Posted by redave (ca) on October 02, 2010 at 23:19:41:
Everything I read says land trusts do not provide asset protection, here?s two articles for example:
However, I don?t really care about the land trust, I only care about the original question?.do you have any knowledge about the original question?? Or has creonline turned into a drunken land trust fest.
Equity share note - Posted by redave (ca)
Posted by redave (ca) on October 01, 2010 at 10:48:51:
I?m partnering with a guy to do a rehab and flip. I find the property and do the rehab, he brings the money. I would normally put him 100% on title and have a joint venture agreement detailing a 50/50 split. He says he doesn?t mind bringing the money but would prefer I be 100% on title so he isn?t exposed to the liability risks associated with owning real estate.
I?m thinking he I could take title and he could have a note and deed of trust against the property, where the terms of the note specifies that he gets back his original contribution plus 50% of the profits.
Can this be done? Should this be done? Can somebody point me to a note that has this kind of wording?
Thanks,
Dave
Re: Equity share note - Posted by Tom Thumb
Posted by Tom Thumb on October 01, 2010 at 16:29:16:
My recommendation would be to put the property into a land trust and
grant him a 50% beneficiary interest. Your Trustee, which should be a
professional non-profit corporate trustee, holds legal and equitable
title and you and your partner own personal property, i.e., an interest in
the trust, NOT an interest in real property. I’ve done it many times and
WAREIA is an expert in this area of real estate title holding. Good luck.
Re: Equity share note - Posted by redave (ca)
Posted by redave (ca) on October 01, 2010 at 17:16:32:
He doesn’t want to be on title. We thought about a land trust. A lawsuit against the trust can pass through to the beneficiaries thus offers little protection unless beneficiary is an entity. Even if you do have entity protection it can be a headache and there is a cost to defend.
An equity share note and dot, if such a thing exists, might avoid this kind of exposure.
Re: Equity share note - Posted by WAREIA
Posted by WAREIA on October 02, 2010 at 22:54:18:
Although I agree that an entity as a beneficiary is better, the first part of your statement is totally untrue.
“A lawsuit against the trust can pass through to the beneficiaries thus offers little protection.”
This is absolutely not true.
I’ve been in courtrooms several times with Judgment Creditors attempting to “bust the trust” or get to the corpus (property) of the trust, including with the IRS and in Bankrupcty Court. In every case we prevailed and the property could not have a lien place on it or be attached.
The only thing a creditor would ever be able to do is receive a Charging Order against the Person, not the interest in the trust they hold. If and only if that person ever receives a distribution from the trust would they obligated to pay on the charging order. It is not a attachment that is automatic and it only affects the person with the charging order and not any other beneficiary of the trust. There are a few states such as Louisiana and Tennesse that do not recognize the inability of a judement creditor to “bust the trust” and in some cases, depending on how it’s written and who is the trustee, the state of NY may treat the beneficiary interest in the trust as an interest in “real property”.
Seeing that you are in California and we have done literally thousands of trusts in CA, and if you use the right Documentation Process and the right Trustee, you have nothing to worry about.
In my experience, having been involved in hundreds of Equity Share transactions using Valid Land Trusts I would never do a RE transaction of any type without a Valid Land Trust and Trustee in place.