Trusts are unique, powerful legal instruments. The following words from the famous English legal historian F.W. Maitland reveal how significant the creation of trusts has been to modern prosperity.
If we were asked what is the greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence I cannot think that we should have any better answer to give than this, namely, the development from century to century of the trust idea.
— F.W. Maitland, Legal Historian
Three Important Features
Though there are many types of trusts, nearly all have three important common features. First, trusts provide “invisible” ownership — in other words privacy — because beneficiaries are never disclosed. And secondly, trusts provide a “liability” shield from personal hazards (tax liens and judgments) because they isolate you personally from the assets legally owned by the trust. And third, they provide simple transfer of ownership.
Real Estate Trusts provide an excellent example of the benefits that legal separation can provide you. If you own rental property in a Chicago Title (realty) Land Trust, the public tax records reflect only the name of the trust and trustee. Your beneficiary is unlisted. Any liability of the rental property is contained within the trust itself — it rarely extends to you personally. Holding Trusts (personal property such as artwork or aircraft) have similar characteristics.
Business Trusts are for-profit operations. Yet all trusts have common protections and benefits. The curtain of invisible ownership and the containment of liability within a single trust are often enough to discourage lawsuits before they can begin. This offers you strategic advantages.
Trusts Have A Dual Nature
Another way to illustrate the useful separation that trusts create between you personally and your other assets is the metaphor of a coin. Like the two sides of a coin, trusts have a dual nature. A trust allows you to enjoy the entire coin while assigning special properties to each side — one side of the coin is the legal “title”; the other side is the “benefits” of the asset. This basic division is central to the power and privacy that trusts offer.
Three Simple Facts
- A private trust is a written agreement, or contract.
- Anyone can create a trust recognized in 49 states.
- Centuries ago ordinary citizens created trusts. You can still do the same today. A trust can own a car, home, or any other property.
How You Create a Trust
- You have the idea to create a trust. Then you select the appropriate name and decide upon the number of trustees. Contribute assets to fund the trust. Identify the beneficiaries.
- The trustee(s) manage or distribute assets owned by the trust on behalf of the beneficiaries, under any terms you choose.
- You can also be a trustee and/or a beneficiary.
Setting Up Multiple Trusts
Sometimes it’s smart planning to use multiple trusts. Place individual assets into separate trusts because it keeps them safely isolated from each other. It avoids cross contamination. Trusts never registered in any public record only “live” as private paper documents in your files. Yet in the event of a challenge, your strategy and decisions are in writing.
Creator Can Also Be the Beneficiary
There are certain circumstances when the creator of the trust is also the beneficiary of the trust – most often the living trust.
Who Can Benefit from a Trust?
Anyone whose possessions include one or more of the following:
- Aircraft
- Class A Motor-homes
- Yachts and Watercraft
- Fine Jewelry
- Automobile Collections
- Wine Collections
- Antiques and Artwork
- Bank and Financial Accounts
- Real Estate
- Patents and Copyrights
“The Unique Power of Trusts”