Beneficiary Controlled Trust Fact Sheet

By: Charles Lamm
Submitted: 2007-01-17 16:16:59
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

A beneficiary controlled trust is fast becoming a favorite estate planning tool as rising real estate prices push up the value of middle class estates.

In a beneficiary controlled trust, the primary beneficiary acts as co-trustee and exercises nearly all of the rights, benefits, and control over trust property that a person would have over that same property with outright ownership - but without the normal exposure to creditors, lawsuits, divorce courts, or the IRS.

Here are the elements of a beneficiary controlled trust:

1. The donor, often a parent or grandparent, is the grantor of the trust.

2. The beneficiary cannot be the grantor and cannot put any of his or her assets into the trust.

3. The trust is irrevocable. Once the assets are in the trust, they cannot be removed except under the terms of the trust.

4. The beneficiary of the trust is the primary beneficiary. The interests of the primary beneficiary take precedence over the interests of any descendants who might also be beneficiaries.

5. The trust has two trustees, one of whom is the beneficiary. The beneficiary is the primary trustee, also known as the investment trustee. The second, independent trustee is known as the distribution trustee.

6. The second trustee can be a friend, financial advisor, attorney, or a financial institution such as a bank.

7. The primary beneficiary has the power to replace the second (independent) trustee which gives the beneficiary the power to control the trust.

8. The second trustee cannot be a "related or subordinate party" as defined by the Internal Revenue Code.

9. The trustees can acquire assets for the beneficiary's use and enjoyment.

10. The trustees can invest in a business/corporation that can employ the beneficiary.

11. The primary beneficiary can protect the trust assets for future generations.

12. Assets in the trust are protected from the claims of creditors, ex-spouses, and the IRS.

13. Does not allow a creditor to force a distribution that would be attachable by the creditor.

14. The beneficiary is also protected in the event of a lawsuit or bankruptcy since the beneficiary does not technically own any trust asset.

15. At the beneficiary's death, assets pass to the beneficiary's children and not to a spouse or creditor - or to the taxman.

16. In most cases, the assets are protected from estate taxes.

By proper construction, a beneficiary controlled trust creates an almost insurmountable shield against the claims of creditors and ex-spouses.

For grantors who want their descendants to have the use of their property and assets - and not that rotten non-working husband or trampy wife - a beneficiary controlled trust is a superior strategy to outright gifts.

The inheritance becomes more valuable to the beneficiary in trust than through outright gifts. The assets can be used for living expenses, mortgage payments, new cars, and even vacations, all while having the added protections of a trust.

Expect beneficiary controlled trusts to grow in popularity as middle class estates become larger.

Charles Lamm is a retired attorney and currently an unrepentant gamer using the fast Triton player available free at: http://www.playtriton.com More trust information can be found at: http://www.caketrust.com

Article source: Expert Articles

Most Recent Articles in Estate Plan Trusts category

  • Choosing Guardians for Children - By: Jamie Kahn
    The most important decision you'll make in your estate plan is appointing guardians for your minor children. Who you pick will impact not only your children but also the lives of your guardians. While you and your children may feel an affinity for a particular adult(s), that relationship could be strained in a 24-hour-a-day, 7-day-a-week environment.
  • How To Protect Your Retirement Savings For Your Golden Years - By: Gregg Hall
    Retirement is a glorious time every working individual looks forward to. It is a time of freedom, rest, and relaxation. It is also a time to do what you did not have time or resources to do when you were working.
  • Some Simple Strategies For Protecting Your Assets - By: Gregg Hall
    As elementary as it may sound, no matter how much money you make, you still need to find ways to hold onto it. There are many small steps to take that will add up to big savings in the end. If you value the assets you have accumulated, or if you feel you should be accumulating more, take this advice and make some minor changes.
  • Reverse Mortgage Supplemental Retirement Financing Strategy - By: Jon Hansen
    A reverse mortgage is a loan for senior citizens. It is often used to cover medical expenses, and is becoming a common way for retired persons to supplement their existing monthly retirement income.This is a loan that senior home owners may take against their current home.
  • Understanding The Benefits Of Forming Trusts - By: Alexander Gordon
    What is a Trust And Who Are The Settlor, Trustee And Beneficiaries?A trust is an institute of a special type of structure capable of holding title of the property-providing benefits to one or more people. It is a lawful relationship between the two people, the settlor and the trustee.
  • Trust Deeds – Breath A Debt Free Life at Easy Terms - By: Linda R Davis
    Trust deeds are considered as a convenient settlement of debts a debtor is no more able to pay off. The trust deeds are a method used in Scotland for easy clearance of debts. Usually elsewhere for lessening and time bound pay off of debts, debt management program is sought by the debt ridden person.
  • Ira Trusts: What's All The Hype About - By: Perry Fields
    A recent new development in estate planning is helping thousands of affluent people across the country with IRAs over 100,000 transcend estate tax and income tax. It keeps your beneficiaries from blowing all of the money you’ve worked so hard for.Its gives YOU the control over the conditions which must exist before your beneficiary can access the funds (other than the mandatory IRA distributions).
  • Enduring Power of Attorney Being Phased Out - By: Adrian Tatum
    In the UK the new mental capacity act is due to come into force on the first Monday in April 2007.The Act governs decision-making on behalf of adults who lack mental capacity, both where they lose capacity at some point in their lives, and where the incapacitating condition has been present since birth.This act covers all decisions, including personal welfare and financial matters, and covers decision-making on their behalf by attorneys, or court-appointed "deputies".
  • Probate and Estate Sales - By: Mika Hamilton
    “It's all about quality of life and finding a happy balance between work and friends and family.”-Philip GreenProbate and estate sales usually occur when someone wealthy dies. Estate sales have to be conducted because the decedent did not leave a will and everything is in his name.
  • Anguilla as a Offshore Jurisdiction - By: Gissela Martinez
    Anguilla is another jurisdiction with misleading bank secrecy. Commercial confidentiality is contained in the statues, BUT the government of Anguilla will co-operate fully with law enforcement agencies and regulators in other jurisdictions, think wholesale fishing expeditions and inquiries related to “possible” income tax violations. In other words records may be requested just to see if in fact there were any taxation violations that citizens of a certain country may have committed using Anguilla as a jurisdiction.