Setting up a Trust for Subject to?

I have heard that having a trust is a good way to avoid the DOSC in a sub to deal…
How dose one set it up? Attorney I assume? What are general costs? What negatives are there in holding a sub to in a trust?

Thanks Joe

Setting up a trust is rather simple, once you have a document that is satisfactory. It is mostly paperwork…in a trust you will need a grantor, beneficiary, and a trustee. There are many resources on line to learn about this and for sample documents. In addition to the trust, one will need a quit claim deed to deed the property into the trust and make certain the new deed is recorded into the property records in the county where the property is located.

You also would want to consider looking into obtaining a tax ID number specific to the trust for many reasons including establishing a checking account to manage the cash flow of the property as well as expenses whereby your personal SSN will not be attached (protecting property from ambulance chasers who like to sue and attach personal assets). One could open a bank account in the name of trust without attaching a personal SSN, however, if you do give the personal SSN, the bank’s charter will most likely say any personal liens/levies/judgments would not subject the trust account’s assets to those claims.

One does not need an attorney to establish a trust for your house, land, business, or any other type of trust if you are, in fact, informed. If, however, you were to use an attorney, one would need to shop as they typically charge thousands of dollars for a trust…last trust I was quoted by a law firm was a simple trust at $2500 including a specific power of attorney…that is money ONLY well spent if one does not know what they are doing!!

I see no negatives in using a trust to hold a ‘subject to’ deal…only positives. Although tax returns are not required for a specific trust (according to many private letter rulings), one must be informed about how to use trusts and use them for the right purposes to protect and insulate the assets in the trust (ie: the house with existing financing), and do your taxes according to your usual methods from funds which are earned as income out of the trust (this is not tax advice…merely entertainment).

Lastly, one might consider that a trust, with the only asset being a house with ‘subject to’ financing in the trust, can be sold and financed as a “trust sale” with private financing…think that through carefully and be well informed prior to your actions.

Hope this helps.

Rob in Atlanta

can you explain that last statement? what is a trust sale and is there any benefit? thanx

Perhaps consider a trust, which is a separate and distinct entity, with its own tax ID #, and the only asset held by the trust is the subject property that one purchases ‘subject to’ the existing financing.

Then consider a private contract with terms where the trust is sold to a third party, again in review, where the only asset in the trust is the subject property.

Hope this helps.