When Are Land Trusts Terminated?

Direction of Beneficiary

In most instances, a land trust can be terminated at any time by the beneficiary of the trust. Trust termination by a beneficiary generally occurs when the beneficiary wishes to sell the property to a third party. However, in some cases, a beneficiary may not have the authority to terminate the trust if the terms of the trust agreement between the original settlor and the trustee prohibit termination.

In some cases, the original owner of property will place it into a land trust to hide the true owner's identity. In this type of scenario, the original owner acts as both the settlor and the beneficiary. Since the settlor has the authority to negotiate the terms of the land trust agreement, termination is typically reserved at his discretion. However, in some cases, property is transferred into a trust by a third party for the benefit of another. For example, a property owner may convey land to a trust through a will. If the settlor provided specific instructions or terms in the land trust agreement, the trust will be subject to termination according to the terms or wishes of the original owner.

Another method of land trust termination is by an alternative contractual designation contained within the land trust agreement. Ordinarily, land trusts set up by their owners for their own benefit will contain provisions that allow the trust to terminate at their discretion; however, in some cases, where there is a collective group of beneficiaries, such as in the case of community or conservation land trusts, one beneficiary may not be granted the power the terminate the trust without some other action such as agreement by the remaining beneficiaries. These alternative types of termination clauses may be tailored to fit the specific needs of the beneficiary group.

Land trusts may also be terminated by court order. This type of termination is rare as the courts generally refuse to interfere with valid contractual agreements between parties. Land trusts may the terminated by the court in accordance with state and federal law when there is a dispute between the beneficiary and the trustee or if the trust is not being maintained in a manner that is compliant with the law.