What’s a Trust? Grantor, Trustee, Beneficiary
ULTRA TRUSTâ„¢ – What’s a Trust? A “TRUST” is nothing more than a “CONTRACT.” The purpose of a TRUST is to create an “Artificial Legal Person” to protect, hold, and manage your private wealth for the benefit of your heirs. As in any contract, someone must initiate the contract (Grantor or Trustee). The contract (trust agreement) must specify the who, what, where, when, why, and other conditions. Finally, the contract is for the benefit of someone or something (beneficiaries: wife, children, grandchildren, church, other charitable organizations, etc.) Trust concept The concept of a trust was first used in Anglo Saxon times and is a contractual arrangement whereby property is transferred from one person (The Grantor) to another person or corporate body (The Trustee) to hold the property for the benefit of a specified list or class of persons (The Beneficiaries). Watch the video on What’s a Trust? Grantor, Trustee, Beneficiary Like this video? Subscribe to our channel. page_title Although a trust can be created solely by verbal agreement it is normal for a written document to be prepared which evidences the creation of the trust (the Trust Deed), sets out the terms and conditions upon which the trust assets are held by the Trustees and outlines the rights of the Beneficiaries. In essence, a trust is not dissimilar to a will except that assets are transferred to trustees during lifetime rather than those assets being transferred to executors on death. The trust deed is analogous to the deed of will. There are three elements to the “trust” document: Grantor Trustee Beneficiaries 1. The “Grantor” The person with the money or assets. The owner of the asset(s). The grantor’s motivation is to get asset(s) out of his name for either some or all of the following: Asset protection/wealth preservation Reduce potential frivolous lawsuits Elimination of the “probate jail process” (see definition, below) Elimination of estate taxes To gain some tax benefit or some other tax deferral benefit If the “Grantor” initiates the trust (contract), it’s called a “Grantor Trust,” otherwise it’s called a “Non-Grantor Trust.” If the “Grantor” wants to retain certain control over his asset(s), it’s called a “Revocable Trust” otherwise, it’s an “Irrevocable Trust.” Revocable / Irrevocable has significant asset protection and tax differences. “Revocable,” is like the kid next door that brings the ball to play basketball with the other kids. Everything is fine, as long as he makes the rules, and he makes the rules as he goes along. If you don’t agree, he takes the ball and goes home. Ball game over. Living Trusts are outright dangerous. The Living Trust can destroy your estate in the event of a lawsuit, serious illness, or elderly care. One name given to a “revocable” trust is the “Living Trust.” The sole purpose of the Revocable Living Trust is to “eliminate the probate process.” Assets in a trust, avoids probate Assets NOT in a trust goes to probate with or without a will The living Trust is outright dangerous for asset protection, wealth preservation, and estate tax elimination. It’s obsolete for assets greater than $675,000. With the Living Trust the owner of the assets retains significant power over his wealth and will NOT insulate assets from the lawsuit explosion. There’s absolutely no tax benefit, no asset protection and no wealth preservation benefits with the “Living Trust.” I DO NOT RECOMMEND THE “LIVING TRUST.” if you have one, reconsider your financial goals. (See my final word about trusts, below) Personally, I think the “Living Trust” is a sham perpetrated on you by shameless professionals out to extract more than just one fee. Don’t just walk, run!! Various tax proposals are being bandied about, including House Ways and Means Chairman Bill Archer who says that he’s “pushing” to “g r a d u a l l y phaseout” the death tax within the next 10 years. “Death by itself should not trigger a tax” says Chairman Archer. Currently, estate taxes vary from 37% to 55%. Only Japan has a higher rate of 70%. Germany takes a maximum of 40%, while Australia and Canada, take nothing. When you add-up your federal, state, probate, legal fees, accounting fees, appraisal fees, administrative and executor fees, and etc. fees, ……. it could easily cost you 70 to 80% of your estate. You can avoid these unwanted results with the Ultra Trustâ„¢ or the Medallion Trustâ„¢. NOTE: The new 2001 tax PHASE-IN for estate taxes, changes absolutely nothing. The estate tax is the only voluntary tax. The new laws have added confusion. You can avoid the voluntary estate tax by simply engineering an irrevocable trust. 2. The “Trustee” The trustee is the guy who manages your trust assets. Great care should be taken in your selection of your trustee. The trustee is bound by the trust document (contract) and he has a duty to protect trust assets for the beneficiaries. The independent trustee manages, holds legal title to trust assets, and exercises independent control. The trustee can be your lawyer (worst person you would ever want to trust), your accountant, best friend, or any-one you trust who is not a relative by blood or marriage. You may have more than one trustee. I usually recommend two trustees in all cases of $500,000 or more. Accountability of trustee The law imposes strict obligations and rules on trustees including a duty to account for any benefits the trustee may have gained directly or indirectly from a trust. This goes beyond fraudulent abuse of position by a trustee. There is a basic rule that a trustee may not derive any advantage directly or indirectly from a trust unless expressly permitted by the trust, for example, where he is a professional trustee and the trust provides specifically for a right to make reasonable charges for services. However, full disclosure of the basis and amount of charges is required. The trustee of