You’ve probably heard of trusts, but do you know what they are?
The concept of a trust dates back to British common law principles from medieval times. When knights went off to fight in the Crusades, they’d entrust all their assets to a friend in case they didn’t come back.
In that case, their trustee would inherit their land, their goods and their children.
A trust is not a type of entity, but a legally binding agreement.
In this video, filmed at the Platinum Mastermind in Fiji, Richard Watson talks about how and why to use trusts in your asset protection strategy.
WHAT IS A TRUST?
Because a trust is not an entity, you can’t buy it or sell it, and it does not replace your business structure.
Once you’ve set up a structure and some entities and assets, your trust is a legally binding arrangement that wraps up those entities and assets.
With a trust, a person known as a settlor transfers assets to another person known as a trustee. The trustee is entrusted with legal title to the trust assets, not for his own benefit but for the benefit of other persons known as beneficiaries. The beneficiaries may include the settlor.
Once you set up a trust, you separate ownership from control. The assets no longer belong to you, the settlor, but to the trustee. You continue to control them but the trustee owns them.
This is perhaps the strongest form of asset protection, but it’s also the biggest leap of faith. Trusts are not for everyone, and if you do decide to set up a trust, you definitely must be careful when nominating your trustee.
THE DUTIES OF A TRUSTEE
What are the duties of a trustee named in a trust?
In the most common scenario, the settlor sets up a trust during their lifetime. As long as they live, the trust is revocable.
However, they nominate a successor trustee who will take control of their assets upon their death. When this happens, the revocable trust becomes irrevocable and the successor trustee assumes responsibilities.
After setting up a trust, the settlor must send a copy of the trust document to the beneficiaries and lodge a notice of trust under public record.
The trustee must be careful to handle the assets correctly. It’s their job to make sure creditors are paid and tax returns are lodged. As the settlor, you must make sure they have all the information to do this correctly.
The MOBE Platinum Mastermind is where the most experienced mentors in investing and asset protection share their investment methods with fellow members. To learn more about the Platinum Mastermind, click HERE.