Since my name was tossed around pretty good in this thread, and since I’m holding a free 3-day workshop in Dallas (free to REIC Members) within next few weeks (toward the end of October) for the REI clubs there, I guess I ought to respond to the teensy-weensy bit derogatory post by “Charles.”
No offense “Charles (and I mean that sincerely…my response was requested by the owner of the site under the circumstances),” but there in fact may be some true misunderstandings on your part that I might be able to clear up.
First off, for some good information on the Texas Land Trust, go to
http://www.woodrecords.com/law/Page_6.
A good and well documented article by Atty Bryan Dunklin re. “The Texas Land Trust.”
Next, review the following, if you’d be so kind:
TEXAS LAND TRUST LEGISLATION: As is the case in 41 other states where land trusts flourish, but wherein they function by authority or under the fiction of law, there is no specific land trust legislative land trust authority in Texas. Do note, however, that the Texas land trust is fully acceptable, legal and functional at least partially by virtue of:
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Its exclusion from prohibitions within Texas trust and land use regulations. See V.C.T.A. §112.031 and §112.032. See also Gurley v. Linsley, 459 F.2d 268 (5th Cir 1972); A Device for Texas Land Development: The Illinois Land Trust, 10 Houston Law Revue 692 (1973)
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Its conformity to Texas inter vivos trust regulations in general (a land trust is merely an inter vivos trust wherein the power of direction and management is vested in the beneficiaries versus the trust, and wherein both the legal title and equitable interest in the trust corpus is vested in the trustee.
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By virtue of Texas’ recognition of the doctrines of merger and equitable conversion, and by virtue of the protection of co-beneficial interest against partition actions and charging orders by judgment creditors (including the IRS), the land trust becomes a much preferred asset protection vehicle when compared to the LLC, Partnership or Corporation.
Deviations/Variations/ Nuances Re. Land Trusts in Texas: The land trust trustee nominee need retain the affirmative function of actively dealing with matters of the property and its title, in order to avoid characterization as a passive or dry (or “failed”) trust under regulations with the Texas Statute of Uses.
Oh and one other thing…(re. seeing only one DOSC call in 17 years) I currently have 8 or 9 such foreclosure letters in my file and stories of another dozen or) where lender’s have in fact and indeed foreclosed on properties strictly because they ‘could,’ under their alienation (DOSC) provision. As a matter of fact, I currently have three such letters in my hold box right now wherein Countrywide Funding and Washington Mutual foreclosed on Equity Holding Trust properties (1 PAC and 2 NEHTs), and then backed off when my letter pointed out that resident beneficiary whom they presumed to be an owner had neither an equitable or legal title to the property, and was only a triple-net tenant leasing from a land trust in which the property was vested.
In one case a CW official responded with something like: Oh yeah? Well…then…that’s still an unapproved transfer. My response to them was, “Show me the word “unapproved” in Title 12 of the US Code, which clearly allows me to place a mortgaged property in a trust and lease it to anyone I want to and name anyone I choose to be my remainder agent or co-beneficiary without a DOSC violation. No response was forthcoming (seven months now).
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Also…concerning the comments about the use of the ‘Equity Holding Trust Transfer System (the PACTrust or the NEHTrust)’ being a waste of time and money: Each of these devices (the former, a two beneficiary trust and the latter a three beneficiary trust) is designed to do all of the following. If someone has a better plan that does not involve transfer of title and foreclosure headaches due to the risk of “equity” claim to thwart eviction and force foreclosure, let me know.
The EHT allows for:
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Transfer full ownership benefits safely, including tax benefits…without title transfer to the buyer (IRC 163(h)4(D)
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Acquisition (or sale) of property of all types safely without cash or credit qualifying…or title transfer
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Effective shielding one’s property from creditor claims or judgments, including IRS liens
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“Sale or trade (note quotation marks)” of income tax benefits to tenants in order to leverage higher rents while greatly reducing the tenant’s after-tax rental costs
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For taking or allowing loan-payment take over without a due-on-sale clause compromise
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Transferring real estate ownership benefits with one brief document, without escrow, title or lender involvement
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Structuring equity-shares and all forms of subject-to financing safely and effectively without title transfer or due-on-sale trigger
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Structuring lease options without potential for an “Equity" claim to forestall or thwart eviction and force a protracted foreclosure process
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Structuring and forming “creative financing” safely without threat of untoward or illegal actions by either party (i.e., duplicate the object of wraps, CFDs, Option, Equity Shares and all Subject to’s without their risks and downsides).
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Putting sellers at ease who would never trust creative financing or investors otherwise (no title transfer to the unknown quantity)
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Structuring partnerships without cost or standard paper work, or income tax reporting obligations
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Hiding real property ownership from ALL prying eyes.
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Avoiding reassessment and property tax increases when transferring RE ownership
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Avoiding reconveyance (transfer) fees when transferring RE ownership
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Converting realty to personalty, while still qualifying for 1031 Real Estate Tax LIKE-KIND Tax Deferred Exchange exemption
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Avoiding “real property dealer status” when acquiring numerous properties
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Delaying Capital Gains tax on a sale for years while leaving IRC Sec. 1031 exchange benefits (and/or 121 exclusions) fully in place
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Structuring residential leases with full income tax benefits to the tenant
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Structuring safe Lease Options with full income tax benefits to the tenant
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Maintaining complete privacy and anonymity of ownership with all RE holdings
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Avoiding a property’s involvement in Probate upon the death of the property owner
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Maintaining maximum simplicity of multiple property ownership (i.e., only one party need sign all documents irrespective of the number of beneficiaries)
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Eliminating or effective quash dissention and disagreements among participants
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Simplifying tax-free Gifting
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Avoiding public disclosure of acquisition costs and sales prices
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Avoiding the threat of partition by a dissident member during dissolution of a partnership or a marriage
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Avoiding the necessity of obtaining new title insurance when ownership benefits are transferred
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Avoiding or circumventing many restrictive Real Estate Brokerage Laws (a seller can cancel a listing and dispose of the property without selling it…place it in a land trust and lease it out instead: the parties get the benefits of a sale without there being one, or a need to honor a failing listing agreement).
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Eliminating RE related threats of spousal claims and sabotage in marital disputes
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Acquiring foreclosed-upon properties with simplicity, without bank involvement and without subterfuge or risk of claims of unconscionable advantage)
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Avoiding seasoning issues and double-escrows with Flips and Assignments
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“Condominiumizing” small apartment buildings (1-10+ units) without refurbishment, extra expense or special permits
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Structuring time-shares, simply and safely—among the trust’s beneficiaries
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Handling foreclosure-bailouts (leaving the borrower in the property) and acquisitions without violation of Civil Code Regs. (such as California’s §§1695 and 2045)
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Making BIG money fast, ethically and safely with tenant/buyers who may have minimal cash and marginal to poor credit (a larger contigency fund easily buffers the credit history, when simple eviction recourse is assured)
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Effectively and comfortably managing out-of-area or out-of state income property without management, maintenance, negative cash flow or personal involvement
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Acquiring or sell over-encumbered and over-leveraged property for big profits
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Holding ownership in, and live in, your home for years and still qualify for 1st-time homebuyer loan
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Sailing through lightening-fast closings with or without Escrow
Enhance your credit strength and financial leverage by not showing an income property inventory on the mortgage app. (trusts show under “stocks and bonds”)
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Acquiring and holding ownership benefits, income and profits in your Self-Directed Roth IRA while earning unlimited amounts…TAX FREE.
Bill Gatten