What a land trust does — and does not do — in a subject-to purchase

The structure in one paragraph

A land trust holds legal title to the property in the name of a trustee. The people who actually benefit from the property hold beneficial interest, which in most states is personal property rather than an interest in real estate. In a subject-to purchase the seller creates the trust, deeds the property to the trustee while remaining the sole beneficiary, and then — separately — assigns that beneficial interest to the buyer. The mortgage stays in the seller's name and the buyer takes over the payments.

Why the order matters more than the paperwork

Each step has to be a real act on its own date. A trust created, a deed recorded, and an assignment executed all on the same afternoon reads to anyone reviewing it as one transaction wearing three hats. The gap between the deed and the assignment is what makes the middle step a genuine conveyance rather than a formality, which is why FAPG enforces a default 30-day separation and flags anything under seven days.

The protection it does not give you

The Garn-St Germain exception for transfers into an inter vivos trust requires that the borrower remains a beneficiary and that the transfer does not relate to a transfer of occupancy rights. A subject-to purchase fails both. The trust is not a shield against the due-on-sale clause, and structuring it correctly does not change that — it avoids making the position worse.

What the trust does give you

In states where beneficial interest is personal property, the trust keeps the beneficiary's identity off the real property records. It provides a clean mechanism for transferring benefit without re-recording title, and it gives the parties a defined trustee, a defined successor, and a written instrument governing what happens next — instead of a handshake and a recorded deed.