A trust is a legal arrangement or entity to hold, manage, control, privatize, protect, or take care of property in certain special ways.
Trusts are not publicly created by a state corporate bureau, but by private written contracts between two parties – the grantor and the trustee. The trustee creates the contract for the benefit of a third party – the beneficiary. Typically the beneficiaries include the grantor, their spouse, and heirs, such as children, grandchildren, etc.
The Revocable Living Trust
There are many types of trusts. Our focus here is an estate planning trust that starts with a revocable living trust (RLT). The primary purpose is to transfer your assets to your heirs upon your demise without the cost and agony of probate.
With a revocable living trust you have superior “family legacy planning” because anything a will does, a properly structured RLT does and does so much better as follows:
(1) Identify and control the transfer of property to rightful heirs–with very little chance of being contested. (A will can always be contested and often is.)
(2) Avoid probate expenses, disputes, and hassles by transferring legal title of property out of the grantor’s name into the trust. (A will does not do this.)
(3) Give instructions for the management of the trust assets during a period of grantor incapacity while the grantor is still living. (A will does not do this.)
Without such a trust, the following real world financial disasters continue to happen:
My cousin (Martin) was happily married for many years with four great children. Unfortunately, he and his wife got divorced. Subsequently, he met a “lush” (who can drink anyone under the table). They marry, and a year later he suddenly and tragically dies.
Guess who gets his entire estate? The lush! Guess who got NOTHING – his children! It was not a huge estate, but $275,000 (including a house) is not chicken feed. Suppose you were the children–how would you feel? Obviously not very good.
This sad family occurrence wouldn’t have happened with a properly structured trust.
Bob Bernstein (a dentist) had over two million dollars in assets, including real estate. He is single with two teenage children – Bob, Jr. and Roberta.
After receiving a flu shot Bob, Sr. became 90% paralyzed (incapacitated) for ten months. During this period his children – Bob Jr. and Roberta (who had access to dad’s funds) – got swindled by a con artist with a Ponzi scheme for $486,000.
When Bob, Sr. recovered, he realized he had to do two things: Avoid flu shots and use a trust. This substantial loss wouldn’t have happened with a properly structured trust.
The personal assets that should be held by the trust are:
- The ownership certificates (shares) of your LLC, corporation, and other entities
- Your home, second home
- Your vehicles – car, truck, RV, boat, plane
- Bank accounts, brokerage accounts, securities, annuities, life insurance, etc.
- Other personal valuables – jewelry, antiques, precious metals, rare collections, etc.
These assets have value and are therefore subject to attachment.
Note: Investment real estate is not placed in this trust but instead in a properly structured LLC with the shares of the LLC in the trust.
While a properly structured revocable living trust will protect the above assets from probate upon your demise, it does not give you asset protection and privacy.
Let’s look at the next disaster that would not even be protected with a revocable living trust. One of my students, Thomas Vareya from New York, sent this to me:
A real estate investor/landlord was sued by the parents of a son. The son (tenant) locked himself out, scaled to the top of the house to get in, but fell and became permanently paralyzed. Then their lawyer realized the investor’s LLC certificates were considered personal property. So the lawyer sued and won, wiping out the investor completely.
In another words, to attached personal assets instead of initially trying to collapse the LLC entity itself (LLC front door), the lawyer went right through the LLC back door, attaching the investor’s totally exposed LLC membership certificates (shares) and then collapsed the LLC entity to attached personal assets.
This is a form of “reverse veil piercing,” a dangerous and very effective weapon against unprotected assets, as demonstrated above.
The Power Elite Trust
The SOLUTION would have been the Power Elite Trust (PET). The PET is far superior than an RLT as it does everything an RLT does, only better. Plus it protects your personal assets from attachment such as what happened in Disaster 3 and would have been even more effective in Disasters 1 and 2.
To clarify, with the PET, Disaster 3 would not have happened.
Specifically, the PET is a meticulously designed irrevocable, life estate, grantor trust. What does this all mean?
Irrevocable means – only you and your family can undo the trust, but claimants and their lawyers cannot. This, along with special trust provisions, is what gives you the impenetrable wall of protection, yet with the legal ability to revoke the irrevocable (but only if you want to).
Life estate means – during your lifetime you have the full control, benefit, use and income of the trust assets. Upon your demise such assets go directly to your rightful heirs without delay, without probate, and without the possibility of contest even more so than an RLT.
Your family assets are also totally protected from wrongful creditors, money-hungry lawyers, con artists, future gold-digging spouses, and other such vultures during your lifetime and upon your demise.
Grantor means that this superb trust has no adverse income tax consequences whatsoever, with no need to file tax returns. While it has these great benefits, it is invisible to the IRS (and your creditors).
In summary, with this blend of positive attributes, the PET has the best of all worlds:
- Avoids Probate
- Impossible to contest
- Trust management
- Asset protection
- No negative income tax consequences
The Power Elite Trust is a consummate trust system and part of the newly recreated LLC Master Machine Asset Protection System. The PET combined with a properly structured LLC gives you awesome, formidable, impenetrable protection!