.. Land Trust, Seasoning, Quick-Turn - Posted by mmoore

Posted by Jerry on October 27, 2003 at 07:36:57:

I believe as long as she has any benefit from the trust she cannot be trustee. However an extended family member may fill the bill.

Jerry

… Land Trust, Seasoning, Quick-Turn - Posted by mmoore

Posted by mmoore on October 25, 2003 at 20:01:40:

Hi,

I read a really great tip at http://www.legalwiz.com/articles/seasoning.htm

Here’s a quote:
+++
SOLUTION: Create a land trust with the seller’s name on it (e.g., if the seller is John Smith, call it the “Smith Family Trust.”). Seller deeds the property to the trust before closing. If the lender checks the chain of title, they will see that the seller has been on title for years and recently transferred title to a trust.

At closing, the seller assigns his beneficial interest in the trust to the investor and resigns as trustee, making the investor the successor trustee (an assignment of beneficial interest in a land trust is a sale for tax purposes). The new trustee (investor) signs a deed from the Smith Trust to the buyer at closing.
+++

I have a quick question about this… after the trust is created, can the seller be the beneficial interest AND the trustee? and when the beneficial interest is assigned to the investor, can the investor be the beneficial interest AND the trustee?

Also, when the “trustee (investor) signs a deed from the Smith Trust to the buyer at closing”, is the grantor of the deed the trustee?

One more question, do you guys use land trusts when flipping? If so, do you use it in a manner like above? How else can one use land trusts when flipping or is it not necessary?

one more question about the same example of using a land trust… on the purchase agreement between the investor and the end-buyer, what goes on the line for ‘seller’? The name of the Trust or the Trustee?

Thanks everyone.

Re: … Land Trust, Seasoning, Quick-Turn - Posted by Brent_IL

Posted by Brent_IL on October 26, 2003 at 22:20:43:

IMO, trusts are always a good idea, but that has to be tempered with regard to applicable costs. In my state, they?re minimal. If you are charged a transfer tax or excessive filing fees every time that you do something, it might be easier and less costly to do the flips directly. A trust won?t change the taxability.

If privacy is your only issue, you can be trustee and beneficiary at the same time without consequence. Not a great idea, but not illegal unless prohibited by state law. In my sole opinion, I think it?s dumb.

The “Dry Trust” concept concerning Domestic Grantor Trusts applies to taxation and liability issues. There is no legal liability protection. The IRS thinks dry trusts are a very bad idea. If they classify your actions as tax evasion, there will be fines and penalties.

Since I flip the financing, I’m in the middle for a few years. I use trusts in lieu of L/O’s. I start out with a third-party trustee, so the resign/successor trustee ploy isn’t necesary.

Re: … Land Trust, Seasoning, Quick-Turn - Posted by Lloyd W.

Posted by Lloyd W. on October 26, 2003 at 22:07:45:

Attorney Mark Ward has a super book on land trusts that every investor should read. About $35 at amazon.com Yes, I know gurus charge more for trust info, but everything you need is in Mark’s book for about 10% of what the “super stars” charge.

Re: … Land Trust, Seasoning, Quick-Turn - Posted by chris-atl

Posted by chris-atl on October 25, 2003 at 20:48:58:

Yes, Seller can be beneficiary and trustee, but it’s not a good idea to do that. It’s better if it’s two different people. Just find a friend who wouldn’t mind being the trustee on all your trusts and then you won’t have to worry about it when you form one. Here’s why I don’t think it’s a good idea. If you were the trustee and beneficiary, and you were to be taken to court and under oath you were asked, “Mr. Investor, do you own this property”, you can legally say no, because the trust owns it, BUT if they point blank ask you “Are you the beneficiary of the trust that owns the property” you can’t lie. If the trustee is someone else, they can answer no and then when asked to name the beneficiary, they can answer, “I have a fiduciary resposibility to not divulge that information.”

The grantor is the trust, but the trust can’t do anything on its own. So the trustee is the legally appointed representative for the trust.

I wouldn’t worry about trusts for flips. It’s overkill.

When the investor re-sells the house, the seller is “The XYZ Trust.” And the signature line will be signed by the trustee, with “As Trustee” added. The beneficiary doesn’t sign it.

Re: … Land Trust book - Posted by Neill

Posted by Neill on October 26, 2003 at 23:43:53:

The author’s name is Mark Warda (with an “a” on the end).

Re: … Land Trust, Seasoning, Quick-Turn - Posted by Jerry

Posted by Jerry on October 26, 2003 at 07:19:55:

I dissagree with Steve on two points. One, You cannot be trustee and beneficiary at the same time. It would be considered a dry trust. Two, Yes you can use a trust with flips. Since the title of record is the trust and you are buying sub2, there is no sale of real estate but personal property (beneficial interest). Therefore you will not have season problems. Ownership of the property stays the same (the trust), only beneficial interest is bought and sold.

Re: … Land Trust, Seasoning, Quick-Turn - Posted by Phillip

Posted by Phillip on October 26, 2003 at 22:44:53:

Will it work with your wife listed as trustee and you assigned as beneficiary?

Phillip