Who is the Nominee Trustee in a Land Trust?

The nominee trustee in a Land Trust is a person, whom you trust, to serve as trustee for recording purposes only. After your property has been deeded from your personal name to that of the trust, (which, as I indicated in prior blogs, includes the name of the trustee) your nominee trustee will resign and you will take control as the undisclosed successor trustee. The public will be left with the impression, because your name is no longer on the title, that you no longer own the property.

By way of reference, this is how the land trust is similar to a Nevada corporation with nominee officer and director protections. When I create a Nevada corporation, an attorney in my office assumes the initial director and officer position of the client’s corporation. As the initial officer and director, the attorney’s information is provided to the Nevada Secretary of State to be made public to anyone with a computer. After the initial filings are complete, control of the corporation is passed to my client with the nominee’s resignation and my client’s subsequent assumption of these positions. From the public’s perspective, John Q’s attorney is listed as the nominee officer and director, and my client’s involvement is hidden. This process can be repeated on a yearly basis to keep your involvement private.

When the trustee resigns, does this imply that your trust will be without a trustee? Absolutely not! When you create your trust, you will be sure to nominate a successor trustee to assume control when the initial trustee is no longer serving. Who will be the successor trustee? You.

The question you might be asking yourself at this point is, what happens if your nominee trustee will not resign, or, even worse, he sells your property? For me to answer these questions satisfactorily, you must understand the legal relationship between the trustee and the trust beneficiaries. How can the beneficiary fire the trustee who presumably has control?

Most financial planners and attorneys you speak to about land trusts typically get this wrong. They do not understand this very important dynamic that distinguishes a land trust from a living trust. The trustee in a land trust holds title to trust property for the benefit of the trust beneficiaries. A trustee’s powers are limited to the specific powers conferred to him under the trust agreement. All other powers are specifically reserved for the trust beneficiaries.

In a good land trust agreement, your trustee should have the power to deal with tenants, make repairs, and expedite other limited expenditures, but all other matters concerning title, i.e. sale, loans, encumbrances, change in trustee, etc., require the consent of the trust beneficiaries. In other words, the beneficiaries are the ones with the real power under a land trust, which is why you should always be the beneficiary of any trust that holds title to your property.

What happens in the event your trustee turns out to be a rogue and sells the trust property without your consent? A client’s wife put this exact question to me after she learned that her husband, the trustee of their land trust, sold the trust property without her involvement. Let me put that a different way: The wife knew the husband was going to sell the property but believed she would need to sign some paperwork to effectuate the sale.

To make matters worse, the husband consulted an attorney who assisted with the closing and told the husband that he had full power of conveyance as the trustee of the trust. Wow, that was a huge mistake for an attorney to reach such a conclusion without reviewing the trust agreement.

You see, my trust agreement, states … Except as otherwise specifically provided in this trust agreement, all powers of the Trustee are subject to the consent of the Beneficiaries… The trust then goes on to state that the Trustee can convey title to real property but only after he has obtained the beneficiaries’ consent.

So how does this alleviate the wife’s concern? Simple, the trust beneficiaries could set the sale aside because they did not give their consent to the sale. The trustee will find himself embroiled in a lawsuit or two, and if an attorney gives the trustee his blessing and advice to move forward with the sale, then he will get the pleasure of experiencing the justice system from the other side of the table as well.

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Jonas Taylor: Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.