Once created, a trust is one of the most flexible mechanisms recognized by law. Born out of the time of William the Conqueror, it is one of England’s most proud contributions to the law.
A trust is a legal arrangement whereby one person controls property transferred by another person for the benefit of a third person. In other words, it allows the trustee to take possession of and hold title to a property that is used for the benefit of other people, known as the “beneficiaries.” The one who creates the trust and bequeaths the trust property is called the “settlor.”
Trusts are most often used to protect assets from creditors, taxes, failed marriages, and financially irresponsible loved ones. Trusts are also an efficient, and powerful tax planning tool.
A trust can conduct a business; hold title to and invest in real estate, cash, stocks and bonds; provide for minor children or the elderly; pay medical, educational, and other expenses; substantially lower burdensome taxes; avoid the muddle of the probate court process (when used as an estate vehicle); and act as an effective proxy for a prenuptial agreement.
For those who value their privacy, a trust is an excellent choice. Even though a trust must file tax returns, the inner workings of the trust are shielded from public view. For example, assets held in a discretionary trust are strictly private unless a court orders disclosure.
Invitation for Discussion:
If you would like to discuss this article in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Tax group at Shea Nerland LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.