Nominee Trusts
There are many kinds of trusts, including, among others, revocable trusts and irrevocable trusts. There is also a device which is called a trust, but which is actually not a trust at all.
You may find real estate titled in a "nominee trust." The document will provide that the "trustees" will hold bare legal title to the property, and will do nothing except what they are directed to do by the beneficiaries. The beneficiaries are not set forth in the instrument, but are shown on a Certificate of Beneficial Interests, which is not recorded. The nominee trust is not a trust - it is an agency arrangement in which the "trustees" are agents for undisclosed principals.
A true trust is an arrangement under which a "grantor" or "donor" transfers property to a trustee to use for the benefit of one or more beneficiaries. The trustee holds legal title to the property, and the equitable or beneficial title is held by the beneficiaries. The trust instrument, not the beneficiaries, tells the trustee what to do.
The nominee trust was used to conceal the identity of the true owner (such as when someone was assembling parcels of land for a shopping center and did not want this to be known), when the owner of property wanted to transfer it to beneficiaries in separate gifts (for example, $14,000 of the value of a property each year, by simply changing the Certificate of Beneficial Interests), or when the real ownership was in an estate planning trust which the owner wanted to keep private.
The trustees do not file income tax returns - the activities of the trust are shown on the tax returns of the beneficiaries. If the trustees undertake any action on their own, even opening a bank account, except as directed by the beneficiaries, they may convert the nominee trust into a corporation for tax purposes, with horrendous tax consequences to record a simple statement of certain trust provisions, which is sufficient to complete the chain of title.
The reasons for holding title in such a trust are:
Limitations of Nominee Trusts
It will do absolutely no good regarding MassHealth /Medicaid Planning, because it is not really a transfer in their eyes. Also, you cannot take a Homestead declaration on it, so creditors can attach it in a lawsuit, assuming liability.
There are many kinds of trusts, including, among others, revocable trusts and irrevocable trusts. There is also a device which is called a trust, but which is actually not a trust at all.
You may find real estate titled in a "nominee trust." The document will provide that the "trustees" will hold bare legal title to the property, and will do nothing except what they are directed to do by the beneficiaries. The beneficiaries are not set forth in the instrument, but are shown on a Certificate of Beneficial Interests, which is not recorded. The nominee trust is not a trust - it is an agency arrangement in which the "trustees" are agents for undisclosed principals.
A true trust is an arrangement under which a "grantor" or "donor" transfers property to a trustee to use for the benefit of one or more beneficiaries. The trustee holds legal title to the property, and the equitable or beneficial title is held by the beneficiaries. The trust instrument, not the beneficiaries, tells the trustee what to do.
The nominee trust was used to conceal the identity of the true owner (such as when someone was assembling parcels of land for a shopping center and did not want this to be known), when the owner of property wanted to transfer it to beneficiaries in separate gifts (for example, $14,000 of the value of a property each year, by simply changing the Certificate of Beneficial Interests), or when the real ownership was in an estate planning trust which the owner wanted to keep private.
The trustees do not file income tax returns - the activities of the trust are shown on the tax returns of the beneficiaries. If the trustees undertake any action on their own, even opening a bank account, except as directed by the beneficiaries, they may convert the nominee trust into a corporation for tax purposes, with horrendous tax consequences to record a simple statement of certain trust provisions, which is sufficient to complete the chain of title.
The reasons for holding title in such a trust are:
- Anonymity of ownership,
- Ease of title transferability: you do not need to re-record a deed every time you want to change the percentage of interest in a property held by the trust,
- Avoidance of state recording fees for deeds and a transfer tax (formerly known as tax stamps). Regarding new deeds (you can allocate and change a percentage of ownership in Realty merely be amending the percentage of ownership in the Schedule of beneficiaries)
Limitations of Nominee Trusts
It will do absolutely no good regarding MassHealth /Medicaid Planning, because it is not really a transfer in their eyes. Also, you cannot take a Homestead declaration on it, so creditors can attach it in a lawsuit, assuming liability.