Is there a minimum or maximum allowable term for a Square1 Trust™?
Yes. It is reported in the literature that any land trust whose term is deemed a contrivance to avoid payment of income tax would (could) be challenged by the IRS and declared a “dry” or “failed” trust. For example, if the trust’s term clearly conflicted with time requirements of certain tax deferment or exemption provisions (e.g., tax-deferred exchange), the trust could be characterized as a non-standard corporate entity or a security agreement. A failed trust could [might] conceivably — 1.Deprive the co-beneficiary of mortgage interest and property tax deductions; and/or 2.Create an untimely capital-gains tax event for the settlor beneficiary. For these reasons only, it is recommended (though not mandatory) that two years be considered the minimum term for a Square1 Trust™. Regulations relative to Perpetuities would also compel a “land trust” term to be limited to no more than 20 years, or the length of the underlying financing on the trust property, whichever would be greater. If yo
