Using Land Trusts To Avoid Due On Sale Clause & Other Benefits

[Michael DiGiovanni]

Hi Everyone,

Since I don't want to leave money on the table, can someone please give me the "in a nutshell" explanation to the following questions:

1) Should I set up a revocable or irrevocable land trust on each property I plan to sell on Owner Financing or L.O?

2) How would you recommend I go about setting up the land trust?

Last, but not least, here is a basic example of what I know:

Let's say that you come across a seller who is willing to give you title to his property. The only "glitch" is that the loan is not assumable because the mortgage has a "due on sale" clause. Here's the process for getting around it:

STEP 1: Sammy Seller signs a trust agreement with you as trustee of his trust. Sammy is named as the "beneficiary" of the trust.

STEP 2: Sammy Seller transfers title to the trustee (no violation of the clause)

STEP 3: Sammy Seller quietly assigns his interest under the trust to you (similar to a transfer of stock in a corporation). This assignment is not recorded in any public record. Sammy moves out and you move in.

STEP 4: You are now the beneficiary of the trust. Your trustee makes payments to the lender.

I know I should name the trust "Current Seller Last Name Family Trust." However, since I am currently in negotiation with a seller who owns the ideal L.O. or seller financing type of deal, an answer to the following two questions would be greatly appreciated.

P.S. If you have a real estate attorney that specializes in asset protection, land trusts, and works with investors in the State of Washington, I would appreciate a referral if you feel comfortable.

Thanks!

Michael

[Nghi Le]

Trusts don't offer asset protection and tax benefits. It only offers privacy. If that is the information your investor of 35+ years told you, I would question their credibility.