Personal Property Trusts When Investing In Used Mobile Homes

Personal Property Trusts

We could spend a week talking about trusts.  I urge you to learn more about them, anything by Mark Warda is excellent.

Definition: A trust is a legal arrangement in which the Grantor (the owner selling the property) sells something (land, car, house, mobile home) to an established trust for the benefit of one or more beneficiaries.

Basically a trust is simply a shell entity we have created, for free, to hide our property from the prying eyes of the public, attorneys, everyone.

Beneficiary(ies) = Individual or company that receives all benefits of Trust. (Cash flow, appreciation, tax shelter, ect)   (Usually you or your company)  Each trust spells out the duties of the Beneficiary as the sole owner(s).

Trustee(s) = Owner of Record, Actual Owner as far as for signing legal documents for Trust/property/home.  As Trustee he or she has the full rights to sell, rent lease, fix, insure, and refinance the property within the trust.  (You choose the Trustee of your liking. Friends/Family/Lawyer/Coperation)

A trust can have a single beneficiary or multiple beneficiaries (who may or may not be treated alike).  It can have a single trustee or trustees.  Each trust spells out the protection for the Trustee(s).  A trustee is a puppet for the Beneficiary.  The wording in the Trust is to protect the Trustee just as much as the beneficiary.  The Trustee is not liable for anything that happens on or to the property.  The Trust also gives the Trustee the obligation to never divulge who the Beneficiary is; unless under subpoena.  The point of the Trust is to hide the owners’ name from the public.

Why We Use Trusts?

So wouldn’t it just be a lot easier to just put the homes in my name or a company’s name?

One of the major reasons we use Trusts is to keep the owner’s/beneficiary’s name (your name) off of the Title of record/Public Record.

1. This allows you to transfer ownership simply by assigning the “beneficial interest” in the trust to another company or individual other than yourself.  This paperwork is easily created by you in minutes.  Why should I care about this? When someone dies with or without a Will the property goes through the legal process of “probate”.  Probate is the long drawn out process of deciding who owns what after death.  Even with a Will this process can take weeks or months.  By having a Trust in place; the “Trust” never dies but the Trustees and Beneficiaries can change as ownership changes or people pass.
2. Remember we are not renting these homes; we are selling them day number one.  Since our TB own the home day one, if they decide not to pay us we would typically have to foreclose.   However, our trustee is still the only person/company named on the title/sol (statement of location, tx only) paperwork.  So what does that mean? That mean that we can simply revert all the beneficial interest from them back to us through the “power of attorney” we have signed in advance.  Now we can perform a simple 2 week eviction and they are out, opposed to a 6 month long foreclosure.  *Remember, just because we are selling them the beneficial interest in the home we are not giving them possession of the title or the right to change trustees.

Trusts are also is a layer of protection, a veil if you will, to hide the true ownership/beneficiary (you).  Whether you have one property or fifty, it is important to have your name hidden from anyone that might be sue-happy. (its so easy for a lawyer to search your name and see you own a few homes and think you’re a big fish that is worth suing for some fictitious reason!)

Bottom Line = Trust make it super easy and free to change ownerships around “off record”, which allows us to not be shown on public and sell the home (which is the manner most parks prefer instead of you using a “lease with option to buy” AND you are not the owner anymore as of day 1 so you need not stress about slip and falls or other accidents, but you can still retain all the tax benefits ((depreciation)).

Happy Investing

- John Fedro