OfflineTRUSTS! The hidden gem that only the rich know about but are a valuable tool to your future success!
I've finished 1/2 of my course on trusts, and I must say it is some of the most valuable information I have learned to date! And, it isn't as complicated as I thought it all was. There is a way to keep yourself safer from lawsuits and vulnerabilities for your properties (or other assets you have)because if say you were in a car accident and someone wanted to try to pursue you, a lawyer would pull up your name and see you have no assets, and tell the client 'ok, we'll take the case, but I need a $large sum of money retainer up front and other unfavorable conditions. If a lawyer doesn't see assets, they won't do a payment at settlement because it looks like there will be nothing to win.
Super basic information about trusts (AKA Land Trusts):
A trustee is appointed by the owner of the asset, in this example I'll use a rental property. That trustee has the power to sign for all things about the property, receives the tax and insurance bills. The trustee is NOT the owner of the property, BUT the title recording shows the vesting as JANE DOE, trustee for THE ABC TRUST.
The beneficiary is the one who benefits from the trust. The person(s) are the actual owner of the asset. Beneficiaries can be a corporation, an LLC, a person, minor children or any combination of them.
A director is not necessary, but if there are minors involved or specific things you want to monitor, ie if there is a law suite pending against Alex Doe (one of the beneficiaries we'll say), the director can specify that nothing is flowing through to the beneficiary Alex Doe. So if for some rare reason the trust is broken (an expensive thing to do! Over 10K for a lawyer to find out who the beneficiaries are)
A trust can apply for its own tax identification number and is a way to protect yourself from taxes. Also, for tax purposes and estate planning, trusts are one of the safest ways to plan for the future. They are not contestable like a will, and there is NO PROBATE when a property is held in trust. This is the tip of the iceberg, but I'm so excited that I've learned about trusts. I'm in the process of writing them up for every asset I own, and I've learned how to write them on my own. Once you review it with a lawyer in your state, you can reuse the wording for other trusts.
Its a personal document that isn't recorded anywhere and is notarized with those involved.
If anyone wants to add more information, let's expand this discussion! I saw a brief mention of land trusts, but I think for the most part, it is such a little known item, that it is not of common interest. So, I put this hopefully attention getting title on this post {:)
The way I've successfully put in offers has been 'Tammy Lastname, trustee for the LA County Trust, vesting TBD at closing' and I include a copy of the direction for Land Trust form and black out the beneficiary.
But, you can leave off the vesting TBD, and make a note (IF APPLICABLE) (Cash offers won't need this)in the contract somewhere that if the financing bank will not work with the financing under a trust, the beneficiary may need to change the vesting to accommodate the lender.
However, if your agent won't submit it, tell her to please try it, other people you know do submit offers on REOs this way successfully all the time. Tell the agent it is important for the beneficiary's estate planning purposes and they only buy property using trusts. If you are using the standard CA purchase agreement for the offer, all the words don't fit.
IF you take the trust to closing, you must sit with them and NOT allow them to make any copies of it. This is a private, confidential security instrument. They only want to make sure it exists; they are not ever permitted to copy any trust!
It doesn't matter if the bank likes it or not. The 'direction for Land Trust' must be included with the offer, which says who the trustee will be, and they have authorization to make an offer on [property address], and that the [name of trust] will be created for the purchase of the [property address], signed by the beneficiary. Hope this helps some.
When you create a land trust to use for a property you own (not to avoid transactional funding costs), you can set up the trust to have its own unique Tax Identification Number.(TIN) And, if you need to have financing on the loan, there aren't very many banks that will loan to a trust, unless you can assure them that they will get the property in the case of default. Now, it can be very advantageous to a bank because they will simply get 100% beneficial interest in the property by doing a collateral assignment of the land trust. Using specific directions, the property in the land trust can go directly to the bank by transferring 100% of the beneficial interest to the bank, without ever going through all the steps of foreclosure. The trick is finding a bank willing to do the financing through the land trust.
When taking properties subject to, you can actually transfer the mortgage under the TIN # so it will no longer shown as an open account on the person's property you're taking subject to. Now, I'm going to be doing this shortly and see if it works, but that's the ultimate goal. Their name still appears on the Trust Deed, but their credit is free of the encumbrance of the loan and can free up their credit for another loan. I have yet to test this, but I will be doing it shortly and will let everyone know how it goes and if it actually works!
great, let me know how that goes. I have already begun the process for changing my agent. I haven't schedualed any meetings with new ones, but I will start on Monday. I will also try the changes you suggested in submitting my offers, one thing is I never submitted the Trust Direction with the offer, so maybe that is where I was lacking.
Thank you for all your information.
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Hello Ms Tammy, this is a very interesting information and thanks for bringing it up. There are so many conflicting infor re land trusts, from the costs for setting them up, to their use or benefits etc. Regarding costs I saw one website that charged $3000k, while another charged around $400.
The following link has some interesting infor, but if I have any ????s, you are now the DG guru!! Thanks
http://www.warda.net/LTSC-9.html
Steve
We seldom get what we want, but we will always get what we expect.