Protecting Account I have First Lien On?

Stock and Bond Fraud, including Boiler Rooms / Pump and Dump Schemes, Mutual Fund & Hedge Fund Fraud, FOREX scams, plus Churning, Private Placements, Venture and Bridge Funding, IPOs, Viaticals Fraud, HYIP and Prime Bank scams, MTNs, Historical Notes, Recovery Schemes, etc. Includes the Jim Norman Project and the Michael Dotson Project and similar HYIP scams.
ejalquat

Protecting Account I have First Lien On?

Postby ejalquat » Mon May 28, 2012 6:54 pm

I am entering a business/financial arrangement whereby a large investment account will be opened in the name of the other party. This account will serve as collateral for a deal between the two of us and will exist for up to 30 years . Although the account will be in the name of the other party, the account is strictly for my benefit and I will be given a first lien on the account to protect my interest but I am not allowed to control the account nor can my name be on the account. I will be able to monitor the account online. I just cannot control it.

One potential danger I see is of course fraud where the other party absconds with the funds in the account and since it is in their name it would be simple to do and a first lien on nothing is worth nothing.

What structure and/or where should the account be held in to protect my interest? Thanks.

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Re: Protecting Account I have First Lien On?

Postby Kestrel » Mon May 28, 2012 7:46 pm

Why in the world would you do that? Are you trying some roundabout way to shield assets from the IRS or other creditors or the bankruptcy court?

If that's what you're attempting, you won't get much help here.

If this is something more along the lines of keeping money out of the hands of a spendthrift relative, you should seek out an estate and trust attorney.
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ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Mon May 28, 2012 8:18 pm

Kestrel wrote:Why in the world would you do that? Are you trying some roundabout way to shield assets from the IRS or other creditors or the bankruptcy court?

If that's what you're attempting, you won't get much help here.

If this is something more along the lines of keeping money out of the hands of a spendthrift relative, you should seek out an estate and trust attorney.


It's none of the above. I am doing an installment sale of an asset which has some tax deferred benefits. I want some security that the principal payments will be made as agreed. As such, the buyer will be required to fund an escrow sort of account. If I have control over the account it will be considered constructive receipt. OTOH, I want to make sure the funds are secure and that the buyer doesn't empty out the account.

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Re: Protecting Account I have First Lien On?

Postby ArthurWankspittle » Mon May 28, 2012 9:46 pm

ejalquat wrote:
Kestrel wrote:Why in the world would you do that? Are you trying some roundabout way to shield assets from the IRS or other creditors or the bankruptcy court?

If that's what you're attempting, you won't get much help here.

If this is something more along the lines of keeping money out of the hands of a spendthrift relative, you should seek out an estate and trust attorney.


It's none of the above. I am doing an installment sale of an asset which has some tax deferred benefits. I want some security that the principal payments will be made as agreed. As such, the buyer will be required to fund an escrow sort of account. If I have control over the account it will be considered constructive receipt. OTOH, I want to make sure the funds are secure and that the buyer doesn't empty out the account.
I may be talking rubbish here but why can't an attorney hold it in escrow for both of you?
Also
If that's what you're attempting, you won't get much help here.
Not only may you not get help but I'd doubt it would work.
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Re: Protecting Account I have First Lien On?

Postby Kestrel » Mon May 28, 2012 10:19 pm

ArthurWankspittle wrote:
ejalquat wrote:I want some security that the principal payments will be made as agreed. As such, the buyer will be required to fund an escrow sort of account. If I have control over the account it will be considered constructive receipt. OTOH, I want to make sure the funds are secure and that the buyer doesn't empty out the account.

I may be talking rubbish here but why can't an attorney hold it in escrow for both of you?

You're not talking rubbish. I was thinking the same thing.

Trust law is not my specialty, but I don't see why an appropriate trust couldn't be established. It should be held by a bonded third party, and have provisions requiring that the trustee verify taxes, insurance, and future mortgage payments are adequately funded before money could be used for other purposes.
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ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Mon May 28, 2012 10:26 pm

ArthurWankspittle wrote:I may be talking rubbish here but why can't an attorney hold it in escrow for both of you?
Also
If that's what you're attempting, you won't get much help here.
Not only may you not get help but I'd doubt it would work.


An attorney probably could hold it. When you say "it" won't work, could you be more specific?

ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Mon May 28, 2012 10:29 pm

Kestrel wrote:. It should be held by a bonded third party.


Is there some central registry of bonded third parties? For a google search, what exactly would I type in to search for this?

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Re: Protecting Account I have First Lien On?

Postby notorial dissent » Mon May 28, 2012 10:38 pm

ejalquat welcome to Quatloos.

If I understand you, you are selling an "asset" on an installment basis, and expect to take 30 years to complete the process, which by the way you describe it does not sound like it is land, which makes it a problem to start. Which only leaves what, a business?

Otherwise, if you are selling land outright you would/should have a mortgage on the property and if they don't pay, you take it back, and since normally on an installment contract sale YOU would retain title of the land until it was paid for you would still have ownership until the land is paid for, so if they don't pay you would already still have title.

To put it another way, unless you have some kind of enforceable claim on the "asset", you got nothin'. You've in effect just given someone a present otherwise.

The financial account set up you describe makes no sense since even with the lien you would have no claim on the funds in that account without having to go to court to get it enforced, and by that point they would be long gone.

So, I'm afraid this doesn't make a whole lot of sense.
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ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Mon May 28, 2012 11:13 pm

notorial dissent wrote:[b][color=#0000FF]ejalquat welcome to Quatloos.

If I understand you, you are selling an "asset" on an installment basis, and expect to take 30 years to complete the process, which by the way you describe it does not sound like it is land, which makes it a problem to start. Which only leaves what, a business?


Notorial thanks for your reply. There are many assets besides land or business that can be sold on an installment basis including art, classic cars, valuable antiques, jewelry etc. All of these are assets where it would be impractical or impossible to place a lien on it. However, the seller may not want to realize all the income at the time of sale and/or the buyer may not be able to pay for it up front. As such, we're mutually trying to come up with a method of securing the installment sale because as you say, otherwise it's just a gift.

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Re: Protecting Account I have First Lien On?

Postby Judge Roy Bean » Mon May 28, 2012 11:30 pm

Find a local attorney who is familiar with your state's trust law and have them create the appropriate structure.
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Re: Protecting Account I have First Lien On?

Postby notorial dissent » Tue May 29, 2012 3:17 am

ejalquat, everything you say is entirely true, however, what you are not saying is what I find the more interesting.

That aside, since it would appear we are talking about something moveable, the Judge's advice is the best, and most responsible, you are going to get, as quite frankly you are treading into very murky areas with something like this. You are going to need a very good lawyer who specializes in this type of thing, and who practices in your jurisdiction, and even then.....
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.

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Re: Protecting Account I have First Lien On?

Postby Pantherphil » Tue May 29, 2012 8:01 pm

The poster is apparently confronting the difficulty of reconciling the problem of deferring income tax under the installment sales rules with the concepts of constructive receipt and present economic benefit. So you do have to walk carefully on this to avoid the premature recognition of income.

An appropriate perfected security interest or some kind of trust arrangement or a legitimate guarantee or real commercial letter of credit may be an adequate way to secure the promise to pay in the future. There are some regulations under the installment sales rules which describe appropriate security interests.

The traditional way of protecting yourself in these situations is to have a valid and perfected mortgage or security interest in appropriate collateral to secure that the installment payments will be made when due.

However, there have been some rather obvious and notorious scams here in which someone like the original poster is led to believe that there is a real asset or account securing the promise to pay in the future. After all, the investors with Mr. Ponzi and Mr. Madoff all thought that there was money in their accounts. Everyone received nice paper statements.

So I am skeptical and suspicious of what the original poster is describing here. Either he has a valid security interest in the hypothetical securities account or he doesn't. Smells like a scam to me.

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Re: Protecting Account I have First Lien On?

Postby Cathulhu » Tue May 29, 2012 8:04 pm

Actually, I think he's being paid to design the exchange and trying for free research.
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Re: Protecting Account I have First Lien On?

Postby ArthurWankspittle » Tue May 29, 2012 10:22 pm

ejalquat wrote:
ArthurWankspittle wrote:I may be talking rubbish here but why can't an attorney hold it in escrow for both of you?
Also
If that's what you're attempting, you won't get much help here.
Not only may you not get help but I'd doubt it would work.


An attorney probably could hold it. When you say "it" won't work, could you be more specific?
I was referring to what Kestrel was saying; if it's an attempt to hide an asset from bankruptcy, ex-spouse etc. it isn't likely to work.

Back to the original request: why can't you sell whatever it is, on a private mortgage or lease deal? (with the relevant advice from a tax / trust lawyer.)
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ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Wed May 30, 2012 1:56 pm

The issue has been solved, the account will be held by a neutral third party. For those who provided useful suggestions (including contacting an attorney) I sincerely thank you.

For those who snidely suggested I was just doing free research I'd like to mention that it's striking how if you go to a forum with doctors, professional plumbers, electricians, carpenters, investors etc, you never get chastised for doing "free research". Quite the reverse, these professionals seem more than willing to go out of their way to help someone trying to get their bearings. It seems however if you go to a forum with attorneys present, some are willing to help, but others seem very disturbed that a non-attorney might actually be trying to do some "free" research or horror of horrors might be looking for some "free" advice. Attorneys constantly defend this by pointing out that time is money as if this didn't apply to plumbers, doctors etc. I can't even imagine a doctor participating in a forum criticizing in a smirking fashion an individual looking for some answers. Yet attorneys wonder why they have such a lovely reputation.

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Re: Protecting Account I have First Lien On?

Postby wserra » Wed May 30, 2012 3:00 pm

ejalquat wrote:I can't even imagine a doctor participating in a forum criticizing in a smirking fashion an individual looking for some answers. Yet attorneys wonder why they have such a lovely reputation.


A couple of questions: how do you know that the people who suggested that you might be looking for free advice are actually lawyers? Just assumed that? Hint: they're not. Knowing that, does it change your opinion as to whether lawyers' "lovely reputation" is deserved? I'd guess not - but, hey, I'm just assuming too.

BTW, I don't read those posters to be saying that there's anything wrong with seeking free advice. I seek free advice here all the time, and I am a lawyer. I also offer free advice all the time - not in your case, because I have never done commercial work. Still, the best free advice you're going to get is Judge Roy Bean's (a lawyer): seek competent legal advice where you are.
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ejalquat

Re: Protecting Account I have First Lien On?

Postby ejalquat » Wed May 30, 2012 3:12 pm

wserra wrote:A couple of questions: how do you know that the people who suggested that you might be looking for free advice are actually lawyers? Just assumed that? Hint: they're not. Knowing that, does it change your opinion as to whether lawyers' "lovely reputation" is deserved? I'd guess not - but, hey, I'm just assuming too.


My bad for making the assumption. I still don't get the criticism from whomever it was. People go to forums for advice all the time. It's perhaps their main useful function.

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Re: Protecting Account I have First Lien On?

Postby Demosthenes » Wed May 30, 2012 3:50 pm

For those who snidely suggested I was just doing free research I'd like to mention that it's striking how if you go to a forum with doctors, professional plumbers, electricians, carpenters, investors etc, you never get chastised for doing "free research".


This isn't a legal or financial forum. It's a scam forum...
Demo.

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Re: Protecting Account I have First Lien On?

Postby JamesVincent » Wed May 30, 2012 9:58 pm

ejalquat wrote:For those who snidely suggested I was just doing free research I'd like to mention that it's striking how if you go to a forum with doctors, professional plumbers, electricians, carpenters, investors etc, you never get chastised for doing "free research".


Its awful funny you say that. I am actually a general construction contractor and a master woodworker. If you had asked anything but what you had asked I would have answered but since there are several attorneys on here and several others dealing with securities and trusts plus some CPAs I felt it was better to let them handle it. As Demo said this is a scam forum, not a legal or financial forum and we are biased more towards exposing and reporting on scams, whatever type they be. And in any situation of the type you spoke of the best advice will always be what was given: find an attorney licensed and practicing in your area and has a background in what you are dealing with. Wes may be a damn good attorney but he practices in NYC and the laws and statutes may be different where you are and it is always better to find one in the specific area you are or the situation is in. Any other advice given here would be general information, not specific.
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