A. STEP ONE: A would-be “seller” agrees (‘for any number of reasons) to place his/her property into a beneficiary-directed, title-holding trust (i.e., a trust model directly analogous to the “Illinois Land Trust”). Although the use of the title-holding trust, in our context, effectively provides the safest and most secure means of transfer of ownership interest possible, the trust itself is used for myriad other reasons as well:
- For privacy, estate planning, probate avoidance and assets protection
- To enable one to convey all tax benefits to any party in the transaction that he/she would choose…without title transfer…in order to command up to 150% higher rents, while eliminating all costs of vacancies, management and maintenance
- To avoid compromising a lender’s due-on-sale clause provisions within the underlying financing agreement relative to detrimental owner-financed transfers
- To shield the property from virtually all legal threat and potential for, say: marital dissolution disputes, creditor judgments, bankruptcy of any party to the transaction, and threats of federal and state tax liens
- To make home purchase by payment-assumption safe and simple int that the seller is so well protected while remaining primarily responsible the mortgage
- To end worry about the collection and disbursement of payments.
- To avoid the necessity of any party’s having their name on title, creating public notice of owning valuable “litigation targets”
- To make one’s your selling (or other disposition) easier, since the buyer can be so well protected while assuming payments on existing financing… without a Down (if you so choose) and without bank financing and stringent credit requirements
- To make “sandwiching” easier, since the investor in a two-tier PACTrust(tm) needn’t ever be concerned about the potential for untoward or illegal actions by, or personal problems of, the person remaining on the loan: or of the person living in the property and making the payments
- To make eviction faster and easier, in that a defaulting tenant cannot forestall foreclosure, eviction or unlawful detainer action by claiming that they hold “equity” in the property (i.e., such “equity held is in the trust, ‘not in the trust property)
- To shield the home buyer against illegal or illicit foreclosure or unlawful detainer by the non-resident beneficiary absent appropriate cause
- To allow for the collection of as high a security deposit as one might want, without the restrictions of legislation pertinent to leases (i.e., “first and last”). The EHTrust(tm) contingency fund can hold as many payments in reserve as one might wish. This is because the payments held are retained relative to ownership in the trust, rather than relative to the tenancy in the property.
- To shield the settlor or investor beneficiary from highly-biased (and often unfair) landlord/tenant regulations and rent control restrictions
B. STEP TWO: A co-beneficiary interest in the trust is assigned to a would-be buyer (YOU), a would-be real estate investor, or homeowner. This assignment is done versus there being an outright sale or transfer of the property’s legal or equitable title, and is done in order to afford the acquiring party 100%+ of ll ownership benefits, while simultaneously providing the added benefits of shielding the property from all forms of attack by creditors or dissension among beneficiaries (i.e., the property’s title is held throughout the trust term by a bona fide third-party trustee for the shielding of the property, and for the mutual benefit and protection of all involved).
C. STEP THREE: In a completely separate action, and in order for the acquiring party to gain possession and tax benefits, the acquiring party (‘now a co-beneficiary) executes a lease of the property from the trustee on a “triple-net” basis. I.e., the term “triple-net” refers to a lease that contains a contractual obligation for the lessee to cover all costs of ownership and possession, such as, say, mortgage interest, property tax, insurance and maintenance expense): thereby having provided the incoming resident beneficiary with 100% of ALL the benefits of home ownership…‘and then some:
- Full income tax write-off for mortgage interest
- Full income tax write-off for property taxes paid
- Equity build-up resulting from principal reduction in the underlying mortgage loan
- Potential for profit from appreciation in the property’s market value over time
- 100% of the property’s Use, Occupancy and Possession
- The right to sell, sublease or rent out the property (or do nothing)
- *Protection from a deflation of property value (i.e., ‘at the end of the specified trust term, should the property have lost value, the resident beneficiary is free to walk-away and pay nothing further…or negotiate for an extension of the term.without penalty.
- *Privacy of ownership: i.e., all ownership is secret, silent and unrecorded in the public record
- *A shielding of one’s property from the ravages of creditor liens, tax lines, lawsuits, bankruptcy claims, marital dissolution issues and Probate
- *The ability to buy with the least amount of up-front cost, without new mortgage financing and without compromising the existing lender’s alienation admonitions (due-on-sale clause) [See 12USC1701(j)3,Sec. 8]
WHAT HAPPENS AT TERMINATION:
In a typical EHTrust Transfer(tm), the beneficiary agreement itself provides that the resident co-beneficiary will, at termination, either refinance the property in its own name, or sell it and pay the investor all monies due to him/her from of the proceeds of such sale or other disposition. The sale price at termination is agreed in advance to be the Fair Market Value of the property at termination…MINUS any moneys owed to the acquiring party (resident beneficiary) by virtue of its beneficiary interest in the underlying land trust. The beneficiary agreement also provides that the sale price will be set at the date of the termination of the trust and the lease agreement, as is to be determined by a mutually acceptable appraisal ['any disagreement among the parties are to be settled by a full M.A.I. appraisal, which is to be ordered and paid-for by the dissenting party].