Fideicomiso/ BankTrust

What is it and what is it used for?



1. The Mexican bank trust is a common instrument for non-Mexican citizens, such as Americans and Canadians, to acquire coastal land in Mexico. This bank trust in Mexico is known as a fideicomiso. It is common to hear "Banktrust" in Baja California. .

2.This is the safest method of investing in real estate in Baja California. His Fideicomiso Bancario must be incorporated in a Mexican bank authorized in its Department of Trusts. Interesting facts about the trust:

A bank trust is used to acquire property in Mexico only on land within the restricted zone, arguably the most coveted by buyers. This restricted zone, sometimes also called the prohibitive zone, encompasses coastal land between 18 meters (60 feet) from the average high tide, up to 50 kilometers (31 miles) inland from the ocean and up to 100 kilometers (62 miles) from the international borders.

The restricted zone covers all of Baja California. 2. This land is restricted, since the Mexican Constitution reserves it for Mexico. In 1973, Mexico amended its foreign investment laws to encourage foreign investment in both real estate and companies that use trusts to acquire land. In 1998, the term was extended from 30 to 50 years. The Mexican Bank Trust was created in 1971 by Mexican President Echeverria to promote tourism and retirement investments in the most popular coastal areas, and authorized the Bank Trust program.

3. This Restricted Zone is one of the four main types of land that foreigners will encounter when buying real estate in Mexico. The other three types of land are the Federal Zone, the Free Zone and the Ejidos. It would be convenient to find out about all of them, since here in Baja California, the four types of terrain are present and common.

4.*If you sell your fiduciary rights to a Mexican citizen, they have the option of taking the property in their name in the trust or removing the property from the trust and taking the property in deed. A Mexican would likely choose to obtain ownership of their land and home through a public deed for two reasons.

First, it is more traditional, and second, they do not have to pay the fees associated with the trust. *If another foreign person acquires your fiduciary rights, it can be an individual, a married couple or family, any group of people, or a U.S. limited liability company (LLC). Your buyer will provide you with the necessary documents to instruct the bank about the sale and the name will be changed, including your beneficiaries as well.

5. The trust is transferable and does not need to be recreated when selling the property. This makes the trust an asset. By having a trust, you have a wider market to sell, both to Mexican and international buyers, which increases the liquidity of your investment.

6. The property you own in a bank trust is yours to improve, build, sell, leave in your estate, etc. You will enjoy all the same rights you have to your real estate in U.S. ownership through the bank trust.

7. Am I the only owner or is the bank owner as well?

The buyer of the Mexican property is the beneficiary of the trust. This buyer/beneficiary will receive all the rights inherent to the property.

8. Why do I have to go through a bank? A Mexican bank acts as a fiduciary and maintains a fiduciary relationship with the buyer, which means that it acts in good faith for the buyer/beneficiary and looks out for their interests. The bank has direct ownership of the property and performs functions related to with it that serve the wishes of the beneficiary, the buyer.

9. What if the bank sells my property or takes it away?

The deposit of the deed in the bank is sufficient to comply with the Mexican Constitution and allow a foreigner to own the property in the Restricted Zone. Without the bank trust, this would be impossible. It is that simple Mexican bank with simple title simply means that the deed to the property is deposited in its possession, but it does not account for it as an asset on its books. The bank cannot sell, depreciate, or receive benefits from the property because it has no control over it; it only has simple title deed, i.e., no profits. If the bank administering the bank trust fails, the trust is transferred to another Mexican bank to continue administering the trust on behalf of the beneficiary.

10. Am I able to sell my property or give it as an inheritance to my children and wife?

That's correct. The buyer/beneficiary has control of the property and will account for it as an asset in their books. You have the right to occupy it, enjoy it, lease it, improve it, depreciate it, exchange it according to law 1031, finance it with your IRA account, borrow money with it as collateral, bequeath/testate it, add beneficiaries to the trust to avoid probate of a Mexican will, lease with option to buy, sell it and any other operation that can be carried out with Mexican real estate. etc, etc 6. In addition, since the legal term of the trust is 50 years, the buyer/beneficiary can also renew it.

11. The costs associated with a trust are about $1600 to set up and about $600 a year to maintain it. Not including permits and other closing costs such as notary fees or taxes