Using A Family Trust To Hide From Due On Sale. Where's The Money?
Hi Folks,
I recently read a post from someone in this forum which was very instructional and intriguing in that said person described the chain of documents they used to transact a sub2 without alarming the bank about the change of title, and therebye avoided the Due on Sale scary.
It was something like this:
Seller deeds property to a family trust with seller as beni and investor as trustee.
Seller also signs limited POA giving investor signing rights on property related issues.
Insurance company is informed about change of deed to family trust and existence of trustee. They in turn inform the Bank. Theory is Bank thinks this is normal and is not alarmed. The Bank is also informed (how?) that all correspondence should now go to the trustee (I gotta say I find it kind of hard to believe the bank wouldn't smell something going on here).
Seller signs another doc giving up their interest in the trust and naming the trustee as sole beneficiary (what is this doc called, by the way?). Bank doesn't see this. So this is some kind of legal contract NOT recorded with the registrar.
Investor is now making payments on the property.
Question - at what point in this chain of docs does the seller get cash? Which contract in this chain contains the consideration ($$$) which is the seller's cash-out?
Pardon my ignorance. Thanks for your advices.
-presley
Not an expert but:
All this would be done at the same time with seller getting his $.
Banks are used to people transferring property into trust mainly for estate planning purposes. Trust is required to be recorded at the courthouse but the transferring of beneficial interest is not recorded. This is sort of hidden but insurance co will only pay on a claim if policy in the name of the person with the bene interest so you will have to pay for another insurance policy. Which is the only problem I see. Banks will see the change of name if you change the original policy so you need another.
the_acrobat,
I believe the document you are looking for is a Purchase/Sale Agreement. You can specify how the seller will be cashed out. You may also enter a promissory note for any unpaid amount not given at closing.
wow! lot of heavy breathing let me catch my breath. Lot of unneccery paperwork.
just have the seller deed the property into a trust you create (warrenty deed to abc trust). the warrenty deed is the only thing recorded. you or your company (perferebly a company) are the trustee.
so warrenty deed is recorded as such:ABC trust,trustee mickey mouse.
have your llc,s corp,etc... own the equitable intrest in the trust.when it comes to insurance see if the exsisting insurance can be changed to a landlord policy with the trustee of the trust as loss payee and the secoundry with the compant that holds the equitable interst of the trust. if this worry's you to much or the insurance will not change to landlord policy get a secound policy. if your worryed about the 600-1000 more per year , do better deals. im not going to let this insurance thing be a deal killer you no what i mean. think creative now say that 3 times and call me in the morning.
god bless