I’ve had a few questions lately about whether a trust can hold title to a property in Ohio. This is a strategy that is used in states other than Ohio to conceal the identity of the true owner. I’ve long argued that this is an unnecessary step when an Ohio LLC can be formed without ever disclosing the owner’s identity (by using an attorney or incorporating company to form the LLC and serve as statutory agent). To clear things up, here’s some information about the ways a trust can be associated with real estate in Ohio.
If a deed conveys to a trustee of a disclosed trust (e.g., “John Smith, trustee of the John Smith trust”) and there is no affidavit or memorandum of trust of record, an objection to title must be made. This comes from Ohio Title Standards 3.18. The purpose of the affidavit or memorandum is to disclose the trustee’s power to sell property, because if the trust doesn’t give the trustee the power to sell, the grantee may be liable to the beneficiaries. With the disclosure, the grantee can take title to the property as a bona fide purchaser, protected from such claims by the law.
This does not mean that a county recorder has discretion to reject the deed (in fact they must accept whatever ragged back-of-the-napkin document you present as long as it’s got the requisite formalities and is notarized, or they can be compelled by mandamus to do so).
If a deed conveys to a trustee of an undisclosed trust (e.g., “John Smith, trustee”), this is not enough to give notice that a trust exists. Thus a purchaser can take title free of claims from beneficiaries and without the need to inquire as to any limitations on the trustee’s power. (See RC 5301.03). This strategy was often used in the past when it was necessary to have a straw man transfer in order to create a joint tenancy with survivorship, since a husband and wife holding as tenants in common could not create a new estate by conveying to themselves as survivorship tenants (this has since been remedied by statute). For practical purposes, title companies generally treat this as a conveyance to the individual directly when searching for judgment liens and encumbrances.
If a deed conveys to a trust, it is void, unless a memorandum of trust is filed in accordance with RC 5301.255. That a trust is not an entity capable of taking title has been settled law in Ohio for a long time (see generally Thompson v. McVey, 2006-Ohio-7036). This mistake was made so often and so many chains of title were clouded that the legislature was fed up enough to enact a curative statute. The memorandum puts the trustee’s name on the record, essentially fulfilling the first requirement that the trustees take title, not the trust.
A trust may be an entity for other purposes, just like a trade name might be considered an entity in some aspects, but it’s not an entity that can hold title. It’s a fiduciary arrangement between the settlor and the trustee. Imagine if you wanted to locate the owner of a parcel that was titled in the name of the “John Smith Trust” without any further information. It’s not registered anywhere, and there is no statutory agent like there would be for a corporation. If you don’t know the trustee’s name already, there’s no practical way to look up this information. Trusts are simply restrictive arrangements they can be created verbally or by one or more written documents. They’re not companies with registered agents and places of business, so the trustee needs to disclose their identity somewhere on the record.