Posted by Scott Shubert on September 21, 2003 at 23:31:41:
Yes, it appears that this title rep was totally incorrect.
I did not say anything about no excise due on the transfer of property but on the transfer of real estate into a land trust where the owner is the sole beneficiary and the subsequent transfer of interest in the land trust. If transfer of interest in a land trust is taxable I have definitely been misinformed.
Disturbing News for Investors with Land Trusts - Posted by Scott Shubert(WA)
Posted by Scott Shubert(WA) on September 18, 2003 at 21:29:03:
I received a call today from a title dept Manager of a well known national title company. I was told that a property for which I had ordered a title search had turned up a deed to a person with my same last name(my wife). The deed was actually to a land trust with my wife as Trustee. The counties are recording these deeds under the name of the Trustee instead of the name of the land trust which I think is incorrect and illegal but that’s not the worst part.
He said that their company would not insure a property in a land trust. Well, of course, that’s okay with me because the people who deeded the property into this land trust do not need title insurance because they already have it. And like my mentors, I don’t need title insurance because I checked the title. I told him that all Presidents had their homes in land trusts and that everyone should put their homes into land trusts and that all estate planning attorneys recommend putting your property into land trusts.
The issue here is that our state is “getting wise” to people transferring property into land trusts to avoid excise tax. My understanding is that it doesn’t matter if they are “getting wise” to these transfers, excise tax simply isn’t due when interest in a land trust is transferred because it is not real property but personal property. They may not like it but they will need to pass new laws to change this fact. And as for title companies not insuring properties in land trusts that may upset a lot of people who have made the wise decision to put their property into trusts. Discrimination is of course illegal so they will have to deny title insurance to EVERYONE who has property in a land trust.
I intend to contact the Regional Director of this title company before revealing their name here and at my investment club, etc. But I have a feeling that this Manager will need to do a little more research before making such ignorant statements as “A land trust is not a valid title holding entity.” Duh!
Anyone else had any experience with this?
Thanks
Land Trusts to NOT avoid taxes - Posted by William L Exeter
Posted by William L Exeter on September 24, 2003 at 15:29:15:
Land Trusts do NOT avoid taxes. Most tax laws consider a 100% transfer of the beneficial interest to be a full and complete conveyance of title and subject to what ever taxes would ordinarily be due.
Title Company is Trustee - Posted by Kathi
Posted by Kathi on September 23, 2003 at 11:56:49:
Not only does my Title Company insure properties held in Land Trust, they also are willing to serve as trustee if you close with them.
Re: Disturbing News - Posted by Bill Gatten
Posted by Bill Gatten on September 21, 2003 at 22:50:46:
I have dozens of my own properties in land trust across the country and have been responsible for putting another few thousand properties into land trusts. No title insurance problems ever.
Understand that in a land trust, the trustee’s name MUST come first (because the trustee IS the legal and equitable title holder–the owner–not the trust. If the name of the trust comes first, that would infer that the trust was the holder of title and not the trustee. Such would not be a land trust, but would have to be deemed be a dry, failed or grantor’s trust without much force or effect, and as such would not allow for transfer of ownership benefits (tax write-off for instance) to another party. And no real asset protection or equitable conversion would have been achieved.
And as someone else mentioned, the county’s job is to record, not make or dictate law. And if you have a title underwriter is that misguided, just get another title insurance company rather than try to talk sense into them.
Understand that anyone should have the right to give his property to anyone he chooses…whether it be a trustee or his brother-in-law…that is not a title company’s business as long as the transfer is clean and legitimate. And re transfer tax (if that’s what you mean by excise tax): what would it be based upon when transferring a property to an inter-vivos trust wherein there is no transfer value…simply a transfer to an inter vivos trust for asset protection purposes (by the owner to the owner?s trust)…there is no basis for assessing a tax (though in some states—Pa., Fla., Wisc. etc.) they do charge a nominal fee of $25.00 or so for transfers into inter vivos trusts).
What I suspect your nay-sayer is referring to are land trusts wherein a new beneficiary other than the settlor is named on the trust. We just don?t do that?in every one of our transactions the beneficiary interest is silently assigned after the settlor creates the trust as its only beneficiary. If the title company or anyone wanted to see the trust, it would show the settlor as the only beneficiary: no sale, no transfer, no conveyance to another at all.
Bill Gatten
Re: Disturbing News for Investors with Land T - Posted by tom
Posted by tom on September 21, 2003 at 21:21:55:
I have several properties in land trust. title insurance no problem. and yes the are recorded ‘123 main street trust, john doe trustee’. no problem so far with insurance. loan are another matter however.
however, you are wrong to say exise tax is not due on the transfer of property. just try to buy a hotel with substaintial business property (beds etc) and try not to pay tax on it. they tax you when you buy sell your car.
not saying these types of transfers don’t happen all the time without tax being paid. that doesn’t make it legal.
best,
tom
Re: Disturbing News for Land Trusts - Posted by Jack
Posted by Jack on September 19, 2003 at 11:16:55:
You are misunderstanding how recording offices work. Their only responsiblity is to record (date and copy) documents, how they index a document is irrelavent to the document’s function.
How did you come to the conclusion that “all presidents had their homes in land trusts”? That seems like an extraordinary claim.
If you didn’t need the title insurance, why did you order a title committment?
It isn’t clear form your post where the issue of excise tax came from.
Land trusts may work differently in your State, but I have always understood that Title (where I live) was always held in the name of the Trustee for the Land Trust (John Doe as Trustee for the 123 Main Street Trust).
Your premise that a Title Company will have to refuse title insurance on all land trusts now because discrimination is illegal is misguided.