Definition
The term nominee trust refers to an agreement that designates a trustee to be listed on a number of legal documents, including the title to real estate. Nominee trusts are not considered true trusts, but a cross between an agency relationship and the structure of a traditional trust.
Explanation
Nominee trusts are oftentimes created to avoid the listing of property owners on public real estate records. Deeds filed with local agencies will list the trustee but not the true owners of the property. Also referred to as a Massachusetts nominee trust, a nominee trust is structured like a traditional trust including the naming of trustees, placement of assets into the trust, and the naming of beneficiaries. However, trustees can only buy or sell the trust's assets after gaining the permission of beneficiaries.
For all intents and purposes, the beneficiaries remain the owners of the assets in the trust. This means they are responsible for income and estate taxes. The one exception to this ownership is public records, which would include the trust as the owner. In addition to this anonymity, nominee trusts also offer advantages such as the ease of title transfer (in the case of real estate), as well as the lowering of fees associated with the recording of deeds and transfer taxes.