Land trusts and revocable trusts on the deed

The deed names a trustee

The word "trustee" on a grantee line is not one thing. It is three, and the first of them is a trap.

Start with the bare label. In Florida, a deed that adds "trustee" or "as trustee" to a grantee's name, while naming no beneficiaries, stating no purposes and identifying no trust by title or date, hands that grantee a fee simple with full power to sell and encumber both the legal and the beneficial interest, unless a contrary intention appears in the deed. Fla. Stat. 689.07(1)¹ says so. That word did no work. Read "trustee" and assume a wall, and you have skipped the rest of the grantee line that would have told you otherwise.

There is one way out, and it has to be on record already. That rule in 689.07(1) does not apply if, when the deed was recorded, a declaration of trust by that grantee was of record in the same county, declaring the trust's purposes or that the land is held other than for the grantee's own benefit. So the escape from the bare label is itself a recorded document somebody can pull. No declaration of record, and the trustee holds it all.

The second kind is the land trust, and there the word means a great deal. In Florida, a recorded instrument transferring land to the trustee of a land trust, and conferring on that trustee the powers in s. 689.073(1), vests both legal and equitable title in the trustee, whether or not it mentions the beneficiaries or the trust agreement. Fla. Stat. 689.071(3)² vests it. And the trust does not fail because no beneficiary is named in that instrument, under 689.071(8)(g). By design, the beneficiary can be absent from the record.

Illinois land trusts

Illinois splits the same house down the middle. Title to the trustee, everything a person wants from a house to the beneficiary.

Title goes to the trustee. The beneficiaries hold the exclusive right to manage and control the land, to possess it, and to take the net proceeds of renting, selling or mortgaging it. 765 ILCS 420/2³ defines it that way for its own Act, and 765 ILCS 415/2⁴ defines it for its own section as one under which the trustee holds both legal and equitable title subject only to the execution of the trust. So your debtor can live in the house, rent it out and pocket the rent while someone else is named on the deed.

Do not expect the beneficiary's name on the deed, and do not expect it in the land records at all. Where a transfer declaration is signed by the parties holding the power of direction under a land trust, it need identify only the land trust that holds record title, not those beneficiaries. 35 ILCS 200/31-25⁵ is explicit. Beneficiaries are named when a trustee or beneficiary applies to the State or a local government for a benefit, license or permit relating to the land, where 765 ILCS 405/2⁶ requires each one by name and address, and a beneficiary so named may not be a nominee for someone else. That is an application file, not a deed.

One Illinois rule does run in the beneficiary's favor against a single-spouse creditor. Held by spouses in tenancy by the entirety, a beneficial interest is not liable to be sold on a judgment entered on or after October 1, 1990 against only one of them, unless the interest was moved into that tenancy with the sole intent to avoid paying debts the transferor could not then meet. 735 ILCS 5/12-112⁷ draws that line. How a creditor reaches a beneficial interest held any other way is a matter of Illinois case law, and this page will not guess at a procedure the Illinois statutes here do not set out.

Florida runs the land trust by statute and keeps the two interests apart on purpose. No lien or judgment against the trustee's title attaches to a beneficial interest, and none against a beneficiary attaches to the trustee's title, unless by its terms or by other law it reaches both. Fla. Stat. 689.071(8)(d) separates them. Where the deed or trust agreement declares the beneficial interest to be personal property, that designation controls. Chapter 679 (the UCC) then governs perfection of a security interest in that beneficial interest, per Fla. Stat. 689.071(8)(c). Chapter 736, the Florida Trust Code, does not govern a land trust at all, per 689.071(12).

Revocable living trusts

The third kind reads nothing like the first two. A revocable living trust leans toward the creditor, not away.

Revocable means the settlor can revoke it without the consent of the trustee or anyone holding an adverse interest. Fla. Stat. 736.0103(20)⁸ defines it. In Florida such a trust is not invalid because the settlor keeps the power to revoke, amend or modify it, under 689.075(1)(a), nor because the settlor is or becomes the sole trustee, under 689.075(1)(g). So a debtor who holds the power to revoke, and serves as sole trustee besides, has not thereby made the trust invalid.

And during the settlor's lifetime it answers for the settlor's debts. Property of a revocable trust is subject to the claims of the settlor's creditors, spendthrift clause or not, to the extent it would not be exempt if the settlor owned it directly. Fla. Stat. 736.0505(1)(a)⁹ says it plainly. Treated like the settlor while that power can be exercised, a holder of a power of withdrawal falls under 736.0505(2)(a), and against an irrevocable trust a settlor's creditor can reach the most that could be distributed to the settlor, under 736.0505(1)(b).

Death changes the arithmetic but not the exposure. What the settlor could revoke at death is liable for the estate's expenses and obligations to the extent the estate cannot pay them, under Fla. Stat. 733.707(3)¹⁰, and the trustee must pay what the personal representative certifies in writing, under 736.05053(1). No power of sale and no direction to pay debts drags protected homestead into those claims, under 736.1109(2). And at the settlor's death the trustee must file a notice of trust in the county court, naming the settlor, the trust and the trustee, under 736.05055. That notice is a filing a searcher can find.

This part is Florida. New York treats a disposition in trust for the use of the creator as void against the creator's existing and later creditors, under EPTL 7-3-1¹¹, which speaks of a trust for the creator's use rather than of revocable trusts as such. Whether New York reaches a revocable trust the way Florida does is a question this page does not take up.

What discovery must supply

The record gives you a trustee, and then it stops. Everything that matters is in the agreement the record does not hold.

That is by design, at least in a Florida land trust. An instrument vests title in the trustee, under Fla. Stat. 689.071(3), and parties dealing with the trustee need not inquire into the unrecorded trust agreement, under 689.071(8)(e). Beneficiaries live in that agreement, and that agreement is not on record. So the name on the deed is the end of the public story and the start of the discovery one.

Florida has a tool aimed straight at this. The fact information sheet asks the debtor, for real estate owned or being bought, for all names on title, under Form 1.977, and the debtor signs it under penalty of perjury. In proceedings supplementary, a person examined cannot refuse to answer because the answer would show a fraudulent conveyance or transfer, under Fla. Stat. 56.29(5)¹². Whatever privilege a debtor might reach for is not there.

New York reaches the same gap through the subpoena. Under CPLR 5223¹³, a judgment creditor may compel disclosure of all matter relevant to satisfying the judgment from the debtor or anyone else, including a trustee. Served on the debtor, on an individual while in New York, or on a business doing or entitled to do business in New York, a subpoena for documents reaches records held outside the state, under CPLR 5224¹⁴(a-1). What the record will not show you is who the beneficiary is, who holds the power of direction or of revocation, and whether the trust agreement is signed and dated. For the public side of the search, see what a property roll shows about ownership and, when a trustee is itself an entity, the entities and officers behind a name.