A nominee trust is an arrangement whereby one or more persons appoint a "trustee" to be listed on legal title, or other documents, on their behalf. The arrangement is simple and passive, the trustee is to do nothing except what they are directed to do by the beneficiaries. Technically it is not a trust but an agency arrangement, although it has been characterized as a hybrid between a traditional trust and an agency relationship. One use of the nominee trust is to avoid reporting the ownership of real estate on the public record. The deed, or other filed document lists the trustee, but not the undisclosed principals. Another use is to facilitate transfer of real property without involving the county recorder.
Unlike a trust, the trustee does not have legal title, which remains in the "beneficiaries". Therefore, the trustee does not file a tax return with regard to income on trust property, as they would in an actual trust. The nominee trust is also an exception to the general rule that the capacity of a trustee is separate from the capacity of an agent. The common law may apply principles of the law of bailment to the nominee trust in some instances. The trustee is an agent of the beneficiaries who merely follows their specific directions. For bankruptcy purposes, the directed agency feature of a nominee trust prevents the trust itself from being a debtor-person. Therefore, a nominee trust cannot declare bankruptcy. Debts contracted by the trustee in his trustee capacity are debts of the beneficiaries.