Exactly what happens when the Beneficiary directs the Trustee to sell off all the assets held in the Land Trust? First of all, the law pretty well protects the Trustee to insure that he has been paid his compensation, if any is due. In many states, the Trustee has the first claim on any assets that are foreclosed or sold at public sale by the courts. Here is how that might work in some states.

The instant that the property is sold, the Land Trust is converted into a Personal Property Trust in which cash is held for the beneficiary. This cash is not real estate, but personal property, so, depending upon the situation, it might be viewed to be non-attachable except by the Trustee whose Trustee agreement–or employment agreement–might state that he is to receive first priority on liquid trust assets in the event his trustee fees are not paid when due. In that event, he would be allowed to pay himself out of that cash. If his fees were considerable, they might consume ALL the cash – leaving none for other creditors, the IRS, and anyone else staking a claim. Kinda makes your mind wander, does it not?

Remember to like me on Facebook, follow me on YouTube, and join me on LinkedIn.