Maintaining Anonymity in Ownership in the Digital Age

A Hot Topic in Real Estate Ownership and Privacy

At Counselors Title, we often encounter inquiries from prospective owners, due to their public profile or other privacy concerns, as to whether there is a way to shield their identity from the public record regarding their upcoming real estate purchase. This has become an increasingly difficult exercise in a modern era where Land Records are available online and often for no charge, making recorded document information easily accessible by news agencies or other members of the public. Although the District and many states have established an Address Confidentiality Program to shield ownership information from the public record in limited circumstances such as for victims of domestic violence (https://ovsjg.dc.gov/acp), this is not applicable to most real property purchase transactions.

One important step towards maintaining confidentiality after a purchase closes is to confirm that the listing broker has removed the listing from the Multiple Listing Service in a timely manner, which will also purge the home’s information from online platforms and home buying websites. However, even if this is done, an individual owner’s name, which must appear on the deed to take ownership, will in turn appear in the easily accessible public record once the deed is recorded. An effective method to avoid this is to create an entity to take ownership of the property, which would then appear as the owner in the public record rather than the individual. If the entity has not yet been created at the time of contract, the contract must allow for an assignment of the contract to the as yet to be created entity.

A popular form of such an entity is a Limited Liability Company, or LLC, which not only can provide anonymity but can also limit an individual’s liability related to the property. Typically, an LLC can be easily created simply by filing Articles of Organization with the local jurisdiction’s business formation website. The Articles only contain minimum information such as a business address and a resident agent, who can be a representative of the entity. An LLC can be owned by a single individual, several members, or even another entity and need not necessarily be created for a business purpose. The Operating Agreement, which identifies the principals involved in the LLC and the how it is managed, does not need to be registered anywhere. Most states do not even require an Operating Agreement if there is only one individual owner. The name of the LLC can also be selected in such a way as to shield any identifying information regarding the principal, such as the property address. Forming a corporation is a similar process but much more formalized and therefore not an option typically chosen.

A few potential drawbacks to LLC ownership are that it creates a separate taxable and legal entity with separate tax filing requirements, could complicate transactions involving the property, limits the number of mortgage loan programs otherwise available for the property, subjects the property to Rent Control in DC if rented and/or disqualifies the property from Homestead benefits if owner occupied.

Another option for the prospective owner is to create a revocable trust, which appoints a Trustee to hold property for the beneficiaries pursuant to the Trust’s terms. Trust property is

treated for most legal purposes, particularly taxes, as the individual (an irrevocable trust is a different story). Most loan programs allow ownership in trust although the borrower must provide their lender a copy of it. Trusts specify how assets the Trustee owns are distributed after death outside of probate and should only be used as part of an overall estate plan. Like an LLC, the name of the revocable trust can be chosen so as to shield the identity of its creator (usually called the settlor) and the beneficiaries. A trust also does not need to be recorded or registered. In the District of Columbia, title in a trust may be identified in a Deed by reference to the trust instrument only, the name of the current trustee only, or the current trustee as trustee of the trust (See DC Code Section 19-1304.18), creating flexibility to shield identifying information. For those jurisdictions that require both the trustee and name of the trust to be identified in the deed, the settlor could appoint a trustee and select a name of the trust which is not associated with the person seeking anonymity and thus preserve confidentiality. A potential drawback with this option is the initial expense related to creating the revocable trust.

While these options can serve as effective tools to maintain confidentiality in the right circumstances, there are implications to any entity ownership structure. The potential property owner should seek the advice of an estate planning and/or tax professional before moving forward with such an approach

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