I completely understand that technically when transferring the Beneficial Interest of a Land Trust you are not transferring realty, but personal property. I understand the theory quite well.
Now with that said, call your counties Auditor and ask the question… Call several Title Company Atty’s and ask that same question… I have and the minute it is known that the controlling interest has transferred, then they want reporting… because the want the fee…
If you can find a RE Atty who will not feel compelled to report the results of the sale of Ben Int of a Trust, so be it… I haven’t been so fortunate. It seems each one I have dealt with avoid non-reporting like the plague…
Just my experiences… and I think that these vary from locality to locality… as I stated in my original post on the subject.
Will a land trust allow me to shield my purchase price of a property from my buyer if and when I decide to sell it down the line? Will it allow me to shield my selling price (profit) from the person I originally purchased the property from?
I’ve been reading the archives and have learned a little more about land trusts. So I’m thinking I should use it as follows:
1)Create a land trust with the seller as beneficiary.
2)Have the seller assign their beneficiary interest over to me. I am now the owner of the property.
3)When selling I would assign my beneficiary interest over to my buyer.
From this, I am hoping to hide the profit I make from either the original seller, my buyer, or both. Would a land trust accomplish this? Question: Would my buyer have a problem acquiring a property from me in this manner? Would he/she be able to get title insurance? Who would the insurance be issued to?
Land Trusts can accomplish all of the above intended uses, with some limitations. These limitations are that when the Ben Int transfers this should be reported as a sale, which will eliminate the intended benefit. Of course you could likely get by w/o doing so, unless you are using a title company for the closing. They are usually less than cooperative about not reporting transfer/sales to the Auditor.
The other snafu that you will run into is from the Lender side of things. Most Lenders want the property titled in the name of the party to whom they are lending. Following that they do not have a problem with transferring back to a Land Trust, but again this voids your intended benefit of the Trust, in that a sale/transfer will be reported.
Theoretically, if all transactions were for cash this approach would work fine. Title insurance should be issued to the Name of the Trust, and Trustee, so this shouldn’t be much of an element or problem.
“These limitations are that when the Ben Int transfers this should be reported as a sale, which will eliminate the intended benefit. Of course you could likely get by w/o doing so, unless you are using a title company for the closing. They are usually less than cooperative about not reporting transfer/sales to the Auditor.” - JT
Thanks JT. I was going to email you if no one responded. I have a question regarding the above statement. You state that the sale would be REPORTED. Reported to whom? Would the ‘reported’ sale be a matter of public record? Or would someone have to do some expensive snooping to find out? In your opinion, would my buyer have any objections to business being transacted this way?
NOTE, all cash will be used for purchasing and selling. Thanks.
All RE sales are reported to the Auditor and Recorder, (these titles and the process may vary from state to state) who then post the county records for who is responsible for property taxes and also the owner of record. In full disclosure states this will include the purchase price, which I understand is what you are attempting to preclude from being seen.
When a property initially transfers into a Trust and the Beneficial Interest is common with the current owner, most counties will allow this to be reported as an Affidavit Transfer, or other terminology which is not considered a sale. However, when the Benefical Interest later transfers, this is considered a sale in the eyes of the Auditor, et al. Why…? Because if it wasn’t they would be missing out on revenue, plus the ability to use the newer, and normally higher transfer price from which to assess the tax bill.
Just for kicks, call your county courthouse and speak to the Auditor and ask them if you are required to record as a sale when property currently in a Trust, changes who is the beneficiary. Chances are good they may not even understand this terminology, but when they realize that a new beneficial interest = new owner, they will surely advise you to record it as a sale… IMHO
On an all cash deal you can get by w/o recording this as a sale, as long as all sides are OK with doing so. Again, if you have a Title Atty involved, they being an officer of the court are bound by the ethics of reporting this as a sale… again, in my best judgment here… Hope this helps.
If title of the property is transfered to a land trust from the original owner, there is no sale of real estate. Therefore no need report anything except recording of the warranty deed. Then the beneficial interest is sold. Still no real estate has been sold. Only personal property in the form of beneficial interest. Still no need to report to anyone. When the property is sold out of the trust then the reporting begins. While the property is in the trust, you can sell any or all of the beneficial interest all day long as many times as you wish and no one will know except the principals involved in the trust.