Posted by John Merchant on November 29, 2006 at 21:53:02:
Although 100% assignment would probably not even bat an eyelash with most commercial lenders’ ARM loans today, it could legally trigger a DOS, therefore the assignee is taking a chance it could happen to him.
I’ve seen a number of trusts be formed, actually by the buyer (for the seller), then the lender is notified in writing of same, then all of the trust res is sold and transferred to the new buyer…with no negative reaction from the bank.
Also seen the 10% be retained by the Seller, then after a few months it also goes to the new Buyer…actually this is easily done by the B’s lawyer, who then has the other 10% safely done and just keeps in his file cabinet for a while before transferring that to his B client.
And you’re right about the 90-10% rule coming about as per the G St G Fed law…don’t recall whether this is statutory or court made law but I recall it is law.
Posted by Merrick on November 17, 2006 at 13:27:39:
As I come across relevant deals, I plan on having the Seller convey the property in to a Land Trust with him/herself as the beneficiary, then giving me a 100% Assignment of Beneficial interest. In this scenario, who should I have be the trustee, that wouldn’t cause any conflict? Could I make myself or my wife the trustee? Or, would it be best to have my closing attorney be the trustee? I really appreciate any insight you can give.
Posted by colvegas on November 20, 2006 at 22:27:54:
Rick gave some very good advice on this.
The only technical issue is if the seller did assign you beneficial interest he by federal law in order to make it a legal entity must retain min 10% and would assign 90%to you or another beneficiary or whatever percentage of the 100% of the beneficial interest they choose.
The trustee as Rick advised can be anybody you choose i prefer to use a corporate trustee for longer holds usually 2 yrs or more but since you are only holding a short time( 6 months) your attorney should do fine… No legal advice intended here.
I would make sure your trustee is at an arms length transaction since if the trustee and beneficiary are the same natural person or entity you would have a issue of merger which could invalidate your trust…
Since you like to research make sure you read up on this or consult with a good estate planning attorney…
Normally, there are no restrictions as to who you chose to be your trustee. This could be you, your wife, or any other individual(s) over the age of 18 (could even act as co-trustees) or non-natural person entity, such as a corporation or LLC, etc.
You may want to rethink your plan about using yourself or your wife if your objectives include privacy. This would be like a movie star who tells the maps-of-the-stars people where they’ve moved to.
If you want to keep your assets private, keep your name out of the game by even naming the trust anything other than your surname. Many people, myself included, name the trust by the street name of the property, i.e. “____________, trustee of the Elm Street Trust, dated 11/19/2006”
As for chosing a trustee, the most obvious thing is that you’ll want to select a person or business that is extremely honest, dependable, affordable, and available. It could be your attorney (but s/he may want to charge you every time you call them or require a document signed). You could form your own corp. or LLC, or have a very close friend or relative (or their entity) act as trustee. Also, consider getting a U.S. Postal service mail box (not a private box service, which could go out of business).
It sounds like you’ve done 90% or more of the research and are trying to get the last 10%. Good for you. Hope this helps.
100% would be legal, but… - Posted by John Merchant
Posted by John Merchant on November 27, 2006 at 16:36:48:
I think what you meant was that under Fed law, an assignment of 90% or less could not then be DOS’d by the lender bank, if the seller/borrower kept the remaining 10%.
But such an assignment would not be illegal under Fed law or state law to my knowledge…could be problematic although perfectly legal.
Posted by Merrick on November 21, 2006 at 15:25:26:
So you’re saying that some federal law says the beneficiary of a trust can’t assign me 100% of his interest? I hadn’t hear/or read that yet. Where can I find the statute for this, I’d really be interested in seeing what it says. Thanks so much for the response.
Posted by Merrick on November 20, 2006 at 09:07:53:
Thanks for the input Rick, I have done most of the research, and am now attempting to fill in the few missing pieces. I’m the type of person that has to have the answer to every possible question before I start on something, and unfortunately I think I have been using it as a crutch to not getting started, I believe they call it analysis paralysis!
I’m not too concerned with the privacy issue with the trust, because as trustee I (nor my wife) won’t appear to have any beneficial interest in the property. Plus, the property will only be in the trust for a very short time (in a perfect world it will be bought & sold in a simultaneous closing), 6 months at most. Anyway, thanks again for the input.
Re: 100% would be legal, but… - Posted by colvegas
Posted by colvegas on November 27, 2006 at 18:13:28:
John,
Yes sir I meant exactly that and thank you for the clarification I had a brain freeze.
The 10% must be held by the seller to avoid a DOS from the lender and the 90% can be assigned to whatever beneficiaries you choose…
Actually at the start the seller or person on the deed or title has 100% beneficial interest then assigns his beneficial interest accordingly to his/her designated beneficiaries.
As to Mr Merrick I do not know pertinent documentation but our legal team does advise of of the 10% rule they call it to make the trust a legal entity…The one theory I have is the Garn St Germain act of 1982 advises the borrower must be A beneficiary so the 10% minimum interest is that threshold to satisfy that rule…
As to the assignment being problematic can you explain legally why since this is your expertise I do appreciate it your input…???