Title Holding Trust As Asset Protection?
Real estate assets are always vulnerable to a lawsuit. During the last 10 years there has been a dramatic increase in the value of most properties. A significant portion of your net worth may have shifted from stocks to real estate equity. Over the last several years or so there has been much discussion about THT’s on this forum as well as others. However there has been little or no discussion of how a THT can actually protect you from a successful lawsuit, so I would like to share my personal experience with all of you.
On March 25th 2002 First Nationwide Mortgage Corporation successfully sued me in a quiet title action even though my real property was in a THT from day one. The complaint read:
First Nationwide Mortgage Corporation
Vs.
All persons natural and un-natural, known and unknown, claiming any legal or equitable right, title, estate, lien or interest in the property described in the complaint adverse to plaintiff’s title thereto and Does 1 thru 50 inclusive.
By the way this was a vacant rental and there was no other address to serve notice so how did they do it?
The answer: Section 415.50 of the California Code of Civil Procedure describes the legal process of properly serving a defendant by publication when their whereabouts is unknown.
Since I was actually “served by publication”, I had no knowledge of the pending suit and found out about it after they won by default and after the time to appeal the court’s decision expired. By now I felt like I had been screwed
But wait, I suddenly remembered that many years before I recorded a “fictitious deed of trust” on the property as sort of an insulator between myself and any possible future judgments in an amount equal to twice its fair market value, whereby a second THT was the beneficiary. Even though First Nationwide Mortgage Corporation was now the record title owner, they took title subject to my lien and I was able to successfully foreclose on it and take the property back.
Moral of the story:
Use two (2) THT’s …… one to hold title and another to hold equity.
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