Land Trusts - Posted by Tyana

Real Estate Investing
1

Posted by bill gatten on July 16, 2002 at 14:46:16:

Yep, pretty simple.

A property’s deed is made out in the name of whomever you choose to hold the title for you.

A trust document is drawn up that outlines the trustee?s responsibilities and the term of the agreement.

The deed is recorded (the trust is not).

That’s it.

Now, after that, if someone is deciding whether you’d be worth suing or not, it is unlikely that they’ll know that you own anything of value (anything worth suing for), or that the property in question is associated with you.

If the mortgagor (your “seller”) is named as the only beneficiary in the land trust, there is no DOS violation of any lender’s due-on-sale clause. After the deed to the trustee has been recorded, you can then–later on?(or at least with documents dated later on) acquire a beneficiary interest in the trust, rather than a title interest in the property–a personal property issue vs. that of real property. By having done it this way, you have acquired all the benefits of ownership, with the added benefit of very solid asset protection (as far as the property is concerned.

Even though it is of personalty vs. realty, could the lender of record see this transfer to you as being a due on sale violation? Yes they could, but the possibly of discovery would be unlikely, since nothing is recorded and all documentation is silent.

Would a lender win in court if they sued for a DOSC violation? Possibly (but not “probably”): although the outcomes of certain Illinois cases would indicate that they likely would not, so long as their borrower remained a beneficiary and the trust was a revocable trust, functioned during the life of the borrower (vs. by Will), and did not relate to the transfer of occupancy rights (i.e., such occupancy rights would have to be transferred by a separate agreement). Has this been tested outside of Illinois? Not to my knowledge, therefore the outcome of a case would depend upon whether a particular jurisdiction would rely on precedents set in Illinois.

Note: I teach this stuff, but I am not an attorney and this is not intended to be legal advice.

B

2

Land Trusts - Posted by Tyana

Posted by Tyana on July 16, 2002 at 12:11:13:

I have read several of the messages on CRE but have yet to find a great explanation of a land trust. I know they cannot be that complicated, can someone please break it down very simplistically? Perhaps even to the point of a step by step process. I have an opportunity to use this information very soon if it proves detailed and valuable enough. Thank you very much!!

3

Re: Land Trusts - Posted by bill gatten

Posted by bill gatten on July 16, 2002 at 14:48:34:

Yep, pretty simple.

A property’s deed is made out in the name of whomever you choose to hold the title for you.

A trust document is drawn up that outlines the trustee?s responsibilities and the term of the agreement.

The deed is recorded (the trust is not).

That’s it.

Now, after that, if someone is deciding whether you’d be worth suing or not, it is unlikely that they’ll know, or be able to find out, that you own anything of value (anything worth suing for), or that the property in question is associated with you.

If the mortgagor (your “seller”) is named as the only beneficiary in the land trust, there is no DOS violation of any lender’s due-on-sale clause. After the deed to the trustee has been recorded, you can then–later on?(or at least with documents dated later on) acquire a beneficiary interest in the trust, rather than a title interest in the property–a personal property issue vs. that of real property. By having done it this way, you have acquired all the benefits of ownership, with the added benefit of very solid asset protection (as far as the property is concerned.

Even though it is of personalty vs. realty, could the lender of record see this transfer to you as being a due on sale violation? Yes they could, but the possibly of discovery would be unlikely, since nothing is recorded and all documentation is silent.

Would a lender win in court if they sued for a DOSC violation? Possibly (but not “probably”): although the outcomes of certain Illinois cases would indicate that they likely would not, so long as their borrower remained a beneficiary and the trust was a revocable trust, functioned during the life of the borrower (vs. by Will), and did not relate to the transfer of occupancy rights (i.e., such occupancy rights would have to be transferred by a separate agreement). Has this been tested outside of Illinois? Not to my knowledge. Therefore, the outcome of a case would depend upon whether a particular jurisdiction would rely on precedents set in Illinois.

Note: I teach this stuff, but I am not an attorney and this is not intended to be legal advice.

B