How Deed-To-Trust™ Works

The Deed-To-Trust™ Program is a time-tested and proven transfer style wherein beneficiary interest in a Title-Holding Trust is conveyed, rather than a conveyance of the property’s title:

Quick Review:

The Deed-To-Trust™ Program with two or more beneficiaries is designed as a private and silent transfer of real property ownership benefits from one party to another. When used in conjunction with an Assignment of Beneficiary Interest and a Triple-Net Occupancy Agreement, home ownership benefits derived by an acquiring party are directly analogous to title ownership, but with effective asset protection in-rem (i.e., actions against the real estate vs. against the person (“in personam”).

What this means is, real estate, or “Realty” is converted to personal property, or “Personalty”, effectively making real estate held in a properly prepared and compliant title-holding trust immune from untoward legal actions involving divisions of property; i.e., law suits, garnishments,  judgements, future tax liens and the necessity of judicial foreclosure, in that the “resident beneficiary” (i.e., the “tenant / buyer”) does not have equitable interest in real estate, but rather, a beneficiary interest in the trust.

An Ownership Transfer From Property Owner → To Investor → To Buyer While Conserving All Fee-Simple Rights of Ownership For All Parties:

  For three and a half decades, Deed-To-Trust™ has functioned flawlessly as a wholly legitimate and practical means for transferring the benefits of Fee-Simple real estate ownership, and is based upon the centuries old Land Trust, which came to be known in the US in the late 1800’s as the “Chicago Title Illinois Land Trust”. The structure of this trust — where the Beneficiaries share Power of Direction and use a Professional, Non-Profit 3rd Party Trustee — serves effectively to shield real estate ownership from public view in that only the deed to the 3rd-party nominee (the Trustee) is recorded in the public record, while only the unrecorded, privately held trust document contains the identities of the trust’s beneficiaries, and which document remains unavailable to any inquiring party, absent a full court order and official deposition.

♦  In the Deed-To-Trust™ Program, legal title – but NOT equitable interest – to the real estate is temporarily vested in a 3rd Party, Licensed and Bonded, Non-Profit Corporate Trustee.

♦  The structure behind the Deed-To-Trust™Program has been in wide use and is accepted in all US 50 States. In Louisiana, however, beneficiary-interest in any real estate holding device is perceived as Use in, and Ownership of Real Estate vs. Personal Property (i.e., thereby necessitating Foreclosure, versus Eviction, for the removal of a defaulting resident-beneficiary). 

♦  The temporary transfer of a property’s title to an inter-vivos trust does not violate any lender’s alienation (“due-on-sale”) admonitions (see 12USC1701j-3).

♦  Deed-To-Trust™ does not compromise any provision of the Wall Street Consumer Financial Protection Act (“Dodd-Frank”) regarding Seller-Financing. This is despite the fact that virtually 100% of all benefits of fee-simple ownership are being conferred upon the acquiring party (i.e., ‘without a title transfer to, or formal loan-assumption by that party).

Application of Deed-To-Trust™

The objective of this technique is for an owner of real estate to ethically and legally impart ownership and/or investment benefits to one or more acquiring parties, without the necessity of new mortgage financing or any particular bank-imposed credit requirements or restrictions. Deed-To-Trust™ allows owners,  investors and full payout lease-tenants to quickly and safely benefit from the Fee-Simple benefits of real estate ownership (including tax deductions) merely by being named as bonafide co-beneficiaries with specific duties in a carefully documented and properly executed real estate trust arrangement.

Please note: Deed-To-Trust™ does not violate any mortgage lender’s due-on-sale admonitions (re. 12USC1701-J-3); nor does it compromise any facet of the Dodd-Frank, Wall Street Consumer Financial Protection Act.   The reason for the program’s avoidance of such governmental regulations lies in the fact that, even though all ownership benefits are passed from a qualified owner to an acquiring party, the structure of the Trust does not involve the sale, purchase or mortgage financing of real estate.  Neither does the documentation involve an option to buy real estate; or any extension of credit.  There is no involvement with any section within the Federal Truth-in-Lending Act (TILA); the Homeowners Equity Protection Act (HOEPA); the Real Estate Settlement Procedures Act (RESPA; or the Fair Credit Reporting Act (FCRA).

The entire system, despite all of its features, benefits and advantages is essentially no more than the lease of a property from a trust, not wholly unlike leasing a property from a corporation, except that letting of the property by a corporation cannot provide income tax benefits, immunity from federal regulations, safety, acceptability or convenience of transfer.

Deed-To-Trust™ From Start to Finish

Deed-To-Trust™ includes two or more participating beneficiaries and an appointed corporate trustee that holds the property’s legal and equitable title for a stipulated term, following which the arrangement is terminated and the property is deeded to whomever the beneficiaries designate as the new owner.

♦  The Settlor Beneficiary: The owner of record (the Non-Resident primary Beneficiary).

♦  An Investor Co-Beneficiary: A party acquiring interest in the trust for investment purposes (a secondary Non-Resident Beneficiary).

♦  A Resident Co-Beneficiary:  A party appointed by the trust’s existing beneficiaries, who will live in the property under a triple-net occupancy (lease) arrangement, and be responsible for the property’s maintenance and expenses (principal, interest, insurance, property tax, association dues, upkeep and repairs).

♦  The Trustee Nominee: The title-holding entity that is a bona fide non-profit, charitable 501c third-party corporation, acting solely for the benefit of its members (which members are the beneficiaries of all trusts held by the trustee).

      In Deed-To-Trust™ the property owner of record, acting as the trust’s “Grantor” or “Settlor” and primary beneficiary, may, with regard to their property, do one of two things:

      1.  The owner (“grantor” or “settlor”) may appoint a Resident Co-Beneficiary in the trust who, in exchange for all rights, privileges and benefit of real property ownership, will occupy the property, being given from ten to ninety-percent (10%-90%) of the trust’s overall beneficiary interest. It is this percentage of beneficial ownership in the trust that serves to determine each beneficiary’s proportionate share of net profits to be gained at the trust’s termination, upon disposition of the property (i.e. by sale or re-finance).

      OR…

      2.  The property’s owner-of-record (as the trust’s Settlor) may appoint an investor as a co-beneficiary, to be referred-to as the transaction’s Investor Co-beneficiary. This party agrees to accept all responsibilities for the property’s payment, taxes, insurance, etc., but then appoints a third person as the trust’s Resident Beneficiary, who, in exchange for all rights, privileges and benefit of homeownership, agrees to live in, and assume all responsibilities of the trust property: being thereupon granted a percentage of the trust’s beneficiary interest (i.e., from ten to ninety-percent), which percentage becomes that party’s stipulated share of net profits to be earned upon the trust’s termination and disposition of the property (i.e. following sale or re-finance).

      What Happens at Inception:

      1.  An owner’s property is vested in (deeded-to) a fully licensed and bonded third-party corporate trustee, whereby the owner of record becomes the sole-director of the trust with full power of direction of the actions of the trustee, and all responsibility for the property’s management maintenance and ultimate disposition.

      2.  An Investor-Co-Beneficiary (an acquiring party) is assigned a beneficial interest in the trust (from 10% to 90% of such interest).

      3.  A Resident Co-Beneficiary (a party who will live in the property, covering all costs) is assigned a 3rd beneficial interest in the trust (i.e., in any percentage the Investor Beneficiary would choose to relinquish).

      4.  A Beneficiary Agreement (analogous to a Partnership Agreement) is executed by and between all parties, identifying each beneficiary’s rights, privileges and responsibilities.

      5.  The property is then leased to the Resident Co-Beneficiary by means of a Triple-Net, All-Inclusive Occupancy Agreement), whose payment obligations include: mortgage-principle and interest, maintenance, and pertinent property taxes and insurance premiums and HOA dues, if applicable.

      6.  All payments and disbursements, and payment-record-keeping responsibility is turned over to a bonded collection service that is provided and funded without charge by the trustee entity.

      What Happens at Termination:

      No less than six-months prior to the trust’s scheduled termination date, the Resident Beneficiary (#3) is given the first right purchase the trust property at its then Fair Market Value, minus any moneys owed to that party by the Trust at the time of purchase

      The Investor Beneficiary (#2) has the second right to purchase the property under than same parameters as the first.

      The third right to purchase goes to the First Beneficiary (#1) who needs but take the property back and place it on the market for sale, or deal with it in any other manner they might choose.

      When the property is sold on the open market or purchased by a trust beneficiary:

      1.  First all encumbrances are retired (paid-off)

      2.  Then all costs of re-marketing and sale (or other disposition) are covered (e.g., escrow, title, commissions, etc.)

      3.  Next, each beneficiary receives a refund of any initial non-recurring expenditures having been paid-in at the trust’s inception.

      4.  And at the end, all net proceeds from the sale are distributed to each beneficiary in proportion to his/her respective percentage of beneficiary interest having been held in the trust.

      Ownership Rights and Benefits

      In this unique process, the Home Ownership Benefits that accrue to the Resident Beneficiary include:

      1.  Unimpaired Land Use

      2.  Full Use Occupancy of the Property

      3.  Quiet Enjoyment

      4.  Income Tax Deductibility (Mortgage Interest and Property Tax)

      5.  Economic Appreciation Potential

      6.  Equity Build-Up from mortgage principal reduction

      7.  The right to let or sublet (i.e. lease or sublease) or to vacate the property at the trust’s termination (or sooner if all parties are in agreement).

      8.  Perhaps most importantly, Pride of Ownership.

      More amazing advantages of the Deed-To-Trust™: While virtually 100% of all benefits of real estate ownership are being passed from an owner of record to another party, the transfer does not constitute any of the following:

      1.  A sale of the real estate

      2.  A purchase of the real estate

      3.  Creation of a mortgage or extension  of credit

      4.  An option to buy and a reduced or adjusted price

      5.  An Executory Contract

      6.  A contingency sale of the real estate

      7.  A disguised security agreement, or equitable mortgage

      8.  A partnership, corporation or business trust

      Compatibility With Federal Regulations and Admonitions:

      Deed-To-Trust™ is wholly compatible with all existing regulations that would/could otherwise negatively affect, or be otherwise regarded as being opposed to, “Seller-Financing.” This to say that, although the benefits are the same or superior to a standard deed transfer, the Deed-To-Trust™ transfer does not constitute a violation of any lender’s due-on-sale admonitions (See FDIRA 12USC1701j-3): Nor is there a compromise of  Dodd-Frank Wall Street Reform and Consumer Protection Legislation.

      Bulletproof Your Portfolio With Deed-To-Trust™.