Overview

The entity known as a trust will be essential in creating various strategies for accomplishing asset protection, estate planning, and privacy benefits. This chapter will provide a background for understanding how these techniques work and how a trust will be a part of your overall plan. The legal arrangement, known as a trust, has been around for at least several hundred years. Every trust has certain essential characteristics. A trust has one or more trustees, who are responsible for administering and carrying out the terms of the trust. The beneficiaries are those who are entitled to trust income or principle either currently or at some time in the future.

A trust is typically in the form of a written trust agreement between the settlor, the person creating the trust, and the trustee. The written trust agreement provides that the settlor will transfer certain assets to the trustee and the trustee will hold those assets for the benefit of the named beneficiaries. (The terms "trustor" or "grantor" are used interchangeably with the term "settlor.")

Until recently, trusts were used almost exclusively by the wealthiest families to maintain privacy and to pass their wealth to succeeding generations. The privacy benefits were particularly important. Grandpa Robber Baron had no desire to allow the muckraking newspapers and the antagonistic public to know exactly what he owned and how much he was worth. Grandpa was savvy enough to know that revealing the details of his fortune was not good for business and wasn’t smart politics. The Vanderbilts, Whitneys, Rockefellers, and Carnegies created trusts which have now successfully shielded from public scrutiny the family wealth of five or more generations.

But it is no longer only the wealthy who are attracted to the powerful benefits offered by a properly designed trust. Now, those with equity in the family home or some savings put away for retirement or college are using trusts as an essential ingredient in their asset protection and estate plans.

Trusts are extremely flexible in form and almost any asset protection and estate planning goal can be accomplished by an attorney who is knowledgeable and experienced in this field. Using creative trust strategies, the planning opportunities for achieving tax savings and asset protection advantages are unlimited. The following examples will provide you with an overview of some of the techniques that can be used to achieve particular objectives in a variety of circumstances.