Posted by Bill Gatten on December 18, 1999 at 12:48:50:
With a bona fide PACTrust-type transaction, when you go to Mr. Seller, you either have him appoint your corporation or you as trustee (though I wouldn’t do that if I were he); or you both agree on a neutral entity (preferably one that can’t die and get your property tied up in Probate, or screw you out of something). Our corporate trusteee (P.A.C.) will do it for you…their (not my company) residential property fee is $12.00 per-month if they’re not involved in set-up for collections and disbursements, and if there are no other legal services on the part of their (our mutual) law firm of collection/bill-paying service. They require only that the trust be on our forms (They will probably charge extra for a legal review of any other land trust form).
Paul, remember that we do (and advocate doing) things a little differently. For example: We always inist that the original owner’s name remain on the trust (Jack Jones grants the property to the Jack Jones Trust…conforms to Garn SG); we want the original owner to retain a beneficiary interest in the trust, which can be anything from 10% to 90%…makes no difference in your ability to take tax deductions and the other incidents of ownership and profit (which percentage the seller can forfiet at the end, and which conforms to GSG). We also want the original owner to retain 50% of the Power of Direction throughout the trust (avoids transfer taxes in most states…and he can give you a silent Power of Attorney to “vote” for him [direct the trustee] in all matters except those that would involve your dispossession for cause); we advocate (always) that you use a 3rd party, uninvolved, unbiased trustee.*
*In order to best conform in general to lender’s wishes (and not make waves), we are considering creating an extra step in the process: that of establishing the seller, himself, or the buyer, as the initial trustee (for the record), then doing a silent substitution of trustee. This is because it seems that more and more of the DOS letters and the letters authorizing transfer to a trust that we see now are trying to assert (contrary to the law re. FDIRA requirements) that the trust must be between two individuals, rather than involving a corporate entity…the jury’s still out on that one though, as there is nothing in GSG that says the trustee can’t be a corporation).
Hope this helps a little.