Question about Land Trust when doing 'subject to' - Posted by Calvin

import · November 9, 2002, 6:03pm

Posted by Calvin on November 10, 2002 at 08:38:41:

Thank you very much guys! I understand it now!

Thanks!
Calvin

import · November 9, 2002, 6:03pm

Question about Land Trust when doing ‘subject to’ - Posted by Calvin

Posted by Calvin on November 09, 2002 at 19:03:18:

Hi,

I have a question about land trust when doing subject to deal. I have the ‘ABC on subject to’ course. It says when I buy a house using subject to, the process is as follow:

Have seller create a land trust
Seller will deed his/her property to this land trust with him/herself as the beneficiary.
Have seller sign an agreement to assign the beneficiary interest of this land trust from him/her to you.

That is!

My question is: In step 2 above, when the seller deed the property to the land trust, why don’t we just be the beneficiary of the land trust when it first create? In that case, we don’t need step 3 above. Right? Can someone explain the reason behind this please?

Thanks!
Calvin

import · November 12, 2002, 2:27pm

Re: Land Trust/ ‘subject to’ - Posted by Bill Gatten

Posted by Bill Gatten on November 12, 2002 at 15:27:26:

Calvin,

You have now received enough information so far to write a book on the subject (a few of which books I’ve written m’self). However, understand that when the seller creates a living trust (be it a land trust or any other kind of inter vivos trust) he is not violating the due on sale clause: that doesn’t happen until he assigns away his powers of direction and control of the property…however, the concept here (as told to you by your course) is that since the assignment is private, the lender will never know (unless they investigate or unless you transaction ends up in court for myriad possible reasons). So here is what I recommend to my students and “book buyers.”

Set the trust up for the seller with the seller as the ‘only’ beneficiary: your appointing the trustee that you designate (not you, preferably…should be a corporation so it can’t die and get you property entwined in its Probate proceedings)
Take a ‘partial’ assignment of beneficiary interest in the trust, so that when/if you do end up in court you can clearly show that the borrower did in-fact remain A beneficiary of the trust (thereby fully satisfying the requirements of the Garn-St. Germain Act, USC1701-j-3).
Irrespective of the percentage of beneficiary interest left with the “seller” (it really doesn’t matter much), have him execute an agreement to relinquish all of his interest to you when the trust terminates.
Be certain to leave the settlor (the seller) with 50% of the power of direction (“voting rights”), so as not to trigger a reassessment for property tax, and so as not to incur conveyance or transfer taxes (or stamps…transfer to an asset protection trust is merely a ‘name change’ on title: not a conveyance of ownership).
Next, take a Limited Power of Attorney from the settlor to “vote” his interests (analogous to taking a “Proxy”), so that he need not be conferred with on any details re. the trust or the property.

Now…do understand clearly that if you are not planning to hold the property for more than a few months, you can indeed have the seller name you the beneficiary and trustee, so that when your buyer comes along he can deal with you as the owner rather than with your seller (thereby avoiding double escrow and seasoning issues). However, on a long-term hold…NEVER (IMHO)…do it any way but what I described above. And when you tenant comes along you can make him a partial beneficiary in the trust as well, so that he can pay you far more than rent, for having tax benefits and anything else you want to sell him (all or part of the appreciation, all or part of the loan’s principal reduction, mineral rights, water rights, etc.)

Hopes this helps clear things up a bit.

Bill Gatten

import · November 11, 2002, 3:08pm

Re: Question about Land Trust - Posted by DavidV

Posted by DavidV on November 11, 2002 at 16:08:37:

I make the beneficiary an LLC right off the bat and haven’t had any problems yet. If the bank wants info on it i send a certificate of trust. It contains most of the trust info except the beneficiary.

import · November 10, 2002, 3:29pm

Re: Question about Land Trust doing ‘subject to’ - Posted by Brian, WI

Posted by Brian, WI on November 10, 2002 at 16:29:58:

Calvin,

I too have the course you mention, the ABC’s of Subject To, but I think you have things a little mixed up.

If I remember correctly, and I’ve been listening to the tapes recently they say…

You the buyer set-up the land trust.
The Seller deeds the property to the land trust.
You then get assigned the beneficial interest to that land trust.

Hope this helps.

Brian,WI

import · November 9, 2002, 10:07pm

Re: ‘subject to’ - Posted by Dan(FL)

Posted by Dan(FL) on November 09, 2002 at 23:07:01:

Calvin
I am by no means an expert, but I have done a couple of these. So here it goes :

When a property changes owners, whether it be into a trust or different person, the existing mortgage company gets notice. If they find out that the seller no longer is paying or is beneficiary of the house/property, they will/could call the loan due.
This is what were trying to avoid… right??
Im not familiar with whichever course your using but the idea is the same for all. You dont want to record anything that has your name on it. You keep it to yourself.
Part of your paperwork should be a letter from your seller to the mortgage company telling them that they are putting the property in a trust. Then the beneficial interest is assigned to you (after the trust is formed).
Hope this helps.
Dan(FL)

import · November 12, 2002, 7:28am

Re: Question about Land Trust - Posted by Daniel_NC

Posted by Daniel_NC on November 12, 2002 at 08:28:35:

David,
How about your trustee? Is that a person or LLC/Corp?
Thanks,
Daniel

import · November 11, 2002, 8:14am

Re: ‘subject to’ - Posted by Daniel_NC

Posted by Daniel_NC on November 11, 2002 at 09:14:39:

I’ve done a a few of the also and am now making myself (Corp) the initial beneficiary instead of the seller.
I recently listened to a tape with Ron LeGrand, Randy France and Bob Meister and that was their advice and here’s why.

The original purpose was, if DOS is invoked, you could take the document to the lender with the sellers name as beneficiary but of course not show them the subsequent doc where you became the beneficiary. Probably not a good idea, probably fradulant, and probably not going to happen anyway. So simplify the process by being the initial beneficiary and in the remote chance lender calls loan due have a plan to deal with it…which you should have anyway.
One other tidbit fromt he tape was to name the trust using the sellers family name: If John Smith is seller name it the “Smith Family Trust”. Looks a lot like the Smiths really did just transfer to trust for estate planning.
Good Luck,
Daniel

import · November 10, 2002, 4:17am

Re: ‘subject to’ - Posted by jeff

Posted by jeff on November 10, 2002 at 05:17:35:

actually, its better not to alert the bank as to anything your doing other than simply getting the billing adress changed. they will find out soon enough about the transfer, your notification is just one more place they may discover what your up to.

import · November 12, 2002, 8:20am

Re: Question about Land Trust - Posted by DavidV

Posted by DavidV on November 12, 2002 at 09:20:19:

A person.

import · November 11, 2002, 1:35pm

Re: ‘subject to’ - Posted by Dan(FL)

Posted by Dan(FL) on November 11, 2002 at 14:35:57:

Daniel

Hey… if it works for you, and you feel comfortable doing it this way, then great. Either way, we get the job done.
OH… great tip about the trust name!

Dan(FL)