Terminating a Nominee Trust to Advance its Purposes through the MUTC

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Nominee trusts are common vehicles "for holding title to real property in which one or more persons or corporations, pursuant to a declaration of trust, declare that they will hold any property that they acquire as trustees for the benefit of one or more undisclosed beneficiaries." Berish v. Bornstein The trust is the record owner of the property, with the trustee(s) (but not the beneficiaries) named on the deed, thereby offering privacy to those beneficiaries. Nominee trusts also streamline ownership among multiple parties because the trustee(s) can act on behalf of all beneficiaries for matters concerning the property. Additionally, nominee trusts simplify transfers of ownership among beneficiaries, both by avoiding the recording process and also by excluding the subject property from probate. 

 

But what if the benefits to a nominee trust no longer outweigh the burdens for some or all of the beneficiaries? Under certain circumstances, they can sue to terminate the nominee trust and extract the value of their interest. For example, if the nominee trust's terms concerning termination do not apply to the situation at hand, the Massachusetts Uniform Trust Code ("MUTC") may provide recourse. The MUTC applies to any express trust (a trust created intentionally and not by operation of law) of a donative nature (the settlor of the trust intended to give an interest in his/her property to another through the trust). When (and only when) a nominee trust meets those criteria, MUTC § 412 empowers a court to terminate it "if because of circumstances unanticipated by the settlor... termination will further the purpose of [the] trust."

In a recent case, certain beneficiaries did just that. In In the Matter of MacMackin Nominee Realty Trust, beneficiaries sued to terminate a nominee trust holding a collection of vacant lots "adjacent to and in between two summer cottages on Martha's Vineyard." The original owner of the lots and cottages intended the collected property to be a family compound shared equally by his two daughters and their families after his death, but problems arose when one of the daughters bought out her sister's share of the cottages, which were held in a different, testamentary trust. With ownership of the cottages unexpectedly concentrated in one of the sisters, family members no longer could enjoy and use the lots equally as a practical matter. Terminating the nominee trust, therefore, became the best way to advance its purposes because the resulting type of common ownership would allow those family members only holding an interest in the lots to extract and enjoy the benefit of those interests again via sale.  

 

If you have a question about your rights under a nominee trust or with respect to real property, please feel to contact Fitch Law Partners.

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