Did you know that the name of an owner of a property you see on a title search may not actually be the true owner? This can be accomplished by a legal mechanism called a ‘bare trust’ and reflected in a legal document known as a ‘bare trust agreement’.
A bare trust is a legal arrangement in which a trustee, an agent or nominee of the true owner, holds property or assets on a beneficiary’s behalf. The trustee usually has limited control over the property and must follow the beneficiary’s instructions regarding its management, typically acting only as a custodian with no ownership rights or major decision-making authority. The beneficiary is the true owner who owns the property or asset and any income generated from it. Bare trust agreements are used for various purposes, such as holding assets for minors or individuals unable to manage their affairs, or even for privacy reasons although nowadays there are more disclosure requirements as a result of the Land Owner Transparency Act and its various filing requirements.
When to Use a Bare Trust Agreement
Bare trust agreements have been commonly used for:
- Real estate transactions where the buyer wants to remain anonymous on title. The buyer can create a bare trust and appoint a trustee to hold the property in their name. The buyer remains the trust’s beneficiary, and the trustee holds the legal title to the property but has no beneficial interest in it. However, with the introduction of the Land Owner Transparency Registry, all trusts nowadays must disclose the true beneficial owners and whether an owner is holding property in trust, so it is becoming more difficult to hide true ownership with a bare trust but a standard title search will often not disclose the trust relationship.
- Saving on probate fees for estate planning to transfer a property to beneficiaries under a Will without going through probate. The trustee holds a property in trust with a right of survivorship to avoid probate fees by way of transmission of survivorship, and then distributes the property to the beneficiaries named in the Will. The bare trust agreement can help determine the Willmaker’s intentions and make it clear that the joint tenant trustee holds title in name only.
Real Estate Lawyers in Vancouver
Are you looking to prepare a bare trust agreement for your situation? There are significant legal, tax and filing implications for bare trust agreements so get legal and accounting/tax advice before you decide to enter into a bare trust agreement. The knowledgeable real estate lawyers at Bernard Lau and Co. have extensive experience in real estate law. We can provide guidance on the legal implications and benefits of setting up a bare trust agreement, ensuring that it is properly drafted and executed to meet your situation.