Trusts and foundations are both great tools to manage wealth and to help in succession planning. They can be used for personal, estate, ﬁnancial, tax, and business planning objectives. What are the differences between trusts and foundations? A trust is an arrangement where a trustee is responsible for another person’s assets, who is known as the beneﬁciary. The trustee must sustain the assets to maximize the beneﬁciary’s wealth. Foundations have features of both a company and a trust. They are distinct legal entities designed to hold assets. Foundations are beneﬁcial as they can separate assets from personal wealth, separating assets from falling under an estate for inheritance tax purposes. One of the differences between trusts and foundations are the legal structures. Foundations are isolated legal entities which operate in their name and hold legal title to the assets within them. Trusts are not distinct legal entities, and they operate in the name of the trustees; the legal ownership can be in the trustee names. There are various other differences between the two structures. It is a lengthy process to learn about these differences, and how they will inﬂuence your unique circumstances. Therefore, our clients ﬁnd it useful to enlist the help of a professional who is knowledgeable about what is available. We can help you ﬁnd the best kind of trust or foundation to suit your individual needs. Through this careful selection, planning and structuring we help our clients to protect and accumulate wealth.
Global Trustee Settlement Services can set-up the trust and appoint a custodian trustee on your behalf. Deﬁning a Trust is just the beginning. There are many varieties and types of Trusts. Designing an effective structure requires an understanding of what the materials and the tools the shape them can do. This is a simply overview of some of the most common types of Trust:
“Inter Vivos” is a latin phrase that means “while living.” An Inter Vivos Trust is created and effective while the Grantor is still alive. The modern phrase for “Inter Vivos” Trust is “Living Trust.” Most Living Trusts are revocable. However, technically an Irrevocable Trust created and effective while the Grantor is alive is also a Living Trust.
A Testamentary Trust does not come into existence until the Grantor dies. Typically a Testamentary Trust is created by the Grantor’s Last Will and Testament. A Testamentary Trust is generally not effective until approved by court order. This requires probate. The Courts generally retain jurisdiction to supervise the administration of Testamentary Trusts. Testamentary Trusts typically have high fees, a high level of oversight and intrusion by the courts, and low levels of privacy. With extremely rare theoretical exceptions, in today’s world, no credible or competent planner would recommend a Testamentary Trust. We have encountered many people who thought they had a Trust, when what they have are Wills that create trusts through the probate process. In reviewing your own “trust” documents, this is a key element to conﬁrm.
Revocable living trusts are the most common types of trust. They are used for estate planning. If funded, a revocable trust will make probate unnecessary. A revocable trust will also help avoid a conservatorship in the event of incapacity. A revocable trust may give some level of privacy. A revocable trust generally does NOT protect your assets while you are living. Depending on the Trust, it may protect your assets when you are dead. Such post-death asset protection typically depends on whether or not the trust has what we call Dynasty Provisions built in. Most people would prefer some other means of protecting their assets.
The most common type of Irrevocable Trust is the Irrevocable Life Insurance trust (“ILIT”). This is a tool to prevent life insurance death beneﬁts from being taxed at death as part of the insured’s estate. Irrevocable trusts are also used for asset protection, charitable planning, and real estate transactions. An Irrevocable Trust can also be a powerful for marital asset planning. Although an irrevocable trust cannot be revoked, that does not mean it cannot be changed. Most trusts provide for change over time by their terms.
A “Dynasty” Trust is an estate planning Trust speciﬁcally designed to last for multiple generations. Just having the word “dynasty” or “legacy” in the title of a Trust does not make it a Dynasty Trust. The Trust must have substantive provisions that enable and empower it to function over multiple generations. Such provisions will include taking advantage of jurisdictions that have abolished the Rule Against Perpetuities and will utilize the parties Generation Skip Tax exclusions.
Trusts can be used to own or sub-divide real property or as a ﬁnancing device. The most common is a “Deed of Trust” which is used in lieu of a mortgage to secure debt with an interest in real property. Certain kinds of Land Trusts are used to hold title to real estate for the beneﬁt of multiple parties.
Trusts can be formed to operate as a business much like a corporation. Most states treat a business trust like a corporation. The taxation of a business trust may be adjusted by making elections with the IRS. The most common business to use a Trust is a non-proﬁt organization.
A simple trust is generally one where the income is distributed and taxed to the beneﬁciaries rather than retained in the Trust. This has the advantage of causing the income to be taxed at the beneﬁciary’s rate, but may subject the income the liabilities and problems of the beneﬁciary.
A complex trust is generally one where the income is retained in and taxed to the Trust rather than distributed to the beneﬁciaries. This has the advantage of protecting the income but may result in a higher tax liability.
A defective trust or intentionally defective trust is a trust which includes provisions which, under the tax code, cause the trust to be taxed to a particular party. Historically, when trusts were taxed at a lower rate than individuals, this would have truly been a ‘defect” in the negative sense of that word. Now, where trusts are generally taxed at a higher rate than individuals, such a “defect” can result in lower tax liability. The defect can be in favor of the grantor, a beneﬁciary, or sometimes certain third parties. This has a number of accounting and tax reporting issues.
A Trust is “self-settled” when you create it for the beneﬁt of yourself with your own assets. The general rule is that a “self-settled” trust does not protect your assets. In other words, you cannot put your assets in a trust and prevent your creditors from gaining access to them. Some states have come to permit various forms of so-called self-settled asset protection trusts, sometimes called an “APT”. Lawyers are still debating to what degree an APT will work. Generally, they work best with assets located within the boundaries of the state that recognizes such a trust. Assets in other states will not have such protection. This means for it to work, you have to move your property. This solution works for some, but there are other alternatives when as APT is not suitable.
The various types of trusts can be confusing when you don’t deal with them everyday. If you don’t know or can’t tell what type of trust you have, Global Trustee Settlement Services offers a review of any trust. We review hundreds of Trusts every year. Just contact us or send us a copy of the trust to start the process
“Protecting Your Interests, Ensuring Peace of Mind”
What is an escrow service?
An escrow service is a process by which a third party (the escrow agent) holds assets on behalf of two other parties that are processing a deal. The escrow arrangement offers the parties involved a method of protection against bad transactions. Typically, in a transaction, one party purchases a product or service and the other party will supply it. In many transactions, there is no guarantee that respective parties will honour the agreement made. This could result in no payment or no delivery of goods and services – which is where an escrow agent comes into play. Escrow agents hold these assets only releasing them once they receive confirmation from the parties that the transaction is complete, and all obligations have been met.
In partnership with More Group Capital Services, we offer escrow services relating to a diverse range of business transactions.
An escrow partner you can rely on
A one-size-fits-all escrow account may work for small transactions, but for anything more substantial, our tailored solution ensures that everything runs smoothly and according to plan. Whether you require a straightforward solution or something more complex, our escrow experts can customize an agreement to suit your needs.
With specialists in key fields, we are able to additionally offer complimentary services – from bank account openings to tax calculations and more – so that everything is taken care of for you.
Correcting your tax infrastructure
508 Trust “Exempt Organizations”
Entity Classification Change
Gifts and Estates
IRS Lien Release
Power of Attorney (form 2848, your Authorized Representative) IRS Form 56, 56-F (Notice Concerning Fiduciary Relationship)
Which codes apply to you or your business
IRC Safe Harbor (Codes and Regulations)
UCC filings or liens are legal forms that a creditor files to give notice that it has an interest in the personal or business property of a debtor. Essentially, UCC lien filings allow a lender to formally lay claim to collateral that a debtor pledges to secure their financing. The term is a part of a collection of rules established to regulate how commercial transactions work under the Uniform Commercial Code (UCC).
See our UCC page for more details.
A title search is used for verifying all liens before the purchase of property to make sure they are being paid off at closing and the new owner does not have to assume them. A title search report will be used to generate a title commitment and title policy as evidence of title insurance on the property. Typically, a full state statute title search is ordered on purchase transaction.
A deed is an official transfer document showing the change in property ownership. The seller is referred to as the grantor, while the buyer is referred to as the grantee.
There are many types of liens such as Federal Tax Liens, State Tax Liens, Code Enforcement Liens, Municipal Liens and HOA Liens. Liens from a municipal agency will attach to the property and are some of the most dangerous lien types.
Let us do a thorough Title search for you today.
Understanding cryptocurrency basics will help you to be aware of the ongoing cryptocurrency conversation that’s taking place seemingly everywhere.
As an investor, even if you are heavily against cryptocurrency, it’s important to have a fundamental understanding of it not only to keep up with the news, but also for explaining it to others, such as friends and family, who may be considering investing heavily in it.
At the end of the day, it’s financial education that will help you decipher between the latest (and dangerous) trend versus maximizing your returns over time through wise investing. Go to our cryptocurrency page for more.