Real Estate Privacy Trusts

Buying property comes with a paper trail, a lot of which becomes public record after the transaction closes. Without a REPT in place, that could mean that you as a real estate buyer have your name peppered across several documents that are ultimately: 

• Filed in public databases
• Searchable and readily accessible at any point in the future

While you cannot get around completing certain paperwork when you’re buying property, you may be able to enter different information to mask your identity and minimize others’ ability to identify you as the property owner in the future. 

Additionally, it’s crucial to understand that public records are just one side of the privacy coin here. With a REPT in place, property owners may also enjoy anonymity in terms of: 

• Private company record searches: If a private entity or investigator tries to search these records in the future, those inquiries will not lead to you as the owner of real estate if that property is held in an REPT.
• Other searches: This could include searches related to property liens, tax assessments, and more.

Those protections can be exceptionally advantageous as a screen for high-profile parties and famous folks, as well as those who need an REPT for safety reasons. 

Real estate privacy trusts don’t work the same as other trusts, like grantor retained annuity trusts (GRATs) or irrevocable life insurance trusts (ILITs). That’s because REPTs have a different purpose, offering distinct opportunities and potential benefits, along with some strict rules and specific restrictions. 

To walk you through how it all works, let’s say you’re setting up an REPT right now because you’re buying another piece of property. To do that and enjoy the advantages of this type of trust, here’s what usually needs to occur: 

1. You draft the REPT documents, ideally with the assistance of an experienced attorney: This is when and where you will name the trustee(s), the beneficiaries, and the terms of the trust. Once you draft an REPT, you can revise it in the future if needed.
2. Your trustee signs the documents at closing: Your trustee will then be the entity that appears in any public record searches and county databases, not you as the grantor and beneficiary of the trust. Your name would only be in the body of the deed of trust. Although deeds of trust do not have to be recorded in county records by law, mortgage lenders tend to require this step. Nevertheless, even with this step, your name should not be featured in searchable systems as the grantor or beneficiary of the trust.
3. You can name a new trustee later: At any point going forward, you can replace the trustee, naming yourself as the new trustee, a co-trustee, or a successor trustee. This would generally occur after the real estate transaction closes.
4. You can alter or terminate the trust later too: As revocable living trusts, REPTs that you set up can be amended by you during your lifetime. Those amendments can mean updates to the real estate held by the trust, the beneficiaries, the terms of distribution, and more. As the grantor of an REPT, you’ll also retain the right to terminate the trust if you no longer need or want it later. If an REPT exists and you pass away, the trust will become an irrevocable trust, meaning its terms can no longer be changed (and the trust can’t be “terminated”). 

A thoughtfully constructed real estate privacy trust can work for months, years, or even decades serving grantors’ privacy needs, providing effective protections and reliable flexibility as well.

Any number of parties could benefit from real estate privacy trusts in Texas. That includes (and is not restricted to): 

• Individual property owners who value anonymity: If you own or plan to own real estate soon and privacy is a priority, creating an REPT can be one of your best options.
• High-profile individuals: Public figures, celebrities, and otherwise famous or high-profile people can set up real estate privacy trusts to keep their assets out of the public eye.
• High-net-worth individuals: Generational wealth can grow in REPTs while keeping real estate holdings out of grantors’ estates. That can make real estate privacy trusts an effective probate avoidance strategy, as well as a viable way to mitigate estate tax liabilities.
• Anyone with safety concerns: The privacy offered by REPTs can also provide a level of safety for those who have survived stalking, domestic violence, or other traumatic incidents.
• Businesses: Commercial enterprises can own and operate their real estate holdings with added privacy when they have an REPT in place.
• Investors: Real estate developers, property management groups, real estate hedge funds, and other property investors can also be optimal grantors for real estate privacy trusts.

Please keep in mind that while many parties can enjoy multiple advantages from REPTs, some Texans may be privy to redactions of their personal information from some public records upon request. 

Specifically, Texas Property Code Section 11.008(j) stipulates that the following parties can request to have their physical addresses (and other information) omitted from certain types of property records: 

• Lawyers
• Marshals
• Federal and state judges
• Family members of any party named above

Whether or not that option is on the table for you, remember, privacy is not an inherent component of real estate transactions. Obtaining that privacy takes work, and ensuring you have the privacy protections you need can require an REPT crafted with the counsel of an experienced lawyer. 

That’s where TAW Law comes in. Our Austin trust lawyers have created countless REPTs for various grantors with a wide array of needs and objectives. We can help you with your REPT needs, sharing more in a free, confidential consultation.

When you have an REPT, you have the means to buy, sell, own, and operate real estate with a shield of privacy. That is the main benefit of real estate privacy trusts because: 

• REPTs can obscure the identity of property owners.
• Grantors of REPTs will maintain control of the property and their homestead rights for any residence(s).

Along with privacy, other advantages of REPTs can include the abilities to:  

• • Evolve with your needs: REPTs can be updated as you acquire or sell property. They can also be adjusted to include new terms and new beneficiaries, like new grandchildren. Similarly, trustees can be updated at any point, and the grantor(s) will reserve the option to terminate the trust whenever they need (or want) to. This type of flexibility can be incredibly useful, particularly when coupled with REPT’s privacy protections.
  • Reduce the size of your estate: If your real estate holdings are held by REPTs, they won’t generally be included in your estate. That can shrink the value of your estate, helping beneficiaries possibly bypass probate later. Ultimately, that could mean beneficiaries are able to take ownership of real estate inheritances quicker, without court intervention. That could be invaluable if a family business or income depends on certain real estate holdings, for example.
  • Leverage other advantages: REPTs could put or keep certain tax advantages in play, offering another way for grantors and their beneficiaries to benefit from these trusts. 

• Maintain current exemptions: REPTs do not prevent you from applying for and obtaining relevant tax exemptions, such as the Texas homestead exemption.

You could see other benefits from setting up a real estate privacy trust, depending on your needs, your situation, and your goals. To get more insights about how REPTs could benefit you, reach out to TAW Law Texas for more information and answers.