Definition of "Nominee"

Nora Jean Malan real estate agent
Nora Jean Malan, Real Estate Agent eXp Realty

Generally, a nominee defines an individual or company whose name appears on securities or real estate. First and foremost, their purpose is to assist the progress of a particular transaction. Note, however, that the legal owner remains the initial buyer. Thus, the nominee functions as a caretaker or supervisor.

What does the role of a financial nominee involve?

A nominee establishes a nominee account at a neutral subsidiary or nominee company that isn’t involved in any transaction. The entrusted stockbroker safeguards shares that their clients purchased in this account. Moreover, dealing with these shares will become more flexible and straightforward if the client wishes. As a result, the stockbroker sells and buys stocks and securities fittingly to the owner’s objectives and directions. Besides, the nominee will transfer profits and dividends from the transaction to the owner.

Suppose you decide to work with a broker. Then, your securities and shares end up in the so-called “street name” instead of yours. Still, the company will keep the records straight, meaning that you’re still their proper beneficiary owner. 

Your cash reserve and investments are secure all the time. Let’s suppose the nominee goes bankrupt or intends to cheat you out of your funds by speculation. Then, various scenarios apply. First, another brokerage will take over the original company’s debts. Secondly, the

 

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ecurities Investor Protection Corporation (SIPC), a federal fund, will protect you against securities loss and other financial damages.

What is a nominee in real estate?

Nominee companies are single-use companies real estate businesses employ to keep the legal title. The primary beneficiary is a different entity.

A nominee in real estate means a person the homebuyer hires to buy a property instead of them. Sometimes the buyer can assume incognito and becomes an undisclosed principal. However, working with a nominee will not affect the seller. Various estate corporations, such as revocable trusts and Limited Liability Companies (LLC), can fill a nominee’s shoes in real estate. 

Nominees in estate planning

Nominees will become trustees of substantial assets, such as property, bank accounts, retirement benefits, and insurance policies. Working with them can be practical and productive if you’re interested in real estate planning, namely, making a plan to distribute your valuables after death. If you don’t work with nominees, you might risk that people you wished to receive your valuables might not get them.

Completing nominations for estate planning is paramount because they’re superior to wills and trusts. The law determines that the nominee is not the owner ofyour real estate. They are merely caretakers. After your death, they are legally obliged to distribute your funds to the legal heirs. However, the nominee can be the parent, life partner, and children in some instances. Then, the nominee will, by all means, become the owner of the funds. 

Nominee trusts in real estate

You’ll encounter the term nominee of trust in estate planning, often called real estate trusts. It describes a legal agreement in which the settlor (the founder of said trust who places an asset they own into the trust) designate a nominee or trustee to be a property’s lawful owner. Contrary to popular beliefs, a nominee’s trust is not genuine but only an agent assigned by the beneficiary. Consequently, the client maintains the authority to bring any decision. The Registry of Deeds records these trusts.

 The main advantage of setting up such a trust is granting anonymity to the owner. Besides, it is cost- and time-effective. Suppose there’s a change in real estate ownership. Then, all the expenses associated will be the costs for outlining and executing a new schedule of beneficiaries. This saves time because they don’t have to register a completely new transfer deed.

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