a legal method of keeping title to a piece of real estate. As with a trust for an estate, a land trust has both a trustee -- a person who administers the trust -- and a beneficiary who owns the property and usually manages it. Placing land into a land trust has several advantages, although it carries several drawbacks, too.

Advantage: Privacy

One of the chief benefits of a land trust is that the name of the true owner of the trust does not need to be made public. While the trustee of a particular land trust is a matter of public record, the beneficiary of the land trust -- the true owner of the property -- does not need to be revealed, except if this information is ordered by a judge.

Advantage: Ease of Transfer

Another main advantage to L trusts is that if the current beneficiary dies, the title of the property will automatically transfer to another party. While a property received in a will has to go through probate court, a property received through a land trust does not. This means there is no delay in transfer, no lawyers are involved and the name of the beneficiary is still kept private.

Disdvantage: Administration

One of the chief disadvantages of land trusts is that the putative owner of the land -- the beneficiary -- is not allowed to exercise fill control over the administration of the property. Legally, the property is administered by a trustee -- in most cases, a bank or a professional trustee with a trust company. While the trustee usually responds to the wishes of the beneficiary, he must administer the land in accordance with the trust's rules, as set at its establishment.

Disadvantage: Cost

Another disadvantage of land trusts is they cost money to set up. Not only does a person wishing to start a land trust have to pay a person with legal expertise to draft a proper trust document, but the person must set aside money to pay the trustee to administer the trust. This costs at least several hundred dollars per year.