Re: land trust during equity buyout


Posted by Julio Martinez-Clark on February 28, 2008 at 11:45:53:


In Reply to: land trust during equity buyout
Posted by Mitch in TX on February 28, 2008 at 11:03:44:

Mitch in TX,

Land trusts DO NOT avoid due on sale clauses. A land trust is used to "disguise" the transfer of the interest in the property from one beneficiary to another. A land trust is used by "creative real estate community" to make the world believe that the current homeowner has transfered interest in the property to a trust for asset protection and estate planning purposes when in fact he/she has transfered the underlaying beneficial interest in the trust to someone else. Technically speaking the signing away of the beneficial interest in the trust triggers the due on sale clause (read any mortgage agreement and you will find this to be true). The fact that the lender turns its attention to this fact (because as long as the payments come in, the lender doesn't really care who makes them) and doesn't call the loan due doesn't mean that the due-on-sale has not been triggered.

Be aware that some states have banned the Land Trust strategy that you are proposing and some other states are in plans to do so.

Julio Martinez-Clark


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