Transfer Upon Death Clause - Promissory Note

[Zach Schwarzmiller]

Greetings - I am borrowing large sums of money from a private individual and drafting promissory notes. One thing they would like to have in the promissory note is a TOD Clause. I am not looking for legal advise, but rather an example I could model off of to put in my promissory note. In reality, the only thing we need this to do is act as an instrument that if I were to die and she were to die it goes to her daughter. Her will already states that everything goes to her daughter anyhow, and we've previously been operating without this in place, but decided that if we were both to tragically die, it's better we have this in writing than not. Thank You,

[Scott Williams]

Originally posted by @Zach Schwarzmiller:

 I have not consulted with an attorney and was not aware I may be violating any SEC laws. I've only spoken to my accountant about it for tax purposes. I am not selling any securities (at least to my knowledge so I haven't worried much about it). I am really not selling anything, just buy and hold properties.

Highly recommend that you speak with an Attorney ASAP.  My understanding is that having someone fund your Trust Deed IS selling a security per the SEC.  There are legal requirements for licensing to originate Trust Deeds  (Brokers license and/or CFL license in CA), there are requirements for the investors income / net worth relative to the size of the loan they are funding.  You are required to document how the lender was qualified to fund (net worth / income) and kept with your records. BRE requires quarterly & annual reports for the number of loans originated, number foreclosed, etc.  If the borrowed money is crossing state lines, I believe there are more rules that come into play.  More rules if the funds are for your own benefit, Usury limits if not licensed, etc. etc.  Laws seem to change constantly and are mostly getting more onerous for the loan originator.  

NOT trying to be Debbie Downer here, but I think you will be very unpleasantly surprised to learn all the requirements to be compliant.  If one of your loans goes sideways, you could end up in more trouble than you realize.  

Search "Syndication", "Blue Sky Laws" and look for posts by Bill Gulley on this site, if you want to read more. 

Scott Williams