"Personal
Property Trusts."
By Attorney William Bronchick
If you have been reading my articles,
you are probably familiar with the concept of creating and using
land trusts for privacy and protection of your real estate.
However, what about your ownership of notes, mortgages, deeds
of trust, leases and options that may appear on public record?
What about cars, boats, mobile homes and other items that are
registered and recorded in public places? Good news . . . there
is a special trust just for that purpose!
The "Personal Property Trust" agreement
is basically the same as a land trust in that the trustee is essentially
a nominee title-holder acting at your direction. Like the land
trust, the paper trust is a revocable, living trust. The same
rules for tax reporting apply - there is no gift tax or income
tax consequence of placing title to your paper in the paper trust.
You still retain full control of your trustee, so no fiduciary
tax return is required.
Like the land trust, the primary purpose of using
the personal property trust is to keep your name off the public
records. Let's examine a few documents that are generally recorded
and how we can use them with the personal property trust:
PURCHASE OPTION
A purchase option is often recorded in the public
records to give notice to the world that you have first crack
at the property. Again, using a trust as the named "optionee"
will protect your anonymity. Furthermore, it may be an excellent
tool for confusing potential creditors; you record options a gainst
your property in favor of the name of a trust. To theoutside world,
your property looks less valuable, because, after all, who would
purchase a property subject to the recorded options (nobody but
you has to know that your are the beneficiary of the trust and
thus the "true" option holder!).
MORTGAGE OR DEED OF TRUST
One of the most practical uses of a trust is
for holding a mortgage or deed of trust. A mortgage is an asset,
like any other, that can be found by searching the public records.
Using separate trusts for each mortgage will help you keep a low
profile. As in the above example, you could record mortgages against
your properties in the name of a trust to make your property appear
encumbered. Make certain that there is at least some consideration
for the mortgage or you may be found guilty of filing a fraudulent
document.
AUTO OR MOBILE HOME
Essentially any asset that is recorded in public
records can he held in the name of a nominee-type trust. Department
of Motor Vehicle records are often public information and will
let everyone know where you live. Holding your car or mobile title
in the name of a trust with a post office box or business address
will help protect your privacy.
LLC INTEREST
The names of the members of a limited liability
company are public record for everyone to see. Consider forming
your LLC using a personal property trust as the member (you being
the beneficiary of the trust).
TRUST "STACKING"
You can combine a personal property trust with
a land trust for greater privacy. Since the beneficial interest
in a land trust is personal property, it can be held in the name
of a personal property trust. Thus, you could form a self-settled
personal property trust of which you would be the grantor and
beneficiary. The personal property trust would then create a self-settled
land trust of which it would be the grantor and beneficiary. This
"stacking" of trusts might be appropriate in states
which require the public disclosure of the grantor (HI, MS and
AZ) or in situations which an uncooperative lender or title company
insists on such disclosure in writing.
You can find information and forms for creating
personal property trusts in William Bronchick's Land
Trust course
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