Land Trust in Tennessee

General Real Estate Investing
1

Hello,
I am just wondering if you can take full advantage of using Land Trust in Tennessee. My current understanding is that under TN law, beneficial interests is still viewed as real property interests, not as personal property.

Any insights is appreciated.

2

That’s correct. Tennessee is one of two states that do not subscribe to the “Doctrine of Equitable Interest” which enables the conversion of real property to personalty. They are still legal in Tennessee, and still offer protection vs. the DOSC.

Da Wiz

3

Da Wiz,
Thanks for the confirmation. Two quick questions:

  1. What does that really mean in terms of using Land Trust in TN?
    2 Would the language in the Land Trust need to be modified to indicate no conversion to personal property?

Thanks.

4

This only means that if a land trust was challenged as to its validity, the beneficiaries would be seen as owners of real property. This same statement is made in all states as the IRS “looks through” land trusts as if they did not exist (beneficiaries are real property owners in the eyes of the IRS, which provides the same tax obligations and benefits as homeowners.

The disadvantage is that local law would treat the beneficiary interest as realty making the process of eviction no better than it would be for a land contract, equity share, wrap, or lease purchase.

However, the elements of secrecy and asset shielding are not negatively effected in Tennessee.

Da Wiz

5

THANK YOU FOR YOUR VALUABLE INPUTS. If I already own a property, can I do a quit claim deed instead of a warranty deed to the trust?

6

You don’t deed the property to the trust – you grant deed it to your trustee, which is why I very strongly recommend a professional non-profit corporation as Trustee, licensed and bonded, with a payment processing company.

Da Wiz