What’s a Trust? Grantor, Trustee, Beneficiary
Grantor, Trustee, Beneficiary
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.)
There Are Three Elements To “TRUST” Document:
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
#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)
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
#Duty of trustee is to obey trust document for benefit of beneficiaries
The most important rule relating to the duties of a trustee is that requiring them to obey the directions in the trust deed both with regard to the interests of the beneficiaries (i.e. who is entitled to what) and with regard to the administration of the trust (managing the trust property). Trustees are also subject to very strict standards as to the way in which their powers and discretions may be exercised.
Fiduciary relationship of trustee
The courts regard a trust as creating a special relationship which places serious and onerous obligations on the trustees. Thus the law regards the special “Fiduciary” relationship of a trust as imposing stringent duties and liabilities on the person in whom confidence is placed – the trustees – in order to prevent possible abuse of that confidence. A trustee is therefore subject to the following rules:
A. The Trustee Can Have No Private Advantage
A trustee is not permitted to use or deal with trust property for private direct or indirect advantage. If necessary the court will hold him personally liable to account for any profits made in breach of this obligation
B. The Trustee Must Have The Best Interests Of The Beneficiaries
Trustees must exercise all their powers in the best interests of the beneficiaries of the trust.
C. The Trustee Must Act Prudently And Is Under Fiduciary Duty To Do So
Whether or not a trustee is remunerated he must act prudently in the management of trust property and will be liable for breach of trust if, by failing to exercise proper care, the trust fund suffers loss. In the case of a professional the standard of care which the law imposes is higher. Failure to exercise the requisite level of care will constitute a breach of trust for which the trustee will be liable to compensate the beneficiaries. This duty can extend to supervising the activities of a company in which the trustees hold a controlling interest.
In cases of substantial assets, you may add one other safety measure, “the Trust Protector.” The trust protector’s sole function is to hire and fire trustees, at will and without explanation.
The length of your beneficiaries is unlimited. Beneficiaries could include the original grantor, but that would be self defeating. Generally, trusts are irrevocable. The grantor gives-up his assets to gain asset protection, elimination of probate, elimination of estate taxes, and gain certain uncommon tax advantages. Any degree of control by the grantor will render the trust revocable and subject to court discretion.
The period of time of the trust depends on the selection of your trusts legal jurisdiction. Most states and countries have rules against “perpetuities.” That’s to say, that your trust must have an end. Selection of your trust’s Jurisdiction in the United States or outside the United States depends on the degree of risk to be assumed by you. Foreign Asset Protection Trusts (FAPT) are significantly stronger than domestic trusts. Judgments are generally not enforceable outside the United States.
FINAL WORD ABOUT TRUSTS
Before you implement your trust, be absolutely certain that you understand these facts: