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FREQUENTLY ASKED QUESTIONS ABOUT TRUSTS

WHERE DO TRUSTS COME FROM? Answer

WHAT IS A TRUST? Answer

WHY A TRUST? Answer

WHAT IS THE TRUSTEE? Answer

WHAT KIND OF TRUSTS ARE THERE? Answer

WHAT ARE BENEFICIARIES? Answer

WHO CAN BE THE BENEFICIARY(IES)? Answer

WHAT IS THE INDENTURE? Answer

IS IT IMPORTANT THAT THE TRUST BE IRREVOCABLE? Answer

IS A TRUST THE SAME AS A WILL? Answer

WHAT ARE THE BENEFITS OF A TRUST? Answer

CAN A TRUST OPERATE A BUSINESS? Answer

WHAT IS THE SINGLE GREATEST CONCERN PLAGUING WEALTHY INDIVIDUALS AND BUSINESSES TODAY? Answer

IS THERE AN EFFECTIVE LEGAL SOLUTION TO THIS CONCERN? Answer

WHAT IS ASSET PROTECTION PLANNING? Answer

SHOULD MY BANK SET UP MY TRUST AND BE THE TRUSTEE? Answer

SHOULD AN ATTORNEY HELP SET UP THE TRUST? Answer

I CARRY SIGNIFICANT LIABILITY INSURANCE COVERAGE - WHY SHOULD I BE INTERESTED IN ASSET PROTECTION? Answer

I ALREADY HAVE A LIVING TRUST. DOESN'T THIS PROTECT MY ASSETS? Answer

HOW DOES A TRUST PROTECT ME FROM LAW SUITS? Answer

WHY CAN'T I JUST HIDE MY MONEY IN A FOREIGN ACCOUNT? Answer

IS THIS ALL LEGAL? Answer

CAN ASSET PROTECTION WORK IF I AM CURRENTLY IN LITIGATION? Answer

CAN CREDITORS SEIZE TRUST PROPERTY TO SATISFY PERSONAL DEBT? Answer

HOW LONG BEFORE OUR LEGISLATURE LIMITS THE POWERS OF THESE TRUSTS? Answer

CAN YOU ELABORATE ON HOW A TRUST CAN HELP AN INDIVIDUAL REDUCE HIS TAXABLE LIABILITY? Answer

WHAT IF I GET SUED? WHAT HAPPENS TO THE TRUST ASSETS? Answer

CAN THE TRUST BE SUED? Answer

CAN THE TRUST SUE OTHERS AS WELL? Answer

WHAT IF I SHOULD GO BANKRUPT? Answer

WHAT IF I SHOULD GET A DIVORCE? Answer

CAN ARTIFICIAL ENTITIES HOLD THE POSITIONS, GRANTOR/CREATOR, TRUSTEE, AND BENEFICIARY? Answer

WHAT IS A TRUST CERTIFICATE (TC)? Answer

IS THERE A NEED FOR A WILL IF EVERYTHING IS IN A TRUST? Answer

HOW DO MY HEIRS TAKE OVER UPON MY DEATH? Answer

IS THIS CONSIDERED MY TRUST? Answer

DO I STILL OWN THE ASSETS IN THE TRUST? Answer

DOES THE TRUST PAY FOR MY PERSONAL THINGS? Answer

HOW DO I KEEP MINUTES FOR THE TRUST? Answer

HOW DO I EXCHANGE OWNERSHIP OF AUTOMOBILES AND HOUSES TO THE TRUST? Answer

WHAT ABOUT INCOME TAXES? DOES THE TRUST PAY INCOME TAX? Answer

WHAT KIND OF PROPERTY CAN BE CONVEYED INTO A TRUST? Answer

WHY IS A TRUST BETTER THAN A CORPORATION? Answer

WHAT IS A PURE TRUST? Answer

WHAT IS THE DIFFERENCE BETWEEN A PURE TRUST AND A LIVING TRUST? Answer

WHY HASN'T MY ATTORNEY TOLD ME ABOUT TRUSTS BEFORE? Answer

IF A TRUST IS SO GOOD, WHY DOESN'T EVERYBODY HAVE ONE? Answer

Q. WHERE DO TRUSTS COME FROM?

A. Trusts have a long history of usage. Plato used a non-profit Trust to finance his university in Greece around 400 B.C. Trusts were known in Roman law as well. In England Trusts were in use as early as the 11th century and by the 15th century were being enforced by the Courts of Chancery. Many burdens and conditions fell upon the holder of legal title to real estate. For example, the lord of the land was entitled to relief or money payments when the land was passed on to an heir of full age. The lord was also entitled to aid or tax money to pay for the marriage of the lord's daughter or the knighting of the lord's eldest son. The owner of the land was usually prohibited from selling the land or dividing it among his children or grandchildren. If the owner of the land was convicted of a crime, he forfeited all he owned to the lord or the king, thereby leaving his family impoverished. These are some of the major restrictions. There were nearly 100 other taxes and limitations on the ownership of land. It was to avoid these restrictions that Trusts were first created in England. They were designed to avoid the application of these rigid laws by allowing the Creator to vest legal title in a Trustee on behalf of a wife, son, daughter or other person as beneficiary. They had many advantages, not the least of which was secrecy. Trusts were also used in English history to allow religious organizations to use property charitably bestowed which would otherwise not be possible due to certain restrictions against land ownership by churches and religious organizations. The English also used (and still use) Trusts to avoid probate of an estate.

Pure Trust organizations arrived in America with the colonists. The first **"Pure Trust" of record was drafted for Governor Robert Morris of the Virginia Colony, a prominent financier of the American Revolution, by the famous attorney and patriot, Patrick Henry, in 1765, 24 years before the adoption of the Constitution. Known as the North American Land Company, this Pure Trust is still in operation today, over 200 years later.

William Bingham, reputed to be the richest American when the thirteen colonies won their independence, started a Pure Trust for his vast estate in 1804. The Trust owned two million acres in Maine which sold about the time of the Civil War. Bingham, a Senator from Pennsylvania in the Second United States Congress, owned vast land holdings. The Trust was terminated by the Trustees in 1964 after some 160 years of operation. It was terminated because of the multiplication of beneficiaries (total 315) and the liquidation of assets. Throughout the years, the incomes from property and proceeds from land sales were distributed to the beneficiaries. At the time of liquidation, it had no termination date. During its period of existence it was not affected by the death of its Creator, succeeding Trustees, probate procedures, or death transfer taxes.

One of the outstanding examples of the Pure Trust is the Mesabi Trust which owns the reserves of the famous Mesabi iron deposits in Minnesota. This Trust receives the royalty payments from the iron deposits and distributes the royalties to the holders of Mesabi's certificates of beneficial interest. Following the transfer of assets from the company to a Pure Trust, Mr. Arnold Hoffmann, then president of the Mesabi Iron Company, announced in the Wall Street Journal on March 14, 1961, that a ruling by the Commissioner of the Internal Revenue declared the Trust would not constitute an association of persons taxable as a corporation. The shares of beneficial interest are traded daily on the New York Stock Exchange.

Edward H. Hines, a multimillionaire building supplier, established a $12 million Trust in 1914, and headed his business until his death in 1931. His two sons, Ralph J. and Charles, succeeded the elder Hines as Trustees of the Trust and retained Trusteeship of their father's Trust after a court fight instituted by two nieces, a sister, and a nephew sought to break the Trust by claiming the administration of the family estate had been erroneous. The court ruled that the Pure Trust was not an erroneous method of managing the assets, and was in fact, a valid and legal arrangement for the estate. Ralph J. Hines, the eldest son and head Trustee, died in 1950, and again the family assets held in the Pure Trust were not disturbed by estate and inheritance taxes. The younger brother, Charles, subsequently became the head Trustee, handling the Trust for many years. Preserved, intact, for future generations, the Edward H. Hines Lumber Company is still in operation today.

Another example of the Pure Trust used for a family estate is that of the Joseph Kennedy family. Joseph Kennedy, father of John F. Kennedy, originally established a Pure Trust to own the famous Chicago Merchandise Mart. The Kennedy family is known to maintain several other Pure Trusts for tax shelter purposes as well. One such Trust was reported in the Chicago Tribune. March 22, 1947 with the caption: "Kennedy Divides Merchandise Mart." "A Trust agreement formed several years before, in which Kennedy's wife, Rose F. Kennedy, and a long time friend and associate, John L. Ford, joined as Trustees, helped to materially distribute ownership in the 30 Million Dollar Merchandise Mart, among members of the family. It is said that many of these Trusts are domiciled in the Fiji Islands of the South Pacific."

Things have since gone well for the Kennedys. Do you think they enjoyed any tax benefits from how things were set up or were they just exceptional business managers? The below article was recently released in the Associated Press.

TUESDAY, JANUARY 27, 1998

Kennedys Sell Last Business

AP

CHICAGO, Jan. 26 -- "The Kennedy family said today that it had sold its last operating business, the Merchandise Mart in Chicago, in a $625 million deal that unloaded a substantial portion of the family's property holdings. The buyer, Vornado Realty Trust of Saddle Brook, N.J., will pay $465 million in cash, assume $50 million in debt and offer $110 million in securities. The deal also includes other properties in Chicago and in the Washington area. The Merchandise Mart, the centerpiece of the deal, was completed in 1930 by Marshall Field & Company, the retailer, and bought for $12.5 million in 1945 by Joseph P. Kennedy, the family patriarch. The sprawling, 25-story building of limestone and terra cotta is a national center for the home furnishings and design industries, and it remains one of the world's largest commercial buildings. At 4.2 million square feet, the Mart has its own ZIP code and was the world's largest building until the Pentagon was built, in the 1940's. In the deal, the Kennedy heirs will receive a stake in Vornado, one of the nation's largest real estate investment trusts. Most of the Kennedy fortune is in securities, such as stocks and bonds".

William Waldorf Astor created a Fifty Million Dollar Trust estate by a conveyance to Trustees, recorded in New York, August 15, 1991, thereby saving his heirs several million dollars which would have gone for probate costs and death taxes had the estate been distributed by the court instead of Trustees.

The Rockefeller family has used various kinds of Trusts as a means of maximizing privacy. Before his death in 1937, it is reported that John D. Rockefeller tucked much of his fortune into about seventy Trusts for his descendants. This vast web of individual and group funds represent assets of considerably more then One Billion Dollars. Nelson A. Rockefeller and his generation are believed to have reduced their personal holdings by the creation of still more Trusts for their own grandchildren and great grandchildren. It has been reported to one source that there are "well over 100 and perhaps 250 Individual Rockefeller Trusts". Many of these Trusts are known to be Pure Trusts placing the funds beyond the reach of the high cost of probate.

H.L. Hunt, the Texas oil billionaire, is reported to have paid $75,000 for the setting up of the first Hunt family Pure Trust. Hunt then created at least twenty-five additional Trusts many of which seem to follow the names of the Hunt family members as follows:

1. Ruth Ray Hunt Trust Estate - This Trust owns a large percentage of the Hunt Oil Company, estimated to be worth in excess of One Billion Dollars.

2. Caroline Hunt Sands Trust Estate - This Trust is estimated to be worth at least One Hundred Million Dollars.

3. Ray Lee Hunt Trust Estate - This Trust bought the Jefferson Dallas Hotel in downtown Dallas, Texas. Ray Hunt called the purchase by his family's Trust an excellent investment according to the Dallas Morning News.

4. Nelson Bunker Hunt Trust Estate.

5. Ruth Jane Hunt Trust Estate

6. Helen Hunt Krelling Trust Estate

7. Swanee Hunt Trust Estate

8. Hassie Hunt Trust - This Trust is involved in the new exploratory oil drilling efforts in the Permian Basin of West Texas and Southwestern New Mexico.

Some persons who claim to have been close to the Hunt family estimate that there may be as many as 200 Hunt family Trusts now in existence. The death of H.L. Hunt has not affected any of these Trust estates. The family has successfully arranged their affairs so as to increase the estate generation after generation rather than see the estate cut to shreds by the high costs of probate.

Even Ronald Reagan has established such a Trust. Created in 1966, the "Ronald Reagan Trust" has enabled him to enjoy sizable tax advantages. While maintaining a magnificent living standard, Mr. Reagan has, in some years of Trust operation, been free of tax obligations.

These are but a few of the many family estates that are preserved generation after generation through the use of the Pure Trust organization.

 

Q. WHAT IS A TRUST? 

A. A trust is a three party contract, a private legal agreement. The Trust is based upon the "Indenture", which expresses the agreement between a person, (Grantor/Creator), who places assets in a Trust, and the (Trustee), an individual entrusted with, the protection, management and ultimate distribution of the (Trust Corpus) assets for the persons, (Beneficiaries), entitled to benefit from the assets and/or income held under the terms of the indenture.

 

Q. WHY A TRUST? 

A. There are various reasons for considering a trust. Asset protection, Business organization, Protection from liability, Avoidance of probate, Relief from high personal income taxes to name a few.

 

Q. WHAT KIND OF TRUSTS ARE THERE? 

A. Black's Law 6ed. lists more than 80 different and distinct types of trusts that are legally recognized and acknowledged.

 

Q. WHAT IS THE TRUSTEE? 

A. The Trustee is the person into whose control the assets have been-transferred. It is the duty of the Trustee to ensure that the instructions of the indenture are carried out and the beneficiaries' interests protected.

 

Q. WHAT ARE BENEFICIARIES? 

A. A Beneficiary is any person or persons or any other legal entity, including another Trust, that has rights to future beneficial distributions according to the terms of the Trust Indenture.

 

Q. WHO CAN BE THE BENEFICIARY(IES)? 

A. Anyone may be the beneficiary of a trust. That includes children, nieces, nephews, grandchildren, a partnership, corporation, charitable or non-profit organization or trust. The fact is that any "person" living or artificial may be the beneficiary of a trust.

 

Q. WHAT IS THE INDENTURE? 

A. An agreement between the Grantor/Creator and the Trustee that is drawn up in order to define the desires or concerns of the Grantor/Creator. While the specific instructions in the Indenture may vary greatly from case to case, the necessary features are:

• Naming of the Trustee.
• Defining the terms and conditions under which the Trustee can be removed or resign.
• Defining the Trustee's powers and restrictions and responsibilities.
• Describing the assets or initial Trust Property
• Naming the Beneficiaries.
• Naming of the Grantor/Creator, the person who conveys the initial assets to the Trust Corpus.

 

Q. IS IT IMPORTANT THAT THE TRUST BE IRREVOCABLE?

A. ABSOLUTELY !! A revocable Trust is one in which the Creator can change its mind and cancel the contract, thereby taking back all assets placed into the Trust. As a result, a revocable Trust provides no protection of the estate from future claims against the Creator. Say, for example, that for no reason at all, someone sued you, and due to inexperience, lack of knowledge on your part, or perhaps even incompetent legal advice, a judgment is obtained against you personally. In the case of a revocable Trust the judgment creditor could force you to revoke the Trust to allow access to assets to satisfy the judgment regardless of how the judgment was obtained. Since the purpose of the Trust is to preserve and enlarge the estate, you would not want this type of attack to diminish the assets of the Trust.

In addition, if you revoke the Trust and the assets return to you, there is no gain in probate savings. In some jurisdictions, even if you die before the Trust expires, the asset value of the revocable Trust is placed in your estate for probate. Under federal law, the value of the revocable Trust is placed in your estate for federal estate tax purposes.

To maximize the benefits of a Trust it should be irrevocable.

To obtain the maximum benefits from a Trust, It should last for at least twenty-five years. There is no "rule against perpetuities" for Pure Trusts, since the Constitution says that there can be no legislating of contracts. However, contracts must have a "time certain" for performance, so a contract can't go on forever. For this reason a Pure Trust has a renewable term provision that is usually included as a part of the Trust document.

 

Q. IS A TRUST THE SAME AS A WILL?

A. A trust is quite different from a will in that a will is a letter to the Court providing instructions for assets to be distributed after a death. A Trust is a contract which contains instructions (the indenture) on how assets are to be handled while the Grantor is alive. At the death of the Grantor, the minutes of the Trust delineate what, if anything, is to be done and when, and how. A trust serves as a substitute that is far superior to a will.

 

Q. WHAT ARE THE BENEFITS OF A TRUST? 

A. The proper use of the proper trust allows one to :  

• Preserve and protect assets
• Defer, or eliminate estate tax liability
• Increase opportunities for accumulation of wealth and estate growth
• Isolate assets from litigation and liens
• Create a family estate plan that will work for generations
• Privacy
• Avoid lawsuit & judgment losses
• Enjoy Privacy in business
• Utilize Asset and income diversification
• Provide for custody of children's funds
• Protection for retirement savings
• Avoid probate and estate taxes
• Facilitate the transfer of the estate to the heirs
• Protect assets in the event of bankruptcy
• Protect assets in the event of a divorce

 

Q. CAN A TRUST OPERATE A BUSINESS? 

A. Yes, Trusts are and have long been recognized as legitimate entities that can be or own businesses, land, farms, manufacturing, rental property, etc.

 

Q. WHAT IS THE SINGLE GREATEST CONCERN PLAGUING WEALTHY INDIVIDUALS AND BUSINESSES TODAY?

A. We live in a society where litigation and punitive taxation have become the greatest means of depleting wealth. As a person accumulates wealth they become a target for either some arcane or obscure tax or liability through a law suit where the award can easily exceed the limits of the insurance, completely wiping out the company and the company's owners or officers.

 

Q. IS THERE AN EFFECTIVE LEGAL SOLUTION TO THIS CONCERN? 

A. Yes. The FFA Trust System can effectively protect assets from potential litigants and creditors. It allows an individual family or business to defend assets against unanticipated claims. In addition it is effective in deferring many kinds of wealth depleting taxes and yet maintain a great degree of flexibility. FFA has assisted over 7000 clients for 14 years in addressing these matters.

 

Q. WHAT IS ASSET PROTECTION PLANNING? 

A. Asset protection planning is the adoption of advance planning techniques which place assets beyond the reach of future potential creditors. In our system, it does not involve hiding assets, nor is it based upon secret agreements or fraudulent transfers. It is based upon a time proven and Supreme Court proven system of using trusts to hold family and/or business assets.

 

Q. SHOULD MY BANK SET UP MY TRUST AND BE THE TRUSTEE? 

A. A very large number of Trusts today are set up and run by banks. Some people seem to be quite happy with this arrangement and apparently completely trust the bank's qualifications to manage their assets. Most banks will insist on having full control over the assets, including the power to sell and invest them as they see fit without any input from you or reliance on your experience managing these assets. In addition, if the bank should choose bad investments and lose all of the Trust's assets, it would be extremely difficult, if not impossible, to hold the bank accountable for its judgment in making those investments. As a rule, banks have an atrocious track record overseeing Trusts.

With the Pure Trust you have the ability to choose those individuals whom you deem trustworthy and qualified to handle those assets you have worked so long and hard to accumulate.

 

Q. SHOULD AN ATTORNEY HELP SET UP THE TRUST?

A. It is not easy to find a competent attorney knowledgeable in Pure Trusts and willing to assist you in creating one. The business of probate constitutes an extremely large portion of the legal profession's income source. Not known for their altruism, it is highly unlikely many attorneys would sever this lucrative source of revenue. Many lawyers have turned down judgeships to remain probate attorneys. Probate attorneys are very well paid, especially in terms of the amount and difficulty of the work involved.

When Norman Dacey wrote, How to Avoid Probate the American Bar Association fought unsuccessfully all the way to the Supreme Court to prevent publication of the book. As well as denouncing the probate racket, Mr. Dacey claimed that less than 1 % of all attorneys understand the intervivos or living Trust. Those attorneys who do understand Pure Trusts will share the knowledge with their colleagues and use it for their personal benefit but almost never on behalf of their clients. They just do not want to lose the probate business. Four studies over the last decade confirm that ten to twenty percent of an estate is a reasonable probate fee, a fee that goes directly to lawyers and in many states laws prevent the public from knowing about these attorney fees.

 

Q. I CARRY SIGNIFICANT LIABILITY INSURANCE COVERAGE - WHY SHOULD I BE INTERESTED IN ASSET PROTECTION?

A. If you review your insurance policies, you'll find that they may not cover you for punitive damages or intentional wrongdoing. Additionally, a claim can always be made which will exceed your coverage. As an aside, who is a better target; a person with little or no assets, or a person with liability insurance?

 

Q. I ALREADY HAVE A LIVING TRUST. DOESN'T THIS PROTECT MY ASSETS? 

A. Simply put, NO. The revocable living trust can be a useful estate planning tool, which, when properly funded, will result in the avoidance of the probate process for the assets transferred to it, but it affords no protection from your creditors. If you get sued and lose, a court can order you to revoke the trust and pay the creditor. 

 

Q. HOW DOES A TRUST PROTECT ME FROM LAW SUITS? 

A. Many times the decision whether or not to sue is based on the amount of assets the potential target has. Assets held in trust are not legally yours. This fact alone will dissuade many potential litigants from starting legal action. If it is too difficult to get to the assets, often times that is enough to prevent the suit.

 

Q. WHY CAN'T I JUST HIDE MY MONEY IN A FOREIGN ACCOUNT? 

A. While investing funds in a foreign account may prove to be a worthwhile investment, any asset protection planning which depends upon hiding assets or secrecy is potentially doomed to failure. You still have to have a mechanism to get the assets back to you. With proper structuring, a Pure Trust Organization may be used with foreign entities to legally remove funds from the US (tax free) and put the funds into international circulation.

 

Q. IS THIS ALL LEGAL? 

A. Yes, prudent planning and structuring to maximize your efforts and protect assets is not only legal but smart. There is no federal law nor any state law that restricts you from doing what is in the best interest of your business and family.

 

Q. CAN ASSET PROTECTION WORK IF I AM CURRENTLY IN LITIGATION? 

A. In many cases, yes, although your planning options are ordinarily narrowed under such circumstances. Unfortunately, many people first seek to protect their assets after they have been sued or otherwise incurred an obligation. In such cases there are fraudulent transfer laws (in all states) which permit a court to set aside transfers made at the "eleventh hour". So, it makes sense to have restructuring completed before litigation is on the horizon. It can, however, be very helpful during and after litigation, as well. For more information on this click here.

Q. CAN CREDITORS SEIZE TRUST PROPERTY TO SATISFY PERSONAL DEBT?

A. The Supreme Court confirms that a trustee can not be held liable for trust debts, nor may a trust be held liable for a trustee's personal debts.

 

Q. HOW LONG BEFORE OUR LEGISLATURE LIMITS THE POWERS OF THESE TRUSTS?

A. Trusts come under congressional review from time to time. The result has been that Trusts remain a "protected" entity. In addition to that, there are certain very fundamental guarantees prohibiting the restricting of the "right to contract" (Article I Sec. 10 US Constitution) not to mention numerous laws in the US Code specifying the penalties for interfering with the right to contract. Not to mention, it's unlikely that trusts will be seriously legislated on because many of our legislators enjoy the benefits of Pure Trusts.

 

Q. CAN YOU ELABORATE ON HOW A TRUST CAN HELP AN INDIVIDUAL REDUCE HIS TAXABLE LIABILITY? 

A. From a tax standpoint, it is simple, income that is yours is taxed to you. Trust income is taxed to the trust. Properly established and maintained Pure Trusts are not taxable entities.

 

Q. WHAT IF I GET SUED? WHAT HAPPENS TO THE TRUST ASSETS?

A. The TRUST assets belong to the TRUST. Your assets belong to you. If someone sues you, they can not get what is owned by the TRUST. If you have already passed ownership of your assets to the TRUST, then no one can get at them if they are suing you, the individual.

 

Q. CAN THE TRUST BE SUED?

A. Of course it can. It is a legal entity unto itself. The only liability the TRUST has is it's assets. If the TRUST has limited assets, you have no worries. If it was to lose a lawsuit and have a judgment filed against it, the only thing they should be able to get is the current assets of that TRUST. The trick here is to ensure that any Trust liable to suit has no assets. Keep trust assets out of the way of potential liability.

 

Q. CAN THE TRUST SUE OTHERS AS WELL? 

A. Yes! If the trust has cause for initiating legal action then the trust may sue.

 

Q. WHAT IF I SHOULD GO BANKRUPT?

A. As a Trustee, Managing Director, or Beneficiary, going bankrupt will have no effect on the assets of the TRUST because neither of the above own those assets.

 

Q. WHAT IF I SHOULD GET A DIVORCE? 

A. A divorce has no effect on the assets of the TRUST. Again, those assets are owned by a third entity, the TRUST, and not one of the parties involved in the divorce. One thing to note is that once assets are transferred to the TRUST, neither party has any marital rights to those assets in the event of a divorce. If you feel there may be a problem with an upcoming divorce, it's best to resolve the custody problems first, before considering a TRUST for family matters.

 

Q. CAN ARTIFICIAL ENTITIES HOLD THE POSITIONS, GRANTOR/CREATOR, TRUSTEE, AND BENEFICIARY? 

A. Yes! Any legal entity such as a Corporation, Partnership or even another Trust can hold the position of either the Grantor/Creator, Trustee or Beneficiary.

 

Q. WHAT IS A TRUST CERTIFICATE (TC)? 

A. A Trust Certificate is similar to a share of stock. The difference is that while a share of stock represents voting power and equitable ownership of a sort, a Trust Certificate represents only the right to future beneficial distributions, if any. The TC has no ascertainable value, this means that no income or gain tax can be assessed to the holder of a Certificate(s). Trust Certificates cannot be sold, pledged or used as collateral.

 

Q. IS THERE A NEED FOR A WILL IF EVERYTHING IS IN A TRUST?

A. No, not really. The TRUST is all an estate needs to direct the proper distribution of profit and assets. You've already transferred ownership of your assets to the TRUST. Now, it's just a matter of who controls those assets. The one thing you want to keep current is the Successor-Managing Director that will take over the control of the asset's upon YOUR incapacitation,death,or at your request. The Trust will remain intact and undisturbed but control will pass to someone else that YOU designate NOW, at the time of setting up the Trust. If you do have assets that are not held by the trust, even though you have most assets in a trust, you will want to have a will or a will substitute directing the disposition of those assets.

 

Q. HOW DO MY HEIRS TAKE OVER UPON MY DEATH? 

A. If your heirs are the beneficiaries of the Trust, there is no change needed. If your heirs simply want to CONTROL the assets like you did before your death, you need to make sure their name is established as "Successor Managing Director" in the appropriate Minutes. That way, in the event of your death, they automatically take over your position as Managing Director. This way there is no probate or estate transfer taxes.

 

Q. IS THIS CONSIDERED MY TRUST? 

A. NO! You are in control of the TRUST if you are the Managing Director, but it is NOT YOUR TRUST! It is not the Beneficiary's trust, nor is it the Trustee's trust. It is an entity unto itself. The whole purpose of the TRUST is to set something up for the benefit of the Beneficiaries. You can say that you "manage a family trust" or you "manage a business trust", but you should never imply or say that it is YOUR TRUST. In fact, it is not the Beneficiaries' assets either until they are distributed to them upon termination of the Trust or some early distribution as allowed in the Trust Indenture and Bylaws.

You have to be VERY CAREFUL with the wording you choose when dealing with a Trust because there are many people trying to trip you up, mainly the IRS. They may ask questions as to who owns the Trust. NO ONE OWNS THE TRUST! The Trust is an entity unto itself. It is a separate entity set up for the benefit of the Beneficiaries who do not have a vested interest in the assets yet. Only the Board of Trustees has a vested interest in the assets, and yet, the asset's DO NOT FORM A PART OF THE TRUSTEE'S OWN ESTATE! It is totally separate!