The Multi-Beneficiary Title-Holding EHTrust Transfer™
(For Ownership Benefit Transfer from Property Owner to Investor, While Preserving Full Fee-Simple Rights Without Title Transfer)
Overview
The Equity Holding Trust Transfer™ (EHTrust Transfer™) is a multi-beneficiary title-holding trust structure that allows a property owner (Settlor) to transfer the economic benefits of real estate ownership to one or more acquiring parties (Investor Beneficiaries), without recording a transfer of title, triggering a due-on-sale clause, or violating federal consumer lending laws.
Based on the long-standing Illinois-type land trust, this structure separates legal title—held by a neutral third-party trustee—from beneficial interests, which are held privately by the parties. Occupancy rights, if applicable, are granted only through a separate lease agreement and are not conferred by trust interest alone.
How It Works
The property is deeded to a third-party, bonded corporate trustee. The original owner becomes the Settlor Beneficiary, retaining full power of direction over the trust and all actions of the trustee.
An Investor Beneficiary is granted a beneficial interest in the trust, typically between ten and ninety percent, entitling them to a proportionate share of trust benefits and obligations as outlined in the Beneficiary Agreement.
The Investor Beneficiary—or any Co-Beneficiary—may occupy the property, but only through a separate lease agreement executed between the Trustee and the Beneficiary, pursuant to written direction from the directing party under the trust. Occupancy is not automatically conferred by trust ownership and is always contingent on execution of such a lease.
The Beneficiary Agreement governs the allocation of rights, responsibilities, and liabilities, including the obligation of the Investor Beneficiary to cover all property-related expenses. These may include mortgage principal and interest, property taxes, insurance premiums, homeowners association dues, and maintenance costs.
These financial responsibilities are imposed by the trust agreement and Beneficiary Agreement, not by the lease. The lease, if executed, pertains solely to the right of occupancy and does not modify or condition the financial obligations assigned under the trust. Occupancy rights are not derived from, nor contingent upon, the party’s beneficial interest.
Termination Process
No less than six months before the trust’s scheduled termination, the Investor Beneficiary receives the first right to purchase the property at fair market value, minus any trust-documented offsets such as unreimbursed contributions or accrued entitlements established under the trust or Beneficiary Agreement. If the Investor declines this option, the Settlor Beneficiary may retake control and direct the sale or conveyance of the property.
Upon sale of the property, all liens and encumbrances are first paid off. Next, sale-related costs—such as title, escrow, and commissions—are deducted. Any initial capital contributions are refunded. Finally, the remaining net proceeds are distributed to all beneficiaries in proportion to their respective beneficial interests, after applying all documented offsets.
Investor Beneficiary Benefits
When properly structured, the Investor Beneficiary may enjoy exclusive occupancy (subject to a lease), potential tax deductions for mortgage interest and property taxes, equity accumulation through principal reduction, participation in appreciation upon sale or refinance, and the ability to assign their beneficial interest subject to trust terms. Because the transaction does not require title transfer or mortgage qualification, the investor also benefits from insulation against personal liability through the separation of trust-based ownership and occupancy rights.
What the EHTrust Transfer™ Is Not
The EHTrust Transfer™ is not a sale of real estate. It is not a financing arrangement, lease-option, rent-to-own agreement, contract for deed, installment sale, disguised mortgage, or security instrument. It is also not a joint venture, partnership, business trust, tenancy-in-common, or fractional title arrangement.
Parties to the EHTrust Transfer™
The Settlor Beneficiary is the original titleholder who establishes the trust and deeds the property to the trustee. The Investor Beneficiary is the acquiring party who holds a beneficial interest and may lease the property for use. The Trustee is a bonded third-party entity holding legal and equitable title, acting solely under written direction from the directing party in the trust.
Structuring Options
Depending on the objectives of the participants, the Settlor may retain a minority beneficial interest and direct the property to be leased to the Investor Beneficiary. Alternatively, the Investor may lease the property for their own occupancy or sublease to a third party. In multi-party transactions, Co-Beneficiaries may share interests and assign occupancy or economic rights pursuant to internal agreements.
Compliance Summary
The EHTrust Transfer™ provides safe harbors against triggering Dodd-Frank, the Truth in Lending Act (TILA), the Home Ownership and Equity Protection Act (HOEPA), the Real Estate Settlement Procedures Act (RESPA), and the Fair Credit Reporting Act (FCRA). It complies with the Garn-St. Germain Depository Institutions Act (12 U.S.C. §1701j-3), which permits transfers into inter vivos trusts where the borrower retains a beneficiary interest. The structure also supports tax deductibility under Internal Revenue Code §163(h), provided that the required criteria are met. Because the EHTrust Transfer™ involves no loan, financing, option, or extension of credit, it avoids all related consumer lending and reporting regulations.
These regulations are not triggered because Dodd-Frank applies to credit secured by dwellings and no financing exists here. TILA and HOEPA regulate credit disclosures and high-cost loans, which are not present. RESPA governs federally related mortgage settlements, which are not applicable. FCRA pertains to credit reporting activity, which is not involved in the assignment of beneficial interests.
Disclaimer
This summary is for informational purposes only and does not constitute legal, tax, or financial advice. Parties should consult qualified legal counsel before participating in or relying upon the EHTrust Transfer™ model.