Estate Planning

ULTRA TRUST™ – 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       Like this video?What’s a Trust? Grantor, Trustee, Beneficiary   Subscribe to our channel.   The concept of a trust was first used in Anglo Saxon times and is 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).   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 Trust™ or the Medallion Trust™.   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 an “Irrevocable

Estate Planning & Trusts: Items Included in Your Estate for Estate Tax     Watch the video on estate planning and trusts Like this video? Subscribe to our channel.   Key Legal Definitions: Contracts, Ownership, Estate & Trusts   A contract (from the Latin contractus) is simply a formal agreement as between two or more different parties, and this agreement legally obligates such parties to then perform or refrain from particular specific actions. Whether oral or written, contracts under law are binding along with must be entered into by mutual consent with clear terms.     “Ownership” refers to the legal right of possessing something. That possession can be transferred, as indicated by the term “possessore.” True owners trace their possessions in today’s tech age, especially as the public increasingly accesses records and data online.     At death, the assets and the possessions of an individual make up such an estate (patrimonio, inheritance). Under the common law, the estate has property and investments, plus business interests and other valuables.     A trust exists as a legal agreement among parties defining control and administration of asset ownership distribution. A trust separates when the trustee holds legal ownership for their use, and the beneficiary holds helpful ownership for their use, under the rule of the law.     Estate Planning as well as Trusts constitute a written legal agreement. This accord is also a deal creating firm duties for the safety, passage, and handling of private or household riches.      What Is Estate Tax?   Liquid assets: Cash, also checking/savings accounts, CDs, stocks, mutual funds, bonds, treasuries, except securities Other valuables: Collectibles, and also jewelry, stamps, and even paintings, cars, and boats Real estate: Property on sale, investment properties, vacation homes, your residence Business interests: You possess a business, or you are a partner with limits.   Why a Trust Is Better Than a Will   The most effective way for minimizing tax exposure along with avoiding probate is when you establish a trust during your lifetime. A well-built trust is able to:   Reduction of estate and probate taxes is possible. Such taxes can also be eliminated.   Avoid administrative costs and also court delays   Intrusion cannot legally affect your assets with protection of them   Provide for long-term financial control as well as privacy   Trusts give advantages a will just cannot so trust usage has sharply increased as expected.   The Common Mistake: No Plan at All   Many Americans mistakenly believe:   Joint ownership is, in fact, sufficient.   One does not worry about the size of their estate   A complete solution is as a will   These assumptions often do cause many avoidable costs, do delay courts, and will make you lose control over your estate. In truth, many families discover far too late that they own more than they realized. Yet joint ownership fails to protect from probate or tax liabilities.   Probate with a will alone is not avoided. Executors apply for probate in order to gather up the estate’s assets, and only at that point distribute them according to your wishes in the event that you rely solely on a will subject to taxation, fees, and legal delays.   Items Included in Your Taxable Estate   Many assume that today’s higher estate tax exemptions mean some planning is not needed. That’s a critical mistake. For various assets and ownership types, complex tax rules can inflate your taxable estate unexpectedly.   Jointly Owned Property   Half the value of jointly owned property is within the estate of the first spouse to die. The survivor’s automatic inheritance is irrelevant as is payment source. The estate of the survivor is then taxed on the value in its entirety.   Example:H and W jointly own a home. FMV at H’s death = $750,000 $375,000 (½) is taxed in H’s estate.   W now owns 100%.   On W’s death, the full $750,000 is taxed in her estate.Result: Higher overall estate tax at W’s passing.   Pensions and IRAs   These are generally taxable, unless covered by pre-1985 rules under certain qualified pension plans.   Other Includable Assets   Federal law counts several categories of assets into your estate even in the event that you believe you’ve relinquished them.   Gifts that are large can go over annual exclusion limits. For example, gifts exceeded $12,000 since 2006 onward.   Where you retain any benefit or control, property is partially transferred. This covers using a home when children reside there without rent. Gifted stock voting rights remain in a controlled company.   Direct assets via a will if it can go to yourself, also your estate, also your creditors.   Transfers of control retention occur when giving assets to a child while authority is maintained.   Living right there as you give your own home to your children can jeopardize your estate as well as their security plus complicate matters in the event they die before you or happen to be sued.   Estate Tax Law: A Moving Target   The estate tax has been amended 13 times in 25 years. Congress often changes the rules—tightening them for some, adding headaches for all. You can’t predict tax policy shifts, but you can plan ahead with the tools currently available.   Where to Begin   Estate planning is not a quick task. It demands intentional effort. Begin by assessing:   Your goals   Your heirs’ needs, ages, and abilities   Your asset values and ownership types   Start now—while you’re under no pressure. A proactive strategy protects your family, minimizes taxes, and ensures your wishes are honored.

What is a beneficiary of a trust? Describes basic categories of the exercises of the beneficiaries’ rights, two main categories of sequential interests of a beneficiary, the two beneficiaries from the trustees perspective.      Watch the video on Beneficiary of a Trust Like this video? Subscribe to our channel.   A beneficiary of a trust is someone or something legally allowed to gain benefits from a trust like income, principal, or property as the trust document defines. Trustees have a duty toward acting in beneficiaries’ best interest and beneficiaries hold enforceable rights legally and fiduciarily.   Your Trust’s core purpose is for the Beneficiary. Your spouse as well as children and also grandchildren or charitable entities of any kind are meant to benefit from the assets of the trust.   Beneficiaries are with no legally limited number. A Grantor can actually be just like a beneficiary. The aim gets stopped if that occurs. Trusts should be irrevocable. The Grantor gains some real advantages by the giving up of ownership asset protection avoidance of probate elimination of estate taxes and very rare tax benefits. If anyone retains control, that risks making the trust revocable as well as placing it under court jurisdiction.   The duration of a trust depends on what its legal location is. Many states as well as countries follow the Rule Against Perpetuities because it requires a defined end to the trust. However, the strength of your trust feels an impact directly when you select a jurisdiction, whether domestic or foreign. FAPTs provide a unique form of security. That protection is superior. U.S. judgments in general do not have any authority overseas so that FAPTs are much more secure in more high-risk situations.   Categories of the Beneficiary of a Trust   There are two primary trust structures governing how beneficiaries exercise their rights:  Bare Trust (Simple Trust): Beneficiaries of a Bare Trust hold full rights to both income and capital. They also control the trust’s administration, directing the trustees, who serve only to execute their instructions. Ownership is effectively in the hands of the beneficiaries.  Express Trust: Here, the trustee has clearly defined roles and authority outlined in the trust deed. An Express Trust may be either: o Inter Vivos Trust – Established during the Grantor’s lifetime. o Testamentary Trust – Activated upon the Grantor’s death via their will.   Sequential Beneficiary Categories: When trusts involve multiple stages of interest—often with tax implications—two main beneficiary types arise: Vested Interest Beneficiaries (Tenants for Life): These beneficiaries hold rights to the property during their lifetime only. Upon death, their interest terminates and cannot be transferred or inherited. Contingent Interest Beneficiaries (Remaindermen): These individuals inherit once the prior interest ends. For example, if “John has the property for life, then it goes to Sarah,” Sarah is the remainderman. Trustee Perspective: From the trustee’s role, beneficiaries fall into two categories: Fixed Beneficiaries: Have a predetermined right to income or capital. Discretionary Beneficiaries: Entitlements are left to the trustee’s discretion, based on the trust deed’s guidance. The Trust Contract   A Trust document—your legal contract—can vary in form from just a basic three-page outline up to a detailed collection containing exhibits and clauses. Trust planning gains strength from simplicity. Administration in structure more complex is more difficult.   Anything of value can be included within trust assets: your primary residence, investment portfolios, additional properties, or your business interests. What you choose for contribution is the only limit.   Most trusts obtain a federal Employer Identification Number now. They do also file their own tax returns here. Based on the trust’s structure, beneficiaries’ distributions are taxable. The type of the assets that are involved also determines the taxability.   A trust acts as a business entity yet is a private legal deal involving the Grantor, Trustee, and Beneficiaries. Because trusts formally lack a legal identity like LLCs or corporations, outside parties often hesitate to engage in a direct way. For this reason, many trusts do own LLCs, or corporations, or they own partnerships as a means to ease business dealings that have legal clarity plus recognition.   Understand These Important Facts About Trusts:   A Trust is a legal form for ownership where your appointed independent Trustee manages assets. This structure separates control from benefit completely. The assets are not yours legally and you cannot control them. That distinction provides protection now.   The IRS recognizes various trust types as well as legal structures, and each does serve distinct purposes, such as the preserving of wealth, protecting people from lawsuits, eliminating probate, and avoiding estate taxes. A trust, when it is structured in a proper way, is one of the most powerful of legal tools for the transferring and the safeguarding of wealth.

What is a trust protector? What are the duties and powers of a trust protector? Trust Protector can be someone close to family or your accountant, CPA or lawyer.    Watch the video on Trust Protector: The Powers and Responsibilities of a Trust Protector   Like this video? Subscribe to our channel.   When presenting potential clients with different asset protection options, systems, and strategies, one of the questions asked is if I would be willing to act as their Trustee. Yes, I reply but only as a temporary basis and with a resignation letter. The temporary basis allows me to act quickly without fanfare and time consuming communications between the assets and their financial goals.   As an alternative, my answer is, “No, I don’t want to serve as a Trustee, but I will gladly offer my services as the Trust Protector.” The role of a Trust Protector takes up less of my time and I can educate the Trustee in his day-to-day responsibilities.   What’s a Trust Protector?   In offshore Foreign Asset Protection Trusts the role of “Asset Protector” is a standard. Offshore countries have extensive networks of Trust Companies specifically designed to accommodate the implementation of Trust Agreements with ready Trustees. The election to have a Trust Protector, who is usually a United States Person, is a normal offshore business transaction.   Although in Foreign Asset Protection Systems the role of the Trust Protector is a standard, domestically in the United States, only a few states have a legally recognized the dual existence of Trustee and Trust Protector. Those states are Alaska, Delaware, Idaho, South Dakota, and Wyoming.   The power of the Trust Protector is derived from the Trust Contract. The Agreement sets forth the dual function of the Trustee and the Trust Protector. While the Trustee can be a bank or trust company, or other financial institutions, the Trust Protector is usually a person close to the family, a CPA, accountant, or lawyer who is already the family consigliore.   The Trust Protector’s Powers   The Trust Protector’s powers can take any form, limited only by the wishes of the Grantor(s) and their imagination. Generally, the powers granted the Trust Protector are:   Ability to remove or replace the Trustee. Often this is the only power granted to the Trust Protector. In cases where the Trustee is a corporate body (bank, trust company, insurance company, or professional trustee) if the Trustee is unresponsive or not performing to the Trust Agreement for the benefit of all Beneficiaries, or changes in management, or investment choices, the Trust Protector can fire and replace the Trustee, at will, without explanation to the current Trustee. Ability to change the Trust’s situs to take advantage of law changes or necessary steps to act in the best interest of beneficiaries if they move from low tax states to high tax states, i.e. from California or New York (high tax states) to New Hampshire, or Nevada (low tax states) or changes in laws occurring long after the initial implementation of the Trust Agreement. Ability to resolve deadlocks between co-trustees or in squabbling between the Trustee and/or Beneficiaries. Ability to control spending over a certain amount. This level of control is significant if disbursements of the Trust are in excess of pre-arranged amounts requiring two signatures of the Trustee and the Trust Protector i.e. in excess of $10,000. Ability to veto distributions to Beneficiaries. Before distributions are to occur the Trust Protector may want to investigate the financial stability of the Beneficiaries. For example, if the beneficiary is being sued, The Trust Protector may withhold distributions, or the Beneficiary is undergoing divorce proceedings, or the Beneficiary may be too young, is under duress, mentally incompetent, unable to manage, or otherwise unavailable. The Trust Protector can override/veto the Trustee and withhold distributions temporarily or permanently make other arrangements such as buy the assets necessary for the benefit of the Beneficiary (buy a house, a car, sign a rental agreement, but have the Trust own the assets, make loans or make other provisions. Ability to veto investment decisions. This checking and balancing of investment decisions are based on the Trust Protector’s experience, prudence, and the Trust Agreement guidelines in protecting the assets for the Beneficiaries. Ability to sue and defend lawsuits against the Trust assets. The fiduciary duty of the Trustee and The Trust Protector as to save the assets of the Trust, at any cost, for the benefit of all classes of Beneficiaries. Ability to terminate the Trust. If in the opinion of the Trust Protector there are insufficient funds or the cost of administration is greater than available cost/benefit, the Trust Protector may terminate the Trust, as for example, if all beneficiaries have received their distributions based on age (over the age of 21) and there’s one minor beneficiary currently 10 years old, and there aren’t enough assets to administer the Trust for the next 11 years, the Trust Protector has the power to make the final distribution and terminate the Trust. Trust Protector’s Role   The Trust Protector’s role is created by the Trust Agreement to add an additional layer of protection and is usually a person most familiar with the Grantor’s long-term financial and personal goals. A Trust Protector usually is the balance of power between the Trust Agreement, the Trustee, The Grantor, and the Beneficiaries.   Neither the Trustee or the Trust Protector should be a family member, nor anyone related to the family by blood or marriage. Both positions should be independent of each other acting in the long-term interest of the beneficiaries.