You may be advised by your attorney to transfer title to your real estate to a Realty Trust. This advice may leave you wondering – what is a Realty Trust?
I like to tell my clients that a Realty Trust is a very simple trust that has only one job – to take title to a piece of real estate. The trust document is usually short and sweet – only about 5 or 6 pages long. A Realty Trust is a nominee trust. That means it isn’t a “true trust”. Instead it establishes a principal/agency relationship between the Trustee and the beneficiaries.
The Trustee of a Realty Trust doesn’t have full fiduciary powers. In fact, the Trustee doesn’t have much power at all. Instead, the Trustee acts as directed by the beneficiaries. The beneficiaries of the Realty Trust are listed on a separate Schedule of Beneficiaries. The beneficiaries may be individual people or other trusts. The beneficiaries are the real underlying owners of the real estate, but they don’t actually take legal title and their ownership interest isn’t on record with the Registry of Deeds. A Realty Trust is very different from a “true trust”, such as a revocable living trust or an irrevocable trust. The Trustee of a true trust acts as a fiduciary with respect to the trust property, and has lots of powers over the trust property. The Trustee of a true trust doesn’t have to be directed by the beneficiaries to act.
The Trustee of a true trust can own real estate. Nonetheless, it is common in Massachusetts (although not other states) to instead title real estate in the name of a Realty Trust. There are several reasons why:
- A Realty Trust makes it easier for multiple people or trusts to own real estate together as tenants in common. The Realty Trust takes title to the property and then each owner and his or her beneficial interest % is reflected on the Schedule of Beneficiaries.
- A Realty Trust offers privacy for the underlying beneficial owners of the property. This is because the Schedule of Beneficiaries, with the names of all the owners, is not on record with the Registry of Deeds and can be kept private.
- A Realty Trust makes future transfers of beneficial ownership easier and cheaper. This is because in the future a beneficial interest % can be assigned to a new person or trust without recording a new deed. The ownership change can be done off record, with no required recordings with the Registry of Deeds and no recording fees.