Privacy is an almost-forgotten concept in our world. Perhaps we are trying to avoid being found by a greedy family member or being served in a vexatious lawsuit by a degenerate loser. Maybe you are a celebrity or media personality and don’t want your fans – or detractors – waiting outside your building or driveway (I love all of my adoring fans, but I don’t want them knocking on my front door before I start binging Punky Brewster reruns on Netflix). Maybe you are a foreign diplomat trying to secretly create a safe haven for your money and yourself in our wonderful country in case you piss off the head of your political party. But real estate records are public in most counties, so any one of these individuals can find out where I sleep / shower / leave my unwashed dishes without much trouble.
So how do you purchase real estate yet keep it private from the public?
- Using Revocable Trusts Correctly
Revocable living trusts are great privacy shields because they transfer property privately outside of Probate when you die. They are also much faster than Probate, so there is an additional benefit. However, in most states you must include the name of the initial Trustee on the Deed (or, for New York City properties, on the ACRIS forms), which is easily searchable and therefore confounds the entire reason of trying to procure privacy.
I suggest you set up a Revocable Trust with you as the creators and name someone you unconditionally trust to be the initial Trustee, then include language allowing you to replace the Trustee to anyone, including you. The Deed paperwork only includes the name of the initial Trustee, so when you name yourself as the Trustee after the Deed is filed there is no need to update the public land records of the Trustee change. You will want to name your Trust something innocuous that can’t be associated with your name, like the “Batman Trust” or “Mr. Wonderful Trust” (okay, don’t actually use either of these names, but you get the point).
True, you are burdening your Trustee to execute most of the real estate paperwork and mortgage documents, so there is a lot of work involved, but having your attorney do the work should mitigate some of these concerns (though the added legal fees will hurt more than a mere pin prick). Also, there will almost certainly be additional hassles and requirements surrounding the mortgage, and if you are dealing with a Coop this will be incredibly time-consuming, but if privacy is your primary concern then this is the best way to go.
- Using LLCs Correctly
Using LLCs has been a solid way to maintain privacy for several years now. The most important thing is that the organizing individual (uncreatively-yet-unsurprisingly called the LLC’s “Organizer” in New York) not be someone clearly affiliated with you, such as a spouse, child, best friend, etc. Also, remember that the “Osbourne Family LLC” is probably not going to afford Ozzy much privacy, so choose your LLC’s name wisely.
It should be noted that LLCs tend to procure mortgage with higher interest rates than individuals and revocable trusts get, and many Coops don’t allow LLC ownership. In addition, most LLCs are not properly titled to a Trust as it’s owner, so they eventually may pass under Probate. So, while LLCs may be a good choice for maintaining privacy of investment properties, they may not be the best choice for the owner of your residence.