4.8/5 based on 35 reviews.
4.8/5

Sudden Wealth Blog

Using an Arizona Privacy Trust for Buying Real Estate

Happy couple who used an Arizona Privacy Trust

Maintaining privacy is more critical than ever in our data-driven world, especially when it comes to real estate transactions. With identity theft, unwanted solicitations, and legal risks lurking around every corner, keeping your personal information off public records is essential. However, Arizona’s laws make traditional land trusts ineffective for this purpose. Thankfully, the Arizona Privacy Trust offers a robust solution.

Why Land Trusts Don’t Work in Arizona

In many states, land trusts serve as a great tool for keeping property ownership private. Typically, the grantor transfers or purchases land in the trust’s name, with a third party acting as trustee. The trust’s beneficiary, often the grantor or a designated individual, maintains control over the property.

However, Arizona’s A.R.S. §33-404 law requires the disclosure of the trust beneficiaries when the trust is the grantee of real property. This requirement effectively nullifies the privacy benefits of a land trust, as it mandates that the beneficiaries’ identities be public record.

The Solution: Arizona Privacy Trusts

Given the shortcomings of land trusts under Arizona law, the Arizona Privacy Trust emerges as a practical solution for maintaining privacy in real estate transactions. This approach allows you to hold property discreetly without your personal details appearing on public records.

Key Elements of a Privacy Trust Arrangement

Privacy Trust Ownership: The Privacy Trust is named as the grantee on the deed, keeping the actual property owner’s identity off public records. Choose a generic name for the trust, such as “Sunset Property Trust,” that doesn’t hint at your identity.

Role of an LLC as Trustee: An anonymous LLC acts as the trustee, managed by you, allowing full control over the property without your name being publicly associated with it. This step is crucial for maintaining your anonymity.

Beneficiary Structure: Your revocable living trust serves as the beneficiary of the Privacy Trust. This living trust manages the asset distribution according to your wishes and ensures a seamless transition upon your death.

Setting Up a Privacy Trust: Step-by-Step

  1. Forming the LLC to Act as Trustee:
    • Pick a unique, non-identifiable name for your LLC.
    • File the necessary documents with a state that offers anonymity, such as Wyoming.
    • Obtain an EIN from the IRS for your LLC.
  2. Creating the Privacy Trust:
    • Draft a trust agreement naming the LLC as the trustee.
    • Use a generic name for the trust to maintain privacy.
  3. Creating the Revocable Living Trust:
    • Name the trust generically to avoid linking it to your identity.
    • Act as the trustee and beneficiary, and appoint successors for estate planning.
  4. Purchasing or Transferring Property:
    • List the Privacy Trust as the grantee on new property deeds.
    • Transfer existing property titles to the Privacy Trust.

Legal and Financial Considerations

Compliance with Arizona Law: Ensuring your setup adheres to state laws is crucial to avoid legal complications. Consulting with a legal professional can help ensure compliance.

Financial Implications and Tax Considerations: Both the Privacy Trust and the living trust are disregarded for tax purposes, but you should consult with a tax advisor to understand the specific implications for your situation.

Benefits of Using a Privacy Trust

Enhanced Privacy: Your name and contact details remain off public property records, significantly reducing the risk of identity theft and unwanted solicitations.

Control Over Property: Managing the LLC gives you direct control over the trust and its assets without compromising your privacy.

Estate Planning Advantages: The Living Trust handles asset distribution according to your wishes, ensuring a smooth transition upon your death.

Flexibility: The trust structure allows for easier property management and transfers while maintaining your anonymity.

Frequently Asked Questions

How does a Privacy Trust differ from a traditional trust? A Privacy Trust is designed specifically to maintain the property owner’s anonymity by using an LLC as the trustee and naming the trust generically, unlike traditional trusts which may not prioritize privacy.

Can I use my existing LLC as the trustee for the Privacy Trust? Yes, provided it meets legal requirements and does not directly link to your identity.

What are the costs associated with setting up a Privacy Trust? Costs may include LLC formation fees, trust drafting fees, and potential legal consultation fees. It’s advisable to consult with a professional to understand the full scope of costs involved.

Is a Privacy Trust legal in Arizona? Yes, a Privacy Trust is legal in Arizona as long as it complies with state laws regarding trusts and property ownership.

Will I still have the benefit of the Homestead Exemption? Yes, if structured correctly, you can still take advantage of the Homestead Exemption under A.R.S. §33-1101.

Will my heirs receive a step-up in basis on my death if there are two revocable trusts involved (the Privacy Trust and a second trust)? Yes, your heirs can still receive a step-up in basis on your death, minimizing potential capital gains taxes when they sell the property.

Conclusion

Privacy in real estate transactions is vital for protecting your personal information and minimizing risks. While traditional land trusts fall short in Arizona due to mandatory beneficiary disclosure, the Arizona Privacy Trust offers a robust alternative. By structuring your property ownership through a Privacy Trust with an LLC as trustee and a Living Trust as beneficiary, you can enjoy enhanced privacy and control over your real estate assets.

Ready to safeguard your privacy in your next real estate transaction? Contact us today at 602-443-4888 to set up a consultation. We’ll guide you through the process of establishing a Privacy Trust, ensuring your personal information remains confidential and secure.

Don’t wait—secure your privacy and peace of mind with an Arizona Privacy Trust today.

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

SPREAD THE WORD