Real Estate & Finance

DO NOT THROW AWAY A TRUST!
By Agustin Galindo, Attorney at Law

In those real estate transactions where both buyer and seller are foreigners and the buyer has already established a trust on the property to be sold, the buyer may continue using such trust under certain conditions and this way, save some time and money.

Now you may ask: How is that possible? How convenient is it? What are the advantages? How sound is it? What do I do to accomplish this?

How is that possible? Well, first of all, the seller of a property transferred into a trust, is not properly the owner; this is, the owner of the property is the trust bank. The seller (or beneficiary of the trust) can instruct the bank to assign (transfer) her/his beneficiary rights in favor of the buyer. Of course certain requirements will have to be fulfilled with the bank and a notary public. (In Mexico a Notary Public is a lifetime position who has custody of property titles. What he does is carved in granite).

How convenient is it? Well, depending on the duration of the trust .If the trust was created a few years ago (maybe 3 or 5) and its term is for 50 years, then you will have a trust with a duration of 47 or 45 years, and we will be talking about a very long term trust, (who lives forever?) And it can be renewed again for another 50 years! (maybe by your children).

What are the advantages? Consider that if you acquire property already transferred into a trust, you need to extinguish it and pay the corresponding fees and expenses to the former bank and notary public and then pay to a new bank for its acceptance as the new trust as well as a notary public. If rights are just transferred, you just need to pay the current trust bank and a notary public. Moreover, you will save some time in a single shot transaction rather than extinguishing a trust and creating a new one. (Time is important and by transferring rights, you will only need approximately 6 weeks).

How sound is it? If you assign your beneficiary rights, it shall be necessary to verify that:

• The deed of trust is registered in Public Registry of Property;
• The property is free of encumbrances,
• The amount of the annual fee of the bank
• The annual fee of the bank is paid,
• Real estate tax (Predial) is paid,
• Water is paid,
• Electricity is paid
• In the case of a condo, all maintenance fees are paid

All this shall be requested by either the bank or a notary public, but it is something that you should be aware of in case you are signing a private contract for this purpose (with the understanding that in order to be valid, this contract needs to be formalized before a notary public and the trust bank).

Regarding taxes, please consider that even if you are transferring or acquiring property in this manner, for tax purposes, (and I am sorry to tell you) it has the same treatment as a simple buy-sell and therefore, each party will pay the corresponding taxes (i.e., buyer pays Real Estate Acquisition Tax and seller pays Income Tax).

What do I need to do? Generally the procedure is the following:

• Instruct the bank to assign the rights in favor of the assignee(s) (i.e. buyer) and appoint the new substitute beneficiaries, in accordance with the buyer’s instructions.
• Instruct the bank to request a notary public to prepare a deed of assignment of rights.
• Pay the corresponding bank fees.
• Sign the deed by each party, including the bank, before a notary public.
• Verify that the deed is recorded in the Public Registry of Property.

You should always have professional advice for this type of transactions. Your trust bank can assist you, as can the Notary, buy you will be best served with your own attorney, someone you trust.

Agustin Galindo is an attorney at law and founder of Galindo Abogados, S.C. Fully bilingual, he specializes in real estate, tax, civil, and commercial matters including litigation. You can contact him at agustingalindo@prodigy.net.mx, or you can visit the firm's website at: www.galindoabogados.com. Telephone numbers: 554-9915 and 554- 9916.

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