Nominee Agreement Trust: A Comprehensive Guide
Nominee agreement trust, also known as a “bare trust,” is a legal agreement that enables a person or an entity to hold assets on behalf of another person or entity. Through this agreement, the nominee holds legal and financial ownership of the assets, but the beneficial ownership remains with the beneficiary.
Nominee agreement trusts are common in real estate transactions where an investor wants to purchase a property but prefers to remain anonymous. The investor can use a nominee agreement trust to purchase the property under the name of the nominee, who acts as a trustee and holds the legal title of the property. The beneficiary, in this case, is the investor who retains the right to receive the benefits associated with the property, such as rental income or capital appreciation.
Benefits of Nominee Agreement Trust
1. Asset Protection: Nominee agreement trusts offer a level of asset protection that is not available in individual ownership structures. The nominee holds the legal title of the assets, thereby shielding the beneficial owner from any liabilities that may arise.
2. Estate Planning: Nominee agreement trusts are useful for estate planning purposes. A person can use a nominee agreement trust to transfer assets to beneficiaries without going through the probate process, which can be lengthy and expensive.
3. Anonymity: Nominee agreement trusts allow investors to maintain anonymity while still enjoying the benefits of the assets they own. This can be particularly useful in real estate transactions where a buyer may not want their identity disclosed to the seller or the public.
4. Tax Planning: Nominee agreement trusts can be used for tax planning purposes. For example, a person can use a nominee agreement trust to transfer assets to a beneficiary while minimizing the tax implications.
How to Set Up a Nominee Agreement Trust
Setting up a nominee agreement trust requires careful consideration and legal guidance. Here are the steps to follow when setting up a nominee agreement trust:
1. Choose a Trustee: The first step is to choose a trustee who will hold the legal title of the assets. The trustee can be an individual or a corporate entity.
2. Draft the Agreement: The next step is to draft the nominee agreement trust. The agreement should clearly state the rights and obligations of both the trustee and the beneficiary.
3. Transfer the Assets: The trustee should transfer the legal title of the assets to their name. The assets can include real estate, stocks, and other forms of investment.
4. Maintain Records: The trustee should maintain accurate records of the assets and any transactions related to the trust.
5. Termination of Trust: The nominee agreement trust can be terminated by either the trustee or the beneficiary upon the fulfillment of the terms specified in the agreement.
Nominee agreement trusts offer a range of benefits, such as asset protection, anonymity, estate planning, and tax planning. However, these trusts require careful consideration and legal guidance to ensure that they are set up correctly. By following the steps outlined above, you can set up a nominee agreement trust that meets your unique needs and offers you the peace of mind you deserve.