IBA Compliance Connection

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Our trust department acts as trustee for several land trusts, all of which have a term of twenty years, with an option for an extension. In some cases, the twenty years have passed, but we have been unable to make contact with the trust beneficiaries to execute an extension. We also have some land trusts where the beneficiaries have neglected to pay their annual fee. Do you have any guidance for how to address these situations?

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First, we recommend that you check the land trust instruments in question (and any other agreements that your bank may have entered into with these trusts, their settlors, and their beneficiaries, if any).

Typically, the land trust instrument provides that if the land trust beneficiaries fail to pay the trustee’s annual fee or fail to extend the trust after its expiration or dissolve the trust, the corporate fiduciary may resign as the trustee. Additionally, most land trust instruments in Illinois provide for a twenty-year term (as is the case here) and also include a provision permitting the trustee to sell the property at a public sale after twenty years elapse if the term is not extended and the trust is not dissolved by the settlor or beneficiaries. Our understanding is that such sales are rare, and resignation provisions are more commonly exercised than sale provisions.

If your bank chooses to exercise its right to resign as trustee, it should carefully adhere to the trust instrument’s resignation provisions, including any notice requirements. In addition, if your bank resigns as trustee, we recommend issuing and recording the land’s deed in the name of the beneficiaries, which will remove your bank from the public record as the property’s titleholder and ensure that you do not continue to receive future correspondence regarding the property.

We note that if the property is located in Cook County, the Counties Code requires that this deed be accompanied by a statement indicating that the deed was issued pursuant to the trustee’s resignation, and that the name of the grantees are the names of the beneficiaries as they appear in the records of the trustee.

For resources related to our guidance, please see:

  • Illinois Counties Code, 55 ILCS 5/3-5020(c) (“In the event that the document of conveyance is a trustee’s deed issued under resignation by a land trustee, the statements pursuant to paragraphs (1) and (2) of subsection (b) shall not be required, but the trustee's deed shall instead be accompanied by a sworn or affirmed statement executed by the grantor land trustee stating that the trustee’s deed has been issued pursuant to resignation by the trustee, and that the name of the grantee shown on the trustee's deed is the name of the beneficiary of the trust as his name appears in the trust files as of the date of resignation.”)