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The Careful Feeding and Handling of Lawyers...When Using Equity Holding Trust
| | Wednesday, December 04, 2002 @ 05:00 AM EST
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Contributed by: Derrick Ali
Derrick Ali Properties
Read more archived articles about Law and Legal Issues
How to Overcome A Lawyer’s Objection to Using an Equity Holding Land Trust?
It has been my personal experience, that when you place an Equity Holding land trust deal in front of a so-called real estate Attorney who
then advises a client not to pursue PACTrust/NEHTrust because he claims to be very savvy on all types of trusts including specifically land trusts and called it a ‘California scam or sumthin…’
Here’s some of what you might encounter when these legally ‘warped’ professional-types try to put the “I’ve got plenty-o-Initials in front of and behind My Name” to you as follows:
For Example: the Godlike Lawyer says-- “Any time there are 3 (or more) beneficiaries in a trust, what is to prevent 2 of the beneficiaries from "ganging up" on the 1 Settlor Owner and "taking the property away?"
REPLY: Our agreement thoroughly documents to prevent such things and safeguard everyone involved in the Equity Hold Transaction. ---If the Book Head wants proof tell him to sit down and so that you and he can draft the agreement right there!!!
Crown Prince of the PAC/NEH Trust BILL GATTEN says: In a PAC/or NEH land trust, the property is not owned by any beneficiary...it is owned, legally and equitably, by the trustee and only the trustee can perform actions relative to alterations in the original agreement or sign for the trust: and that trustee is bound by contract and by law to respond only to unanimous direction from all beneficiaries. No one or two beneficiaries can cause the trustee to do anything or sign anything, or take any action what so ever, unless ALL are in accord (i.e., all directions to, and control over, the trustee must be express, and must be delivered by certified mail and executed by all parties)
2) If the Lawyer is still uneasy about granting title to an unknown, unrelated trustee. Or either not convinced about that the Trustee doesn’t have any power to do so in a ‘Beneficiary Directed Land Trust’, BILL G says this:
In a PAC/or NEH land trust, the property is not owned by any beneficiary...it is owned, legally and equitably, by the trustee and only the trustee can perform actions relative to alterations in the original agreement or sign for the trust: and that trustee is bound by contract and by law to respond only to unanimous direction from all beneficiaries. No one or two beneficiaries can cause the trustee to do anything or sign anything, or take any action what so ever, unless ALL are in accord (i.e., all directions to, and control over, the trustee must be express, and must be delivered by certified mail and executed by all parties)
3) If the Lawyer recommends that the Trustee be the Settlor (Owner) or a trusted family member then REPLY:
The RISK you run by nominating an individual person say yourself, a friend or a family member is that we all can (and will) die at which point the entire property winds up in the nasty expensive tangle of Probate Court.
NARS and I wholeheartedly recommend using a: Bank and Trust Co., Title and Trust co., one's own Corporation, or a Non-Profit Corporation ‘acting for its members”...and the more "foreign (out of state)," the better, should a law suit arise (such as the case any property transaction (Trust or No Trust.) By using the PAC/NEHT Trustee there is an automatic substitution of Trustee in the event of the demise of a nominated Trustee company, similarly as if a Title Company holding accounts in escrow were to go out of business.
Anytime a private Trustee for a land trust, is hauled into court and challenged, the transaction would more than likely be seen as no more than a disguised security agreement or equitable mortgage, and the trust structure itself would likely fail...becoming a "dry" or "failed" grantor trust without any protections or benefits to a resident co-beneficiary at all.
Furthermore, an individual (you, your friend or a family member) wouldn't have the slightest idea what to say if your legal rights were challenged in the event of a battering by some attorney dead set on breaking through the trust...
4) If the Attorney still balks or remains convinced that this "independent and unrelated" 3rd Party Corporate Trustee “...has to be getting something out of all this!” and further claims that: “The Trustee must be using his/her/their position as title holder of all these assets as leverage(eventually or possibly against the Settlor(Owner)?”
BILL G says: Ask him if he thinks a title company in a trust deed state uses its naked title as leverage. The trustee in a bona fide PAC or NEHT land trust holds only naked title...without power to do anything with it, much less show it as an asset on its financial statement...titles without direct power of sale have no asset basis, and are without any monetary value what-so-ever as far as the trustee is concerned. What it gets out of holding title is a monthly fee and an initial one time set-up (acceptance) fee, and a modest reconveyance fee at termination.
In Conclusion:
I'd theorize that most Attorneys simply aren’t very well qualified to critique the nuiasances of a PAC or NEHT land trust! Why you might ask? Contrary to the above questions which 99% (or higher) your run of the mill real estate & trust Attorneys don’t know a land trust from a hole in their posterior.
As a serious investor and smart shopper for investment property—I’d recommend that you do the same in you hunt for a qualified Attorney / CPA (or any professional) to know for sure that the information you are paying them for is as certain as a Doctor’s diagnosis for cancer treatment or neuro-surgery. And not a personal ‘defensive’ opinion.
Should you need assistance with setting up your Trust deal and or direction/guidance relating to the PAC or Equity Holding Trust please feel free to contact myself or post your questions by going to: www.LandTrust.net link for the Discussion message board.
All the Best,
Derrick Ali
Note: Derrick Ali is Director and Chairman of Consumer Mortgage Loan Advocates. He is the author of The Quick Start Real Estate Investing Guide. Derrick specializes in Land Trust Transaction Engineering for Equity Holding Trusts(tm) and/or PACTrusts (tm)
methods. You can also hire him to consult you on the set up of these Land Trusts for you.
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