What's a Trust?
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A "TRUST" is nothing more than a "CONTRACT." 

The purpose of a TRUST is to REPOSITION your valuable assets to an "Artificial Legal Person (Trust)" to protect, hold, and manage your private wealth for the benefit of your heirs. 

Qualified assets that can be REPOSITIONED without any dollar limitations, are:  your personal residence, your vacation spot, investments (stocks, bonds, art, collectibles) your life insurance policy, your automobiles, business(es), corporate stock, LLC shares, Subchapter S stock, general partnership interests in limited partnerships.  ALL your valuable assets.

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 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: 




The "Grantor" Mr. Day-Trader, our newest millionaire.

He’s the guy with the buck$.  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 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." To me, it’s just legal garbage so lawyers can charge you more.

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!!

 "The Probate Process is a RE-DISTRIBUTION of Your Wealth by the Judicial System"  
Each of the 50 state courts have judicial probate procedures to ascertain that your wealth is RE-DISTRIBUTED according to your will, or ... if without a will, the court will decide who will receive your wealth. 

The Probate Process (RE-DISTRIBUTION of your wealth) begins after your death.  Everything you "own" in your name on the date of your death is inventoried, appraised, categorized, and accounted.  First, the courts will investigate and validate your will to make sure there's no foul play.   Next, all claims are investigated and validated.  Next, creditors and taxes are paid, then the heirs get what's left.

The Probate Process is a Public Procedure/Public Information is available to any-one wishing to know the details of your will and assets.  Your Will is a Public Record.   All creditors, long lost relatives, or any-one can file a claim against the decedent's assets.   The courts will then have to investigate and validate all claims against the estate.   The process takes time, it's expensive, and totally unnecessary.  Courts fees for adminstration, accountants, appraisers, lawyers, and other administrators all earn a fee.  The government is the largest heir, they get paid before any final distribution to the heirs.  With or without a will, everything in your name will have to go to probate.

 With The ULTRA TRUST®  you don't qualify for the Probate Process  because you don't "own" anything in your name on the date of your death.

Lawyers, appraisers, accountants, court administrators, etc. will not be able to earn a fee.  And, because you died without any assets, you don't qualify to file or to pay estate taxes.

You can avoid probate with any trust but you can only avoid estate taxes with The ULTRA TRUST.
See planning for your hard earned estate.

PROBATE    ... is about redistribution of your wealth.
Anything in your Trust, avoids probate.
Anything NOT in your trust, goes to probate, with or without a will.
A will does NOT avoid probate.

ESTATE    ... is about the fair market/cash value of your assets.
The Fair Market Value of anything (in your name) on the date of your death IS TAXABLE.  The government is your largest heir.

ESTATE TAX is a tax on the fair market value not what you paid
Anything in your estate (in your name) is taxable up to 55%.
Anything NOT in your name, is NOT taxable.

An " artificial legal person" created by private contract.

The PROBATE PROCESS  is a money making risk-free bonanza for lawyers, accountants, appraisers, judges, federal and state tax agencies who may consume up to 70 to 80 % of your estate. 

The federal government has done all it can to ensure that they are not left out.  In fact, the federal government stakes their first and largest claim between 37 to 55% of your assets. States are second in line, then the courts, lawyers, appraisers, accountants, executors, administrators.  ... Finally, what’s left go to your heirs. what's an estate?

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® the Medallion Trust® .  If you don't "own" any assets, you don't qualify for the Probate Process, and you don't qualify to pay the estate tax.

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.



The "Trustee" Your Trustee can be anyone not related to you by blood or marriage.

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’s 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 Trust" has sole discretion over trust assets. Your selection of your trustee must be a carefully planned decision.

The significant item to remember is that an "Irrevocable Trust" gets the assets completely out of your (Grantor’s) name and in return you get complete asset protection, elimination of probate, elimination of estate or inheritance taxes, in certain cases a tax deduction for the assets contributed to the trust, and finally, under certain conditions other uncommon tax benefits not otherwise available.

Examples of irrevocable trusts are: the Ultra Trust® the Medallion Trust® the Vertex Trust® the Charitable Remainder Trust, the Charitable Lead Trust.

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:

  1.  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
  2. Best interests of beneficiaries
    Trustees must exercise all their powers in the best interests of the beneficiaries of the trust.
  3. Act prudently
    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.

Additional: 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.



"Beneficiaries" Good reason to have a trust in place.

The beneficiaries is the reason for your trust (contract).

Your beneficiaries are the guys that will enjoy the benefits of your trust assets. They include, wives, children, grandchildren, charitable organizations of every color and variety.

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 trust’s 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.

The contract
The trust document (contract) can be as little as three pages and as long as fifty pounds of paper. The more complicated you make it, the more complicated it is to administer. Simplicity is the key.

Trust assets may include, your personal residence, your investment account, other real estate, your business, limited only by your valuable assets you wish to contribute to your trust.

The trust generally obtains a federal identification number and files it’s own tax return.  Distributions to beneficiaries, may or may not be taxable, depends on the nature of the underlying assets.

Finally, a trust may be a business, however it’s difficult for others to do business with you, since the trust is really a "private contract" between the grantor, the trustee, and your beneficiaries. Your business partners would more likely ask for a complete copy of the trust agreement and they would have their attorney look it over.  As a consequence, most will not do business with a trust, but they will do business with other recognized legal entities such as a Limited Liability Company, Corporation, Partnership, etc. for which the trust may own.

Other Advantages of a trust
Trusts are a powerful tax planning tool but they also have many other uses which are of equal if not greater importance.  A properly drafted and managed trust can confer advantages under any or all of the following:

  1. Asset protection
    Trusts can be used very effectively to protect assets. In simple terms, assets transferred to a trust no longer belong to the grantor and therefore if the grantor experiences financial problems the trust assets cannot be attached by the creditors of the grantor due to bankruptcy, dissolution of marriage, or a court award made as a result of, for example, a professional negligence claim. Thus, although the grantor may be declared insolvent, a portion of his assets might be safeguarded by the trust structure.
    Like renting a car.  You don't "own" it, but you get to use it.
  2. Tax planning
    Assets transferred into a suitably drafted trust structure are, in simple terms, no longer considered as belonging to the grantor and therefore the income and capital gains generated by those assets are taxed according to the rules in the country of residence of the legal owners - the trustees. 

    Inheritance tax would normally be eliminated because the trustees would not die upon the death of the grantor. Generally speaking, trusts can be extremely effective for tax planning purposes and a correctly structured and administered trust will produce substantial savings in income tax, capital gains tax and inheritance tax/estate.
  3. Avoiding the expense and delays of the probate process
    The death of the head of the family will usually result in major disruption of the family estate whether or not there is a will. In most common law jurisdictions the estate must go through the probate procedure with much consequential delay, expense, publicity and upheaval. 

    By establishing a trust, probate can be avoided because "death" will have no effect on the trust property which will continue to be held and managed in confidence by the trustees in accordance with the terms of the trust.
  4. Confidentiality
    Assets in a trust are completely confidential, it's a private matter.  Assets NOT in a trust, goes to probate, with or without a will. 
    The "probate procedure" is a public procedure.  A complete list of all the property owned by the deceased becomes a PUBLIC RECORD in order that that property can be assessed for estate taxes and in order that the property can be legally transferred to the executors who may then distribute to the legal heirs of the deceased according to the will. 

    This probate procedure is therefore entirely unsuitable for those who wish to keep details of their assets confidential. 
  5. Avoiding forced heirship
    In non-common law jurisdictions there will often be questions of forced heirship to consider i.e. the deceased will not be permitted to leave his property to anyone he wishes on his death. This  problem of forced heirship can be avoided by a properly drafted trust.
  6. Estate planning
    Many people do not want their assets to pass outright to their heirs, whether chosen by them or as prescribed by law, and prefer to make more complicated arrangements. These might involve providing a source of income for a widow for life, making provision for the education of children or providing a fund to protect members of the family in the event of sudden illness or other disasters. A trust is probably the most satisfactory and flexible way of making arrangements of this kind.
  7. Protecting the weak
    A trust provides a vehicle by which a person can provide for those who may be unable to manage their own affairs such as infant children, the aged, the disabled and persons suffering from certain illnesses.
  8. Preserving family assets
    Preserving the family assets or increasing them is often a motive for setting up a trust. Thus, an individual may wish to ensure that wealth accumulated over a lifetime is not divided up amongst the heirs but retained as one fund to accumulate further, with provision for payments to members of the family as the need arises while preserving some assets for later generations.
  9. Continuing a family business
    A person who has built up a business during a lifetime will often be concerned to ensure that it continues after death. If the shares in the company are transferred to trustees prior to death a trust can be used to prevent the unnecessary liquidation of a family company. The terms of the trust will ensure that the individual's wishes are observed. These might include provision for payments to be made to members of the family from dividend income received by the trustees but that the trustees retain the shares and keep the company running save in special circumstances justifying sale of control or liquidation. This may be particularly advantageous where the family members have little business experience of their own or where they are unlikely to agree on the correct way to manage the business.
  10. Gaining flexibility
    The best laid plans can, in a changing world, rapidly become obsolete. A discretionary trust can, however, be structured to provide for a system of management of property that is capable of rapid change as circumstances demand.

An irrevocable trust (The ULTRA TRUST® ) is an asset protection fortress when it’s the owner of your sub "S" stock, a limited liability company, the general partner of a limited partnership, the general partner of a family limited partnership, the shareholder of an international business corporation, or other recognized legal entities.

Before you implement your trust, be absolutely certain that you understand these facts:  

A trust is a form of ownership, which is controlled and managed by your designated "independent" trustee, that completely separates responsibility and control of trust assets from your benefits of ownership (you no longer own or control your assets).  The IRS recognizes numerous types of trusts and other legal arrangements commonly used for wealth preservation and legal protection against potential lawsuits, elimination of probate, and elimination of estate taxes.  The independent trustee, manages the trust, holds legal title to trust assets, and must exercise independent control, anything short of the above facts is pure toilet paper.   ALL trust income is taxable to either the trust, beneficiaries of the trust, or the taxpayer unless it's specifically exempted by the Internal Revenue Code (IRC).  


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