Framer35
I find it sad when someone tries to discredit my 100% accurate post about the workings of a land trust.
You said the tenant could encumber or demolish the property – he can’t, The trustee has title to the property.
You said your tenant in a land contract can also deduct the mortgage interest and property taxes – he can, BUT you will be nailed with taxes as a land contract is considered an immediate sale. My previous post about 100% was 100% accurate.
Then you try to tell me how to select your trustee. You should not select a friend, or an attorney, or a corporation as your trustee. The land trust is an awesome strategy, BUT you must do it right. People picking their own trustees or playing games with the trust can give it a bad name.
Here is why you should only select a non-profit corporation who knows what they are doing as your trustee. Here is what is wrong with picking anyone else:
ONE’S SELF AS TRUSTEE
Risky and quite probable failure to honor privacy and anonymity, especially under threat of legal action.
An individual trustee’s failure to charge a fee would not support the land trust’s validity in court. The attempt to charge a fee would not be seen as adequate unless the party were a bonded entity.
If a trustee is also a beneficiary, a merger of title is created (see Doctrine of Merger), invalidating the trust if challenged in court as being a bona fide land trust.
An individual would most likely never be bondable as a trustee and would likely not have the resources to provide a completely separate, free and bonded collection and bill-paying service.
An individual would not be seen by the courts as a standard trustee, charging fees “commensurate with industry standards”: therefore severely impairing the integrity and structure of the land trust.
One’s own personal appointment would not be seen by a 2nd or 3rd co-beneficiary as a mutually trustworthy holding entity. Such likely bias obviously would not be in the best interests of any of the co-beneficiaries.
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USING ONE’S ATTORNEY AS TRUSTEE
Using one’s own attorney would perhaps not pose a problem as long as no other unrelated beneficiaries were involved who would have separate and independent interests and financial objectives within the arrangement.
An individual trustee’s failure to charge a fee would not support the land trust’s validity in court. The attempt to charge a fee would not be seen as adequate unless the party were a bonded entity.
An attorney or law firm would most likely not be bonded as a trustee for land trusts; though his/her malpractice insurance may suffice as protection against malfeasance and/or errors and omissions.
An attorney or law firm would likely not be recognized as a bona fide trust holding institution by any court that would be challenging the integrity and purpose of a a co-beneficiary land trust title transfer.
One’s own attorney would not create a mutually trusted, unbiased third-party “escrow” entity. A biased attorney (acting in primary favor of a client) could wreak havoc in a contest involving dissention between/among beneficiaries.
USING ONE’S OWN CORPORATION
Would create a merger of title, invalidating the trust, should it be challenged in court as not being a bona fide land trust (see N.C. A.G.O. vs Russell and Dianne Barberio 2005)
A privately or closely held corporation would not charge legitimate fees and therefore would not likely be seen by the courts as a bona fide holding company, whose business it is to hold titles in trusts and charge fees commensurate with industry standards.
One’s own corporation would not be seen by a co-beneficiary as a mutually trustworthy, and wholly unbiased third-party holding (“escrow”) entity. Such a bias would not be in the best interests of co-beneficiaries. As well, using one’s own business entity would create a merger of title invalidating the land trust model.
USING AN OUTSIDE CORPORATION AS TRUSTEE
In virtually all states, any corporation used as a holding company must be either: 1) one’s own corporation (see above), 2) a chartered depository trust institution (e.g., Bank and Trust, Title and Trust, etc.) or, 3) a non-profit, charitable corporation established solely for the purpose of holding titles to real estate in trust for the benefit of its members.
The Third Party Non-Profit Corporation
A professional non-profit entity specifically and solely engaged in the holding of titles in land trusts. Fully staffed by full-time knowledgeable professionals.
A reasonable trustee fee is charged, which is well in line with industry standards is charged, enabling the creation and funding of an un-paid 3rd-party collection & disbursement entity (a free bill paying service for the benefit of members).
Cannot die (re. Probate issues), and is well backed financially to allow for careful adherence to all laws. rules and regulations relative to reporting and maintenance of a consistently good standing with the state.
Fully bonded as a trustee for title holding, beneficiary directed, 3rd party trustee nominee title-holding land trusts.
Fully recognized as a bona fide holding institution by any court that would/might be challenging the integrity and structure of the land trust or holding to adherence to statute and or standards in states wherein land trusts per se are specifically legislated and authorized
Functions a fully unbiased and unassociated third-party title holder (“escrow-type)” holding entity.
Framer35, I’m just here to help you understand how a land trust works properly. There is no reason to reinvent the wheel. The land trust is a great tool – just know what your are doing and use it properly. Good luck to you.
Da Wiz