What is a Title Holding Trust

7/28/2019 What is a Title Holding Trust

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What is a Title Holding Trust (Land Trust)?

The Title Holding Trust, often referred to as a land trust or Illinois Land Trust, is a simple and inexpensive method forhold

egal title to real estateor personal property. The Title Holding Trust is a fully revocable grantor trust designed and drafte

pecifically to acquire, hold, manage and ultimately dispose of real estate or personal property on a confidential or private

asis to better protect your assets.

The Title Holding Trust (Land Trust) is very similar to a regular family living trust, but has some very important legal

ifferences that provide some significant benefits and advantages. Its roots come from theIllinois Land Trustlong used to

old title to real property in the State of Illinois.

There are manyreasons for, and benefits of, acquiring and holding title to propertyin a Title Holding Trust. The most

ommon include the need or desire to acquire and hold legal title to real estate or personal property in a confidential or

rivate manner in order to keep the Beneficiary's (owner's) name out of the public records.

xeter Fiduciary Services, LLC, as Trustee of the Title Holding Trust, acquires and holds legal and equitable title to the rea

roperty or personal property pursuant to the terms of an unrecorded Title Holding Trust Agreement.

Who Can Set-up a Title Holding Trust or Land Trust?

The Title Holding Trust can be established by an individual, a group of individuals, a general partnership, a limited

artnership, another trust, another trustee or trust services provider such as an out-of-state trust company, a limited liabi

ompany, a corporation, or any other type of business entity. The person or entity that sets-up the Title Holding Trust is

alled the Trustor, Grantor or Settlor ("Trustor").

Who Serves as Trustee of the Title Holding Trust or Land Trust?

xeter Fiduciary Services, LLC is named or appointed as Trustee of the Title Holding Trust under the terms of the Title Hold

Trust Agreement. Exeter Fiduciary Services, LLC merely serves as Trustee of the Title Holding Trust and has no authority

ct without specific written authorization and direction from the Beneficiary(ies) of the trust.

Exeter Fiduciary Services, LLC

xeter Fiduciary Services, LLC is a private, professional fiduciary services provider providing specialty trust services to rea

state investors and property owners, including the Title Holding Trust (Land Trust), throughout the State of California and

heState of Florida, and is a wholly-owned subsidiary ofThe Exeter Group, LLC.

Who Owns the Title Holding Trust or Land Trust?

The Beneficiary(ies) own the Title Holding Trust. All ownership rights, often referred to as the benefits and burdens of

wnership, are retained by the Beneficiary(ies) of the Title Holding Trust. The Beneficiary(ies) retain the power of directio

ver the trust unless they choose to delegate the power of direction to another individual or entity.

Who Owns the Real Estate or Personal Property?

xeter Fiduciary Services, LLC serves as Trustee of the Title Holding Trust and owns the property under its name in its

duciary capacity as Trustee of the trust. Public records, including the County Recorders', County Assessors' and County T

Collectors' public files and records, would reflect the legal title and ownership of the real estate or personal property as

ollows:

Exeter Fiduciary Services, LLC, as Trustee for, Trust No. XX XXXX.

The Beneficiary(ies) of the Title Holding Trust is not reflected on any public record, and the Beneficiary's informatis not disclosed to any party unless authorized by the Beneficiary, the Trust Agreement, or required under law or by

ourt order.

Power of Direction

The Beneficiary(ies) retain the power of direction over the trust unless they choose to delegate the power of direction to

nother individual or entity. The Trustee merely holds legal and equitable title to the real property or personal property

ubject to the direction of the Beneficiary(ies).
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How Does the Title Holding Trust or Land Trust Work?

The Trustor enters into a standardized Title Holding Trust Agreement with Exeter Fiduciary Services, LLC. The Trustor

ppoints or names Exeter Fiduciary Services, LLC as Trustee of the trust, designates one or more Beneficiaries (owners) o

rust and can also appoint or name one or more Successor Beneficiaries under the trust. The initial Beneficiary is generall

he Trustor and the Successor Beneficiaries are generally the Trustor's children, but could be anyone designated by the

Trustor.

The Beneficiary(ies) of the Title Holding Trust retain complete control over the real estate or personal property held in the

rust. They manage the property or retain agents to manage the property on their behalf. They collect and distribute any

ncome and pay any and all expenses. They insure, develop, finance, lease or sell the real estate as they see fit.

The trust may be modified, updated or terminated at anytime. Additional real estate or personal property can be added to

rust at anytime. The Trustee executes grant deeds, promissory notes, deeds of trust, leases and otherwise deals with the

roperty held in the trust only upon specific written authorization and direction from the Beneficiary(ies) of the trust.

When title to real estate is held in a Title Holding Trust, courts have held that the beneficial interest(s) in the trust is perso

roperty. This beneficial interest includes the right to receive any income and any proceeds from the sale or mortgage of t

roperty. The Beneficiary(ies) reserve the right to live on or otherwise possess and use the real estate. Their beneficial

nterest in the trust, as personal property, can be easily assigned to another party without the need to prepare, sign, nota

nd record a grant deed.

When Should the Title Holding Trust or Land Trust be Set-up?The most effective way to take advantage of the benefits of the Title Holding Trust, especially when confidentiality or priva

f ownership is a concern, is to have the trust take title to the real estate or personal property when it is first acquired. Th

way the Beneficiary(ies) never appears on any public record. However, the Title Holding Trust can be set-up at any point

me.

What Does the Title Holding Trust or Land Trust Not Do?

Title Holding Trusts or Land Trusts provide manybenefitsto real estate investors and property owners, but they are not

esigned for, and should never be used for, getting around various statutory, regulatory or contractual (legal) requiremen

ncluding, but not limited to:

Income taxes on ordinary income such as rental income (not reporting income) Capital gain tax on the sale of property Gift taxes due from gifting property to others Property reassessments for property tax purposes Lender due on sale clauses Lender title seasoning requirements

Title Holding Trusts or Land Trusts protect real estate investors and property owners, especially through the ability to

egotiate, acquire, hold, manage and sell real or personal property in a confidential and private manner, as well as liens,

udgments and clouds against legal title to the property.

Unfortunately, individuals have used the Title Holding Trust in order to get around some of the requirements listedbove. Individuals should always consult with their legal, tax and financial advisors before entering into any

ransaction using a Title Holding Trust to ensure they are not inadvertently straying into the areas of lender fraud, ta

raud or tax evasion.

The Advantages and Benefits of Using a Title Holding Trust or Land Trust

Click hereto view our upcoming Title Holding Trust or Land Trust seminars.

The Title Holding Trust or Land Trust is a device for acquiring, holding, managing and selling real estate. It is a more

esirable and advantageous ownership structure than some of the more familiar forms of real estate ownership. Title to r
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state is held by the Trustee (Exeter Fiduciary Services, LLC) pursuant to aCalifornia Title Holding TrustorFlorida Land Tr

Agreement. However, the use and enjoyment of the property, or beneficial use, is retained by the beneficiary (owner) of t

Title Holding Trust or Land Trust.

Although the legal and equitable title to the real property is conveyed to the Trustee, the Trustee can act only upon t

written authorization and direction of the beneficiary. The typical duties which the Trustee can perform upon thewritten authorization and direction of the beneficiary include holding title to real estate, execution and delivery of

promissory notes, deeds of trust, leases, assignments of rents, and grant deeds.

n any event, the beneficiary retains complete control over, and use of, the real estate. The Title Holding Trust or LaTrust is a fully revocable grantor trust just like a regular family living trust and can be terminated, changed or updat

t any time. It is a pass-thru entity so that all revenue, expenses and depreciation are passed thru and reported on beneficiarys own income tax return. The beneficiary can add or withdraw real estate to the Title Holding Trust at a

ime. All of the rights and conveniences of real estate ownership are retained by the beneficiary without the

disadvantages of non-trust ownership.

ersonal property can also be acquired, held and sold through a Title Holding Trust for many of the same reasons that rea

state is held in the Title Holding Trust.

The reasons that you may want to use the Title Holding Trust or Land Trust to acquire, hold and dispose of real estate or

ersonal property include:

Confidentiality or Privacy of Ownership

Confidentiality and privacy of ownership is without a doubt the most important benefit of the Title Holding Trust or Land

Trust. Owners of real estate are entitled to just as much privacy as owners of stocks and bonds. Real estate ownership do

ot need to be, and should not be, a matter of public record. The Title Holding Trust or Land Trust provides an excellent

method for acquiring, holding and disposing of real estate without revealing the true owner's identity. Title is simply

ransferred to or from the Trustee upon the written authorization and direction of the beneficiary (owner).

The Title Holding Trust or Land Trust is particularly useful in landlord-tenant relationships where the landlord want

ll tenant contact to be with the property manager and does not want the tenant to be able to locate the true owner

Landlord).

Anonymity may also be desirable in real estate negotiations where knowledge of true identities might otherwise hinder or

omplicate the transaction. For example, Walt Disney acquired all of his Florida property through a Florida land trust befo

nyone knew what he had accomplished.

Legal and Equitable Title

The legal and equitable title in the property is conveyed to and held in the name of Exeter Fiduciary Services, LLC, as Trus

f the Title Holding Trust or Land Trust so that the real owners name does not appear on any public record.

Beneficial Interest is Personal Property

Although the legal and equitable title to the real estate is transferred to the Trustee, the beneficial interest in the Title HoldTrust or Land Trust is retained by the beneficiary (owner). The beneficial interest is considered to be personal property an

ot an interest in real property. This is because the beneficiary owns a beneficial interest in the Title Holding Trust or Land

Trust and not a direct interest in real property. The Trustee owns and holds the interest in the real estate. Many of the ot

enefits and advantages of the Title Holding Trust or Land Trust are due to the fact that the beneficiary's interest is

onsidered personal property and not real property.

Avoids Probate

Real estate is generally subject to probate upon the death of the owner, unless the real estate is held in joint tenancy.

However, when property is held in a trust, such as a Title Holding Trust or Land Trust, probate is not necessary to pass tit

ince the Title Holding Trust or Land Trust Agreement provides for succession of ownership upon the death of the beneficia

or example, a woman may create a Title Holding Trust or Land Trust and name herself as the beneficiary. Upon her death
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iens or judgments against a beneficiary can not affect the real estate held in a Title Holding Trust or Land Trust because t

eneficiary does not own the real estate. The beneficiary owns a beneficial interest in the Title Holding Trust or Land Trus

which is personal property rather than real property. This can be particularly important when one of the beneficiaries in a

Title Holding Trust or Land Trust may be prone to litigation, liens or judgments.

The Title Holding Trust or Land Trust protects the other beneficiaries in the same Title Holding Trust or Land Trust

rom these attachments. The real estate can still be sold if desired because the liens do not affect the title to theproperty. The liens or judgments would however attach to the beneficial interest in the Title Holding Trust or Land

Trust belonging to the beneficiary whom the liens or judgments were filed against.

Avoidance of Clouds on Title

This is a very real concern when multiple investors acquire real estate together. They may be needlessly exposing the rea

state to potential risks, liability and litigation from one or more of the owners if they hold title to the real estate in their

ndividual names or entity names (i.e. as tenants-in-common). The individual investors can be prone to untimely deaths,

ivorces, bankruptcies, litigation, settlements, judgments, liens, tax liens, and more, which will affect the legal title to the

roperty.

However, multiple investors can protect the subject real estate by acquiring and holding it in a Title Holding Trust o

Land Trust. The individual investors do not own real estate when property is held in a Title Holding Trust or Land

Trust. They own a beneficial interest in the Title Holding Trust or Land Trust, which is considered to be personal

property rather than real property. Therefore, the individual investors legal problems can not affect the real propertnd harm their fellow investors. The legal problems can only affect their individual beneficial interest in the Title

Holding Trust or Land Trust.

nvestors can protect themselves from clouds on title by using a limited partnership, limited liability company or corporatio

However, they lose the confidentiality and privacy of ownership with the formation of those entities through the Secretary

States office.

No Partition

There is always the possibility that disagreements will erupt over the management of real property whenever two or more

nvestors own real estate together. Either investor has the right to sue under a partition action when the disagreement

annot be resolved. The partition action forces the sale of the real estate and divides the proceeds between the owners.

Real estate held in a Title Holding Trust or Land Trust can not be subject to a partition action because the beneficiar

do not own the real estate. The beneficiaries own a beneficial interest in the Title Holding Trust or Land Trust, whicpersonal property as opposed to real property.

Multiple Beneficiaries (Owners)

Title Holding Trust or Land Trust is particularly helpful in conveying or transferring ownership in property when there is mo

han one beneficiary since title to the real property is held in the name of the Trustee. For example, four children may hav

nherited their parents' property. In order to facilitate the sale of the property, it can be transferred into a Title Holding Tru

r Land Trust. Thus, only the Trustee need execute the necessary transaction documents to complete a sale or refinance o

he subject real property.

No Registered Agent

A registered agent for service of process is not required for a Title Holding Trust or Land Trust unlike with a corporation or

mited liability company.

Pass-Thru Entity and Disregarded Entity

The Title Holding Trust or Land Trust is a fully revocable grantor trust, which is therefore considered a pass-thru entity and

isregarded entity. A separate Federal taxpayer identification number is not required for the Title Holding Trust or Land

Trust. There are no separate income tax returns or other filings required when property is held in a Title Holding Trust or

and Trust. Taxable transactions are reported directly on the beneficiaries own income tax returns. The assignment of a


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eneficial interest in the Title Holding Trust or Land Trust is considered a valid conveyance of title for income tax purposes

nd will also qualify for tax-deferred exchange treatment under Section 1031 of the Internal Revenue Code.

Trustee Has No Personal Liability

xeter Fiduciary Services, LLC has no personal liability when serving in its fiduciary capacity as the Trustee of a Title Holdi

Trust or Land Trust.

Cost Efficient

Title Holding Trusts are much more cost effective compared to other forms of real estate ownership. There are no annual

ling fees, no tax return preparation fees, no minimum annual taxes due, no Secretary of State filing fees and no registere

epresentative costs. There is only the annual Trustee fee.

Transactions are Private

The terms and conditions of any transaction remain confidential and private. Any recorded documents are in the name of

Trustee and are signed by the Trustee.

Saves on Title Insurance Premiums

The Trustee of the Title Holding Trust or Land Trust is the insured party and remains the same before and after any transf

eneficial interests. Therefore, there is no need to obtain costly title insurance endorsements when beneficial interests are

ransferred.

Great Negotiating Advantage

Real estate investors can acquire real property without tipping off sellers or competitors. (Walt Disney acquired all of the

n Florida through a land trust prior to construction of Disney World. This way no one was able to take advantage of Walt

Disney by inflating prices.)

Collateral for Financing

The beneficiary's interest in a Title Holding Trust or Land Trust can be used as collateral for bank loans. The benefi

nterest may be pledged as collateral without the additional need and expense of obtaining a mortgage. The benefici

nterest may be pledged as collateral even where there is an existing mortgage against the real estate.

Documents

What is a Title Holding Trust