A nominee trust is a legal arrangement whereby a person, termed the

settlor In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the se ...

, appoints another person, termed the "nominee" or "

trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...

", to be the owner of the

legal title Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vari ...

to some

property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, r ...

. Although the legal title is transferred to the nominee, the

beneficial ownership In domestic and international commercial law, a beneficial owner is a natural person or persons who ultimately owns or controls an interest in a legal entity or arrangement, such as a company, a trust, or a foundation. Legal owners (i.e. the own ...

of the property is transferred to a third person, termed the beneficiary. The arrangement is simple and passive: generally, the nominee is not required to do anything except carry out specific (lawful) actions if so directed by the

beneficiaries A beneficiary (also, in trust law, '' cestui que use'') in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the perso ...

. For example, in

England and Wales England and Wales () is one of the three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. The substantive law of the jurisdiction is Eng ...

, the

Official Custodian for Charities An official is someone who holds an office (function or mandate, regardless whether it carries an actual working space with it) in an organization or government and participates in the exercise of authority, (either their own or that of their ...

, which acts as nominee for numerous charities, can only buy and sell assets on behalf of charities if instructed to do so. A nominee trust is an example of a

bare trust A bare trust is a trust in which the beneficiary has a right to both income and capital and may call for both to be remitted into his own name. Assets in a bare trust are held in the name of a trustee, but the beneficiary has the right to all o ...

: this is a simple type of

trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...

where the trustee acts as the legal owner of some property but is under no obligation to manage the

trust fund A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...

other than as directed by the beneficiary, and where there are no restrictions beneficiary's right to use the property. A nominee trust is also an example of an agency arrangement, whereby the beneficiary acts as principal, and the nominee acts as agent. This agency relationship means the nominee has limited, or no, discretion as to how the trust property is managed. In the event a nominee becomes

insolvent In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...

, the beneficiary should not be affected as the nominee's creditors cannot take possession of the trust assets. For bankruptcy purposes, the directed agency feature of a nominee trust prevents the trust itself from being a debtor-person. Therefore, a nominee trust cannot declare bankruptcy.

Uses

Avoidance of disclosure of ownership

* Nominee trusts can be used to avoid reporting the ownership of real estate on the public record. The deed, or other filed document, lists the trustee but not the undisclosed principals. * Nominee trusts can be used to avoid shares being registered in the names of the beneficiaries.

Facilitation of transfer of property

* Nominee trusts can be used in order to the transfer of real property without involving the

county recorder Recorder of deeds or deeds registry is a government office tasked with maintaining public records and documents, especially records relating to real estate ownership that provide persons other than the owner of a property with real rights over ...

. * In England and Wales, the legal title to

land Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various isla ...

may only be owned by persons aged 18 or over. Someone wishing to transfer land to someone aged under 18 may appoint a nominee to act as the legal owner, with the person aged under 18 becoming the equitable beneficial owner. Although there is a restriction on persons under 18 owning the legal title to land, they may nonetheless take ownership of the equitable beneficial interest under a trust.

Reduction of administrative burden

* Stockbrokers often appoint company to act as a nominee shareholder to reduce the administrative burden of

trading Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...

on behalf of their clients. * In England and Wales, trustees of charitable trusts may appoint a nominee to avoid the need to change the legal owner of trust property if the charity's trustees change. * Nominee trusts can be used to reduce the number of parties required to validity execute documents relating to

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

Reduction of costs

* Institutional investors often appoint a nominee company owned by an

investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

to act as nominee in respect of their shareholdings due to the

economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...

offered.

Governmental use

* In the majority of

England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe b ...

, the

Treasury Solicitor The Government Legal Department (previously called the Treasury Solicitor's Department) is the largest in-house legal organisation in the United Kingdom's Government Legal Service. The department is headed by the Treasury Solicitor. This office go ...

acts as the Crown's nominee for the collection of ''

bona vacantia Unowned property includes tangible, physical things that are capable of being reduced to being property owned by a person but are not owned by anyone. ' (Latin for "ownerless goods") is a legal concept associated with the unowned property, which e ...

'' (

Latin Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through the power of the ...

for "ownerless goods").

References

{{Clear Agency law Wills and trusts