Trust Basics

Trust Basics
Excerpts from the book: "Your Privacy and Asset Accumulation Guide"

 

Below, are some specific items that you may or may not have a need to deal with in working with Trusts. Most of the items are pretty self-explanatory and you should understand the reasoning behind each one.

No. of copies of document.

Although most officers will want a copy for their records, it is really not necessary or required to provide all officers with their own copy of the TRUST document. There is only one copy that is considered to be the official "copy" and that one is always held by the Trust Officer for the First Trustee. That copy, along with all future Minutes that are recorded, should be always kept in a safe place. If stored electronically, always save a back-up copy off-site.

Situs Address.

The Situs address is one that establishes what laws and jurisdiction prevails over the establishment of the Declaration of Trust. You may use your own mailing location, or some professionals prefer locations such as Belize or Cayman Islands, etc. You are always free to move the Situs of the TRUST. Because of the way the document is written, that would reestablish the governing rules for the TRUST to that new location. Depending on your particular situation and desires, that could be advantageous.

Mailing Address.

The mailing address is assumed to be the Situs address unless specifically changed with an appropriate Minute. The mailing address does not have to be the same as the Situs address. For best results, you could consider leaving the Situs address as your mailing location and then draft a Minute, changing the mailing address if you find it necessary.

Name of Trust.

The name of the TRUST is unimportant as long as it is established as a Declaration of Trust. Some people like to use a name with the suffix "Holding Trust", "Management Trust",etc.... Others prefer suffixes like "Foundation or Group", etc. You can not, however, make it appear as a banking or traditional financial institution. Most people simply choose a name of a city, town, product or service as the basis of the TRUST name.

One thing to watch out for is you don't want to use the words "Corporation", "Company", "Partnership", etc. that would imply this is something other than a Declaration of Trust which is a Contractual Agreement organizing to do business. The proper terminology for the identification of this TRUST is a "Declaration of Trust". It is also known as an Unincorporated Trust Organization by Contract.

SETTLER, First Trustee and Beneficiary.

There are three main parties to a TRUST.The SETTLOR, First Trustee and the Beneficiary(ies). The SETTLOR and the First Trustee contract amongst themselves to start the TRUST for the benefit of the third party, the Beneficiary. The SETTLOR is someone that is protecting the Beneficiary's interests, and wants to donate the initial $100.00 into the account of the TRUST. This $100.00 is a total gift by the SETTLOR and is now considered principal of the TRUST, until such time that it is paid out as income to the Beneficiary.

The SETTLOR decides who the Beneficiaries are and how the TRUST is structured, but beyond that, the First Trustee takes over day-to-day operations of the TRUST. The First Trustee now has the right to bring on additional Trustees, called Secondary Trustees, to help oversee the operation of the TRUST or to run specific aspects of it.

The Beneficiaries of the TRUST are theultimate recipients of any and all income derived from the TRUST activities so be sure how you place people in this position. The easiest structure to setup is one where you become the First Trustee. A very close friend or coworker is signed on as the SETTLOR and your children become the beneficiaries. This is an example of how a Trust is generally setup, but you by no means have to follow this guideline.

One rule to watch out for. The three parties must be separate individuals or entities. You can not be the Beneficiary of a TRUST in which you are the First Trustee. That is a highly precarious situation. One in which you don't want to become involved. Everyone knows one or two individuals they can trust well enough to place assets in their care. The reasoning is that you want to CONTROL everything but not to OWN anything. Therefore, if you control the TRUST, which owns all of the assets, you control what was the assets you used to own. What is the difference in doing that and you owning your assets and controlling them? Nothing, except for now, you're judgment proof. No one can sue you and win something that is not yours, right?

One word about Grantor-Trustee. A SETTLOR is presumed to be giving the initial assets to the Beneficiaries. If it is shown that the SETTLOR still retains control of the assets, it will be judged that the SETTLOR is in fact a Grantor-Trustee. The income from the TRUST assets will then be taxable to the SETTLOR even while the assets remain in the possession of the TRUST. This is why we said it would be safe to choose a close friend to be the SETTLOR. The SETTLOR has initial desires and wishes to make a gift, but beyond that, they relinquish all control over that gift to the First Trustee. Also, a SETTLOR can not have any financial interest in any present or future endeavor that the TRUST embarks upon. Be careful who you choose for the SETTLOR position.

Secondary Trustees.

Any Secondary Trustees must sign the Minute pertaining to their appointment.

Trust Certificate Unit Holders.

The Beneficiaries are the Trust Certificate Unit Holders. Wherever you refer to and place beneficiaries in this document, always remember to list those names with the proper number of T.C.U.s that are issued. There are always no more and no less than 100 T.C.U.s issued at any time. It is the SETTLOR's initial choice to divide these up in any way they want.

Signatures.

Anywhere there is a space for a Witness' signature, you must find a witness to sign.

Declaration of Trust, Trust Indenture, Trust Bylaws and Meeting Minutes.

These headings are pretty self-explanatory. The Declaration of Trust is the general guideline or set of rules that is established as the basis for the TRUST. The Trust Indenture is a more detailed version of the preceding information. The Trust Bylaws are the specific rules that govern the TRUST. They spell out some detailed do's and don'ts of what is allowed. The Meeting Minutes are the documentation of the day-to-day activities of the running of the TRUST.

First Secretary, Trust Manager.

You may appoint a First Secretary. This title is placed here for those times when you can not or choose not to be listed as the First Trustee. You have a couple of options. One is to be signed on as the First Trustee or to take the position as General Trust Manager. You'll notice that if a Trust Manager is appointed, they take over day-to-day activities. Whereas, a First Secretary simply watches over everything and can literally veto anything they don't like.

The best position is still the First Trustee. As you'll read in the trust document, the First Trustee can not be terminated whereas the other positions can be. REMEMBER THIS!

Meetings.

The Bylaws briefly mention the various meetings that would be called from time to time. These are required for a Trust to be legal. It is here that it is established that all meetings can be held anywhere in the World. This is a great benefit to have. Any restricted version of this clause would need to be addressed in a Minute.

Privacy.

The Bylaws grants the Beneficiaries immunity from disclosure. Under no circumstances will a TRUST officer be allowed to disclose the identities of the Beneficiaries. Therefore, no non-officer shall be permitted to view any documents of this Trust Organization except for the "Declaration of Trust" and the "Trust Indenture" sections of the original formation agreement.

The Meeting Minutes grant you the privacy you need to conduct your business affairs the way you see fit. Any additions to the TRUST assets, beyond the initial $100.00, must be documented with appropriate Minutes. Therefore, anything this TRUST does from here on out, will be private and against the wishes of the SETTLER and the Board to be disclosed to anyone without just cause or demand.

Successor-Trustee

It is highly advisable to immediately find a Successor-Trustee. Don't delay this appointment very long. It could be crucial to the ongoing, uninterrupted nature of this Trust organization.

Additional Structures / Layers of Protection.

Some astute business persons choose to add layers of protection by setting up additional Trusts. They'll use a combination of the Family and Management Programs to create an intermingled diversion of entities. Sometimes, these additional layers can provide the extra protection to totally render yourself judgement-proof.

Fraudulent Conveyance.

The one thing to remember in a scenario of Fraudulent Conveyance is that the creditors will want to set-aside or disallow any transfer of assets which could have been used as collateral for a debt owed them. If you are going to transfer assets out of your possession, into a Trust, for reasons of avoiding present creditors, you will need to show that your "transfer" was an attempt to settle a debt with a creditor. It's not your fault there's not enough assets to go around to settle up with all the creditors. If there were, you wouldn't be in this predicament, now would you?

You need to arrange to have another Trust to place a lien against your assets with a monetary value that will exceed the value of merchandise being transferred. This will clearly show that your transfer was in an attempt to clear a lien. Just be very careful who operates that other Trust and how their names are tied to the present operating Trust you are setting up. Those Trust officers should be totally different, if possible.

If you want total protection from disclosure of transfer information to any official authorities of ANY country, you'll want to set up an Offshore Trust. No matter what the reason for the transfer, places such as Belize will not allow any documents to be placed into the hands of inappropriate parties. Since this document is NOT recorded in any state, country or registrar, there is built-in protection from improper disclosure. The offshore Trust's situs can be directed to offshore if you wish. You will need to change the jurisdiction of the Trust in an appropriate Minute.

Multilayered Trusts.

In creating multiple Trusts and multilayered Trusts, the main objective is to create a diversion of paperwork and closed doors for an outsider trying to pry into your affairs. Therefore you need to understand the simple basics of outlining these structures.

The easiest way to understand this is to think of each Trust as a real person. When drawing out your examples on paper, outlining the flow of funds, etc. use real person's names for your example Trusts to clearly understand their relationship with each other.

The easiest example to use for creating an information trail that eventually closes off is having a second Trust be the Beneficiary of the first Trust. Then you could have a third Trust be the Beneficiary of the second Trust and so on until you've created enough of a stair-step that prevents any information leaks from disclosing any identities that should remain discreet. The principal parties, whose identities you're trying to keep a secret would be placed as the Beneficiary of the last Trust in the chain.

Parent/Underlying Trusts.

In the example of a Parent/Underlying Trust, the scenario is that one Trust is either the overall umbrella (or Parent, if you will) that is the parent/controlling entity over all the other Trusts. This works if one Trust wants to diversify and yet have some of the same officers running the subordinate Trusts. In this example, the Parent Trust could be the SETTLOR of the subordinate Trusts. You could use the same or some of the same Trustees for the Subordinate Trusts. This allows you to name different Beneficiaries for different business purposes.

An Underlying Trust is one that is named as Beneficiary of several Trusts. All the Trusts are created for the ultimate benefit of the one Trust. This can be used if someone has limited family and wants to diversify. All the diverse business activities will eventually benefit the one Beneficiary, who himself, operates as a Trust entity as well.

Brother/Sister Trusts.

Brother/Sister Trusts are ones in which they share managing directors or Trustees. They may have different SETTLORs and/or different Beneficiaries but essentially, these are the diverse Business Trusts that will eventually funnel down to an Underlying entity. They are also the diverse Trusts that may have the same SETTLOR as in the Parent Trust. These Trusts are usually the "working" Trusts that generate most of the revenues for either a Parent or Underlying entity. Since they may have some of the same directors/Trustees, be very careful as to how they relate to each other so that none of the Trust officers jeopardizes their fiduciary relationships with their respective Beneficiaries.

Trust Basics - Notes & Quotes

NOTICE: "Your Privacy and Asset Accumulation Guide" is not affiliated with Freedom School.
NOTICE: If anything in this presentation is found to be in error a good faith effort will be made to correct it in timely fashion upon notification.
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