You may know and/or remember from our seminars and webinars that the Title Holding Trust changes the way in which an investor or multiple investors own and hold title to real property.  The Trustee of the Title Holding Trust or Land Trust acquires and holds the legal title to the actual real estate and the owner or co-owner is owns and holds the beneficial interest of the trust. The beneficial interest in the trust is a personal property interest and not a real property interest, which means that the beneficiary now owns and holds personal property and not real property. 

Liens and/or judgments can no longer attach to the real estate because the investor or co-investors no longer own the real estate.  They own beneficial interests in the Title Holding Trust or Land Trust.  The lien or judgment can still attach to the individual's beneficial interest in the trust, but not the real estate since it is no longer owned by the individual. 

The Title Holding Trust or Land Trust is a great way to protect owners, especially co-owners, from each other's liens and judgments. 

Title Holding Trusts are designed and used to keep a persons identity confidential.  The true owner's name never appears on the public records.  There are other benefits as well, such as protection against liens or judgments, but most of the time the Title Holding Trust is used for confidentiality and privacy of ownership.

This is all that it does.  It keeps the property ownership confidential, which is part of an asset protection strategy.  However, the Title Holding Trust or Land Trust is not enough when more than privacy and confidentiality are needed.  The Title Holding Trust will not protect the true owner from any litigation.

You may wish to visit The Center for Wealth & Legacy Studies and ask some of their advisors about asset protection or wealth protection.  They have a very large Advisory Team that can assist you. 

Granting Powers to the Trustee

The Warranty Deed to Trustee conveys and communicates the various legal powers and authority conferred upon the Trustee of the Florida Land Trust by the Deed.  The Trustee still has all of the powers and authority conferred to it by the Warranty Deed to Trustee even if a formal Florida Land Trust Agreement is never drafted.  We always recommend using a formal Florida Land Trust Agreement, however.

Drafting the Warranty Deed

The Warranty Deed to Trustee must grant full powers to the Trustee of the Florida Land Trust.  The individual drafting the Florida Land Trust Agreement should take great care to ensure that the requirements listed in Section 689.071 of the Florida Land Trust Statute be including in the Warranty Deed. 

Trustee Should be a Legal Person or Entity

A Trustee should be a natural person or a legal entity.  The Florida Land Trust itself does not have legal capacity and is not a natural person or legal entity, so the Warranty Deed must convey the real property to the Trustee of the Florida Land Trust, such as Exeter Fiduciary Services, LLC, as Trustee of Florida Land Trust No. 12345. 

The Trustee has the legal capacity to act on behalf of the Florida Land Trust, so you should also take great care in the selection of your Trustee.  There are many providers that charge nominal fees, but getting in touch with them and actually getting timely service can be a challenge.  So, be sure to thoroughly review the options, services, expertise and experience in addition to the fees charged by prospective Florida Land Trust Trustees. 

Personal Property Designation

Warranty Deeds should include language stating that the beneficiary's interest in the Florida Land Trust is a personal property interest (in other words not a real property interest).  The Warranty Deed to Trustee should also clearly state that the Trustee does not have any person liability, which should take care of any possible exceptions that might be found in the Florida Land Trust law. 

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The Wealth & Legacy Series Seminar will be held at the following venue:

"Success, Succession and Sources of Money"
A Very Special Evening
September 30, 2009  -  5:00 PM to 8:00 PM
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The July 2009 edition of the Mortgage Fraud News published and distributed by FannieMae through its Mortgage Fraud Program discusses the most current variation of mortgage fraud that is now running rampant through out the short sale and foreclosure market.

Fraud Alert Involves Land Trusts

This time around the mortgage fraud involves the use of Land Trusts, which are often referred to as California Title Holding Trusts, Illinois Land Trusts or Florida Land Trusts, in order to get around various rules and prohibitions regarding flipping property or double closing on property. 

This is certainly true when the investor is acquiring troubled assets such as short sale, foreclosure or REO properties. The Title Holding Trust (Land Trust) can be a great tool in these transactions, especially when there are multiple investors/owners involved.

Contracts Can Not Be Assigned

There is one catch that the savy real estate investor needs to be aware of before using a Title Holding Trust (Land Trust) to buy short sale and REO properties. The sale contracts used by lenders and other financial institutions, including FHA and Freddie Mac, are generally written so that the party making the offer (buyer) can not assign their rights to purchase to another party. 

The investor will not be able to assign the contract to their Title Holding Trust (Land Trust) or any other person or entity in most cases.  This can complicate the transaction if the investor decides after they have made the offer to acquire and take title in a Title Holding Trust (Land Trust) or any other type of trust or entity. 

This policy is frustrating (at best), but is designed to curtail certain abuses that can go unchecked without this policy. Investors must generally close and take title to the property in the same name of the person or entity that they originally made the offer through.  Acquiring and taking title in the investors name and then deeding the property into the Title Holding Trust (Land Trust) won't work because you will lose the benefit of privacy and confidentiality of ownership once your name appears on recorded title. 

Make Offer Thru the Land Trust

There is generally an easy way around this problem provide the investor knows that he or she wants to acquire and take title to the property in a Title Holding Trust (Land Trust) up front.  Investors can set-up a Title Holding Trust (Land Trust) in advance and make their offers through their new Title Holding Trust(Land Trust).  This is referred to as a dry trust because there are no assets held in the trust. 

The offer to purchase the troubled asset would be made through and in the name of the investor's new Title Holding Trust (Land Trust).  The closing would occur and the property would be conveyed into the new Title Holding Trust (Land Trust).  There is no need to assign the contract because the offer is made in the name of the Title Holding Trust (Land Trust) right up front. 

Title Holding Trusts provide excellent protection against liens and judgments. Liens and judgments can be attached to property that you own in your own name, but liens and judgments can not be attached to real estate held in a Title Holding Trust (Land Trust). This is because you do not own the real estate held in a Title Holding Trust (Land Trust). You own a beneficial interest, which is a personal property interest and not a real property interest. The Trustee of the Title Holding Trust owns the real property interest.

The liens or judgments can be attached a beneficial interest of the trust, but not the real estate directly, so that you can still sell your property without any problems. There are very few real estate investors that truly understand this protection.

So, stay tuned.

This is the second blog post in a series on the Title Holding Trust.

Title Holding Trusts (Land Trusts) are primarily used as an asset protection vehicle because the Title Holding Trust enables a real property owner to buy, hold, manage and sell his or her real estate in a confidential and private manner. It makes it virtually impossible for potential plaintiffs to identify your assets and decide to sue.

Asset Protection Includes Protection Against Liens and Judgments

Real estate acquired andheld in a Title Holding Trust (Land Trust) is also protected from liens, judgments and other clouds against legal to the real property. This is especially helpful when you have multiple co-owners or investors involved in the real estate. It protects each of the co-owners from each other's liens and judgments.

Stay tuned for further blog posts regarding the benefits and advantages of using a Title Holding Trust (Land Trust) to buy, hold and manage real estate. You can also register for one of our upcoming Title Holding Trust (Land Trust) webinars for more complete information.

However, the Title Holding Trust (Land Trust) is an excellent way to buy, hold, manage and dispose of real property, and there are many, many benefits andadvantages of using the Title Holding Trust when structuring real estate transactions.

This post to The Title Holding Trust Blog begins a quick series of posts that explain the benefits and advantages of structuring real estate transactions using a Title Holding Trust (Land Trust).

Can't wait for the series? You are more than welcome to join us on one of our upcoming Title Holding Trust webinars.

So, stay tuned.

Land Trusts: A Real Estate Investors Best Friend (Blog Series)

Here are links to each of the blog posts in this series on Title Holding Trusts.  The links will only be active after the posts have been published, so stay tuned for the entire series on Land Trusts. 

Series Blog Post No. One
Series Blog Post No. Two
Series Blog Post No. Three

Why and how can this possibly happen? Well, it's actually very, very easy.  You see, your real property ownership appears in the public records.  Why do we just "accept" this exposure as a way of life when there is actually such a simple solution to keep your real estate ownership private and confidential?

Keep Your Real Estate Ownership Private

The Title Holding Trust, which is often referred to as a Land Trust, is a simple and inexpensive method for buying, holding, managing and selling real estate.  Its roots come from the Illinois Land Trust long used to keep real estate ownership confidential and private in the State of Illinois.

The Title Holding Trust allows you to buy, hold, manage and sell real estate in a confidential and private manner.  It keeps your real estate ownership out of the public record because your real property is acquired and held by a Trustee of your Title Holding Trust.

Protection From Liens and Judgements as Well

There are also protections from liens and judgments, which can be especially helpful when there are co-owners involved.  Title Holding Trusts can be established by anyone or any entity. 

Who Owns and Controls the Title Holding Trust?

The Beneficiary (owner) owns and controls the Title Holding Trust, and retains control over the assets that are held inside of the Title Holding Trust.  The Beneficiary has control over the management responsibilities such as hiring property managers, leasing, collecting rents and paying expenses, insurance, financing, developing, and ultimately selling.

How Are Income Taxes Treated With A Title Holding Trust?

The Title Holding Trust is a "pass-thru" entity and a "disregarded" so that all revenue, expenses and depreciation items for income taxes are passed thru and reported on the Beneficiary’s own income tax return.  The real property held in the Title Holding Trust is treated as if it was owned directly by the underlying Beneficiaries.