assignment of beneficial interest in a land trust

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Assignment and Transfer of Beneficial Interest In A Land Trust

I took your course some years back.  All the names below are just examples.  What goes in the ????? area?

ASSIGNMENT AND TRANSFER OF BENEFICIAL INTEREST IN LAND TRUST

Joseph A. Seller, the undersigned, being the owner(s) of 100% of the beneficial interest in a Land Trust created pursuant to a Trust Agreement dated December 18, 2019 and known as Palm Trust which names Marcos Helper as the Trustee, hereby assign, transfer, and convey 100%  of our interest of the beneficial interest in said Land Trust over and unto Dream Properties LLC., and hereafter, subject Land Trust and _____????????_____________shall be entitled to all of the rights of the beneficial owner and shall be required to perform all of the duties and meet all of the obligations of the beneficial owner of said Land Trust.

It is also acknowledged that the power of direction is held as follows:

Joseph A. Seller   –                       100%

Hereafter the power of direction shall be held as follows:

Dream Properties LLC.   –   100%

Dated this 18th day of December, 2019.

____________________________

Joseph A. Seller, Beneficiary

Marcos Helper, Trustee

ACCEPTANCE OF ASSIGNMENT

The undersigned, Marcos Helper, hereby accepts the above assignment, and agrees to be bound by the terms, covenants and conditions of said Trust Agreement.

Dated this 18th day of December, 2019

__________??????????______________________

THIS DOCUMENT IS NOT REQUIRED TO BE RECORDED IN ANY COUNTY RECORDER’S OFFICE

Joe, the first blank is for the name of the new beneficiary

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Q&A: Lender Considerations In Perfecting Security Interests in Illinois Land Trusts

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Q:  What steps should a lender take to properly perfect lender’s security interest where the collateral for the loan is held in an Illinois land trust?

A:  In order to properly perfect a lender’s security interest in collateral held in an Illinois land trust, a lender should take a “collateral assignment” of the beneficial interest in the land trust (“ABI”). Since the beneficial interest in an Illinois land trust is personal property, the Illinois Uniform Commercial Code (“UCC”), 810 ILCS 5/9-314, provides that a security interest in the beneficial interest in an Illinois land trust may be perfected by control of the collateral pursuant to 810 ILCS 5/9-107.1, which control is accomplished by service of a Notice of Collateral Assignment on the land trustee and obtaining a written receipt from the land trustee. Many trustees of Illinois land trusts have a standard form for lender’s use in securing the collateral assignment of the beneficial interest in the land trust, and the land trustee will sign the completed collateral assignment form to acknowledge lender’s collateral assignment of the beneficial interest in the land trust.

Q: Should a lender file a UCC-1 financing statement to perfect its security interest in an ABI?

A: 810 ILCS 5/9-312 provides that perfection of a security interest in an ABI may be perfected by filing a UCC-1 financing statement, but filing a UCC-1 financing statement is not necessary to perfect a security interest in a collateral assignment of a beneficial interest in a land trust. Although 810 ILCS 5/9-312 does not require a lender to file a UCC-1 financing statement in order to perfect the lender’s security interest in the beneficial interest in an Illinois land trust, by filing a UCC-1 financing statement, a lender puts third parties on notice of lender’s security interest and better protects lender’s security interest against other parties which may claim a security interest down the road.

Q: What is the benefit of having a collateral assignment?

A:   With a collateral assignment in place, the trustee of the land trust is not able to transfer title to the property held in the land trust or otherwise mortgage or encumber the property held in the land trust without the written consent of lender, as collateral assignee.

In addition, the Illinois Mortgage Foreclosure Law (“IMFL”), 735 ILCS 5/15-1106(a)(3) provides that any collateral ABI may be foreclosed under the provisions of the IMFL; and 735 ILCS 5/15-1106(b) provides that a secured party under Article 9 of the UCC may elect to enforce its security interest in a foreclosure under the IMFL if the security interest was created by a collateral assignment of a beneficial interest in a land trust.

Q: What can a lender do to enhance security?

A:  As belt and suspenders, lenders should also require the land trustee to execute and deliver an original signed and notarized mortgage to be recorded against the real property in the county where the real property is located in order to put third parties on notice of lender’s security interest and to allow lender to foreclose out any subsequent liens on the real property.

This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

Locations in Illinois & Wisconsin

Chicago : 216 S Jefferson St, Suite 303, Chicago, IL 60661 • (312) 382-1600

Milwaukee: 250 E. Wisconsin Avenue, Suite 1800, Milwaukee, WI 53202 • (414) 276-4080

Pleasant Prairie: 10411 Corporate Dr, Pleasant Prairie, WI 53158 • (262) 857-1600

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Land trust with assignment of beneficial Interests

• protects your privacy, avoids probate court costs after death,
• names beneficiaries and a trustee to uphold any income allocation to the beneficiaries as needed,
• transferable to new beneficiaries easily, without having public record,
• facilitates multiple ownerships for clear and easy division, and, helps you retain seniors’ exemptions.

More about Land Trusts:

• Why should I get a land trust for my estate?    
• How is having a land trust easier than just having a will?  

Table of Contents

When can i set up a land trust.

In most cases with multiple heirs, one or more of the heirs waives their rights to the property to avoid a disagreement. It is unfair that one of your children pays for the upkeep, taxes and other expenses associated with the property. Then when the property is sold, all your children expect to share the proceeds evenly. This usually makes tax payments go unpaid, and homes go into disrepair.

What are the benefits of doing a Land Trust?

Probate costs can range from several thousands of dollars to tens of thousands of dollars! It’s unfair to have one of your children pay this cost upfront, and then evenly divide the estate in it’s entirety. These types of disagreements can really split up family. With a trust, the trustee is obligated to distribute the proceeds from a sale evenly eliminating probate court costs.

There are a lot of benefits to having a land trust. One is anonymity. A lot of debt collectors and other interested parties such as business organizations interested in collecting on loans from a business etc. Cannot see who are the beneficiaries to the trust. It is not public information. Another reason is that after you pass, your heirs or beneficiaries will have to go through probate which is costly, from thousands to tens of thousands of dollars, and have waiting time during that process. With a land trust, your home is already transferred to them as owners upon your death, where they will avoid that costly probate process.

There is a trustee named, to carry out the details in the trust, and disburse assets along with other duties, and there are heirs which are further responsible for the property itself.

Debts are usually assigned to a person, an entity or placed as a lien or judgments on a home. No, debts are not usually assigned to land trusts, but some judgements can name the beneficiaries of a person as the parties being sued.

Other Services Related to Wills & Probate

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Victor has been doing real estate transactions as a lawyer since 2002 & as an investor himself since 2003. There are a lot of nuances with real estate & we hope that if you have any questions to contact us during regular business hours. Along with being a Real Estate Attorney, Victor is also a Real Estate Broker, making his expertise long standing & efficient.  

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Document Updates: IL Security Assignment of Beneficial Interest in Land Trust (Cx4936)

As previously announced, FHLMC published Bulletin 2017-28 announcing new guidance concerning land trusts (see https://compliance.docutech.com/2017/12/15/compliance-news-fhlmc-bulletin-2017-28-updates-land-trusts-texas-home-equity-loans/ ). Among these changes included ones permitting lenders to use FHLMC Form 50 as a collateral assignment for land trust mortgages. We created this form and have assigned it to print for loans which will be sold to FHLMC, while still retaining our generic “IL Security Assignment of Beneficial Interest in Land Trust” (Cx4936) for use with loans not sold to FHLMC (see https://compliance.docutech.com/2018/03/19/new-document-il-collateral-assignment-of-beneficial-interest-in-land-trust-cx22151/ for details).

Because it is possible for clients to not know for sure at closing whether their loan will be sold to FHLMC, Cx4936 may still be used for loans which ultimately are sold to FHLMC. If Form 50 is not used, FHLMC does require a collateral assignment to contain the following elements:

“Each beneficiary of the Land Trust who is a Borrower must execute a Collateral Assignment under which the beneficiary:

• Grants the lender named in the Security Instrument and the Note and the lender’s successors and assigns (the ‘Lender’) a security interest in all of the beneficiary’s rights, title, powers and interest in, under and to the Land Trust, the property held in the Land Trust (including any rights to earnings or proceeds from that property), and the Land Trust agreement (including any powers of direction or control over the trustee of the Land Trust or the property) (collectively, the ‘Collateral’);
• Certifies that no prior security interest in the Collateral has been granted;
• Agrees not to make any further assignment or take any other action by which all or any part of the Collateral is transferred in any way without the written approval of the Lender; and
• Agrees that the Collateral Assignment is for collateral security only, that no liability under the Land Trust agreement accrues to the Lender by virtue of the Collateral Assignment, and that signing the Collateral Agreement does not relieve the beneficiary of any responsibility or liability under the Land Trust agreement.” (FHLMC Single-Family Seller/Servicer Guide ch. 5103.7[b][ii][A])

To meet these elements, we will be modifying Cx4936 in the following ways:

• Because the trustee of the land trust is not required to sign the promissory note under FHLMC requirements, we will be revising the recitals to the document to only reference the beneficiary(ies) as being the signatories to the promissory note, when new field “Exclude Land Trust Signature Lines from Note” (FI 121714) equals “Yes.” If this field equals “No”, the current language of the recitals will print.
• Revising the last clause of the first sentence of the first paragraph, revising the last sentence of said paragraph, and revising the second paragraph to expand upon what interests are being conveyed by the collateral and what the beneficiary(ies) liability is under the terms of the Security Agreement as a result of the assignment.
• Adding a new, third paragraph wherein the beneficiary(ies) certify that there is no prior lien on the collateral. This paragraph will only appear when “Lien Position” (FI 1041) equals “First Lien”.
• Adding another sentence to the (current) third paragraph specifying that the undersigned beneficiary(ies) will not make any assignment, or transfer, the collateral without the written approval of the lender.

These changes will take effect immediately to complement the recent land trust signature software changes. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

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Selling the Beneficial Interest in a Land Trust

Land trusts give an investor a wide array of potentially useful tools. One of those tools is selling property in a land trust, or selling the beneficial interest ( as opposed to selling or transferring the deed itself).

The beneficial interest in a land trust is considered personal property as opposed to real property, like the land itself. If the buyer were to default on their payments, the beneficiary would have more flexibility in terms of their options.

If you are interested in pursuing this method, it’s best to set up a land trust and either establish your own company or your personal lawyer as the trustee. The documents can be kept in escrow until the contract is paid in full. This keeps both parties honest and makes the transfer of the property as smooth as possible.

Land Trusts Make Contracts Assignable

The advantage of the land trust is that it allows the beneficial interest to become “assignable”. This operates in a very similar to way to how a stock in a corporation is assignable. A beneficiary of a trust can be changed without needing to change the title of a property. For those interested in selling a property, this can be a useful tool.

The reason why this is possible is because the beneficial interest is not considered in the same category as the property itself. The beneficial interest is considered personal property, while the property itself is considered private property. In addition, beneficial interests can be used as collateral in a loan.

This also adds a layer of privacy to the transaction. The buyer isn’t purchasing a property from you, they’re purchasing the property from a trust. While land trusts can have their drawbacks, there are a number of solid reasons why investors favor using them in certain circumstances.

For those that are simply interested in selling the property from the trust, a land trust still provides more privacy and protects assets in ways that property held outside of a land trust can’t. Land trusts still offer more privacy, protections against liens, and they make it more difficult for an individual to find your property if they’re trying to determine your assets in a lawsuit. Since most litigation attorneys work on contingency, they’re unlikely to go after a defendant who does not appear to hold any serious assets.

Selling the beneficial interest in a land trust is simply one more tool an investor should look into. 

SCOTT ROYAL SMITH

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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