I think Jim,IL said he>>> - Posted by doug,ky

Posted by Jim IL on September 26, 2000 at 15:23:21:

Nope, That was not me.
I do not use an LLC or a Corp for the trustee.
Take care,
Jim IL

I think Jim,IL said he>>> - Posted by doug,ky

Posted by doug,ky on September 26, 2000 at 15:14:07:

used a corporation as the trustee and a LLC as the beneficary when taking title “subject to”. This is a good idea and I like it. But my question is does a corporation have to be qualify (meet guidelines or qualification required in the statutus in the state), for being a trustee? And what criteria does one normally have to meet. I haven’t done any research in my State, KY., yet.

PS Jim,IL thanks for your and others contributions to this site and good luck with the attorney!


Could be wrong but… - Posted by Bill Gatten

Posted by Bill Gatten on September 26, 2000 at 17:33:25:


That is an excellent question.

In certain states (Hawaii and Florida, for example), regulations would imply that a corporation, when acting as a trustee, should be a domestic corporation, and that it must be a chartered trust company (Bank and Trust, Title and Trust, etc.) in order to conform to the states regulations for trusts in general. However, there are no particular restrictions imposed on an individual, LLC or partnership nominated as a trustee.

What our (California) legal department tells me is:

Since the land trust is an inter-vivos ‘nominee trust,’ pretty much any entity can legally be nominated as the trustee (I can’t think of any that can’t): corporation, LLC, Ltd Ptrsp, or an individual. And for an added layer of protection, one might even be well advised to use an out of state (foreign) corporation as a trustee, and have the trust itself be subject to that state’s jurisdiction (an added layer of asset protection if somebody should be trying to find assets to sue for).

The problem comes, however, when attorneys who know little or nothing about land trusts get involved and insist on a literal interpretation of the regulations that were structured specifically for irrevocable income tax-centered trusts (e.g., Charitable Remainder Trusts, Off-Shore Trusts, Ecological Conservancy Trusts, etc.). If your interpretation doesn’t serve their best interests…despite the complete absence of case history…they’re right and you’re wrong before your start (i.e., “Putting a property into a land trust, then appointing a co-beneficiary will violate the Due on Sale Clause…I don’t care what YOU think!”).

Uninformed attorneys are singularly the biggest expense my company has. Millions upon millions of dollars lost in attorney-thwarted transactions over the years (?No matter what Gatten says, Mr. Seller, the PACTrust violates the Due-on-Sale Clause?but if you want to carry, you can pay ME to put together a lease option or a land contract for you?much safer?).

Remember that the IRS “looks through” the structure of the land trust: which is to say that they consider them valid and enforceable, but that holders of beneficiary interest in them are the owners of the property. And irrespective of whom the trustee may be, the trust does not exist in their eyes. Except for Louisiana and Tennessee, as far as I know, all states pretty much follow suit in this regard.

But…just try to argue these points with a dissenting attorney if you’re not one (well…I guess if they weren’t dissenting there wouldn?t BE an argument?). They see your input as akin to performing brain surgery with a hockey puck. Your documents will never be as good as theirs, and your position or point of view will seldom have any merit what-so-ever, no matter how many cites and codes you have committed to memory.


Bill Gatten

Bill Bronchik: If I’m wrong on this issue (re. the issue of a corporation’s needing to be a domestic trust company …not the attorney thing…that’s my battle) I’ll defer to you