The Equity Holding Trust^TM System

(Ama-Kya Trusts ^TM)

The Title-Holding Land Trust (often referred to as the "Illinois Land Trust") is accepted in form, substance and enforceability, throughout the U.S. This all too-often overlooked trust form is slowly but surely becoming recognized as arguably the best possible means of real property asset protection relative to legal threats to one's "ownership" and/or transfer of real estate. 

The land trust is considered unique in that a property's legal and equitable titles are vested in the trustee, rather than in the owner of record. The land trust's beneficiaries remain fully in control of the property and the actions of the trustee. As a result of this beneficiary-directed third-party trusteeship, any property so held is effectively hidden from public view, and shielded from legal actions by lawyers and creditors.

As a matter of fact, when there are multiple (unrelated) beneficiaries in the trust, the property and its title become virtually impervious to tax liens, creditor judgments, lawsuits and charging orders. In short, the message is that creditors, including the IRS, simply cannot reach a property in a co-beneficiary land trust.

Our land trust-based transfer system, the NEHTrust^TM , (Ama-Kya Trusts ^TM) is designed to replace the need for all the risky, and often even illicit, seller-carry financing schemes that abound today. The Equity Holding Trust System^TM by North American Realty is a meticulous, straight forward process of documentation that incorporates, along with the land trust: 1) an Assignment of Beneficiary Interest, 2) a Beneficiary Agreement (analogous to a partnership agreement) and 3) an Occupancy Agreement (i.e., a tenancy agreement whereby a co-beneficiary 'leases' from the trust, versus holding a title interest in the property), and 4) a Power of Attorney from a non-participating beneficiary to the party handling the management of the property.

When combined, these documents effectively afford a would­be buyer all the benefits of homeownership, including income tax deductions ... without the necessity of a transfer of title ownership. The EHT system effectively protects the "seller", as well as the second and/or third beneficiary (investor and/or resident beneficiaries) from any untoward personal or legal action by or against the other parties.

A unique feature of the land trust is that it converts the settlor's ownership of realty (real estate) to ownership of personalty (i.e., ownership of the trust, rather than of the property held by it). Therefore, since personalty is not deemed subject to partition by judgment creditors, unrelated parties holding property in this manner needn't fear the property ever becoming the subject of: a creditor judgment, lien or charging order. Neither would the property be the subject of a tax lien, any party's bankruptcy, marital dissolution or probate .... a most comforting feeling when carrying a mortgage for someone else.

Overall, the EHT gives a relinquishing party - willing to keep its existing financing in place - a quick, easy and safe method of disposing of the property, while simultaneously providing the acquiring party/ies with virtually 100% of all the benefits of ownership. The acquiring party's benefits include full mortgage interest and property tax deductions, and all the other incidents of real estate ownership. And, also, an EHT buyer needn't qualify for a new loan or make a standard "down payment," since all qualification rules and parameters are solely at the discretion of the relinquishing party ("the seller").

In so much as a property vested in a land trust has not been "sold," but instead merely (from any inquiring party's point of view) vested in an inter vivos (living) trust and leased to a successor beneficiary of the same trust ... there is no overt violation of the lender's due-on-sale (alienation) admonitions. As well, the EHT very effectively provides any would-be "seller" an excellent means of avoiding immediate capital gains taxation, and/or the unpleasantness of seller­carry schemes; an untimely or under-market sale; a short-sale (offer­and-compromise); foreclosure; or ... being forced to deal with tenants toilets and trash (maintenance costs) and negative cash flow. Also a state's withholding tax can be avoided if the trustee is a corporation (e.g., re. the sale of a personal residence in Ca.). 

Currently authorized and protected under usage regulations in all states, the land trust is either-specifically permitted, or not prohibited under any state's Statute of Uses. However, the merits of the land trust are somewhat diminished in two states - Louisiana and Tennessee. This is due to those states' non-acceptance of the Uniform Doctrine of Equitable Conversion, which doctrine does prevail in all other jurisdictions. This is to say that, in those two states a beneficiary interest in a land trust is ownership of realty versus personalty, despite an owner's relinquishment of the property's full ownership benefits to another, while still retaining full control and management. However, even in Tn. and La., the privacy and ease of transfer benefits do remain. 

In states where no specific relevant land trust legislation exists (i.e., where there is no "Land Trust Act" per se), the land trust is supported by a reliance on legal precedents established locally and in other states. This is to say that a court's finding in, say, Minnesota, would have to rely largely upon precedent case-findings in other states where land trusts are specifically authorized by precedent or statute, as in: Alabama, Florida, Georgia, Hawaii, Illinois, Indiana, North Dakota, Ohio and Virginia. 

A prime motivation for forming a simple land trust (i.e., one beneficiary only, and without the additional documents that comprise the EHT) are the benefits of privacy and anonymity of ownership. In other words, when a property's title is vested in a land trust trustee, a very effective and protective legal shield is formed, making it virtually impossible for any inquiring party to determine who the trust's beneficiaries are. This is due to the fact that the trust agreement is never placed into the public record. In fact, the deed transferring ownership to the trustee is all that is ever recorded. The trust itself never becomes a matter of public record. Furthermore, following the recording of the deed, the land trust trustee is specifically prohibited from releasing any information to any inquiring party under any circumstances (absent a court order). Information regarding the trust's management and/or the identities of its beneficiaries, including local, state and federal governments, remains wholly private.
 

More on the Due-on-Sale Clause:

The FDIRA (Federal Depository Institutions Regulation Act; or "Garn-St. Germain Law" of 1982; 12 USC 1701+3) limits the justification for foreclosure relative to a lender's due-on-sale clause (re. an "unauthorized title transfer") under certain circumstances, one of which is the vesting of a mortgaged property into an inter vivos trust (such as a land trust). As a result of that federal law, mortgagors (borrowers/property owners) cannot be prohibited from placing their real estate into a revocable, living [land] trust. Neither can they, following establishment of the trust, be prevented from leasing the property to whomever they might choose (so long as the lease is for less than 3 years and does not relate to an option to purchase). To wit: when a lessee (the tenant) in such a trust property is also given a remainder interest (i.e., becoming a successor beneficiary or remainder agent) in the same trust, that party becomes fully entitled [under IRC 163(h)4(D)] to virtually the same incidents and benefits of homeownership that he/she would have, had they financed the purchase of the property in any other manner.

It is for all of these reasons, and more, that the NARS Equity Holding Trust System emerges as a superior and most logical and protective means of conveying the benefits of real estate ownership when a seller would choose to leave the current underlying financing in place to assist an acquiring party.