Excerpts

Dutiful Attention

After settling a Trust, the major focus becomes administration. It is always best to look before one leaps, so now is the time to become familiar with the skills and talents needed to handle a Trust. Getting a Trust turns the family into a business; conduct it as one. The product is the children; the goal is a better world. In this capacity, the Trust supports the Beneficiaries.

Essential Elements

The Trust Indenture is the key to a Trust. The more information, the less confusion, and clearer for Trustees to know what to do, and if a judge needs to decide elements of the Trust, it should be easy. You might wonder what involvement a judge might have in a Trust matter. There are sometimes disputes about the wording in the Indenture and intent of the Grantor. For example, the Hearst Family Trust Beneficiaries challenged the Trustees three different times. Because Randolph Hearst’s wishes are clear, the Beneficiaries failed in their attempts. This Trust serves as an example in this chapter about some standard elements of a Trust Indenture.

Creditors and the IRS

If a Trust is not written correctly, it can become subject to an IRS Lien. In an article appearing in the Los Angeles Daily Journal in April of 2006, several factors must be included in a Trust document. Some of these factors dovetail neatly with much of what has been discussed. Here are a few excerpts from the article:

• Property given to a child is subject to the child’s creditors. Instead, transfer the property to a Trust for the child’s benefit. The Trust must contain a spendthrift provision.
• The Trust gives the Trustee complete discretion as to distribution of principal and income.

Beyond the Laws

The current legal and political standards thwart some of the basic principles of contracts:

• When a politician does not want to be “caught” he or she shreds evidence.
• Recovery of breached contracts under $50,000.00, as well as investments losses is prohibitive, since the cost of litigation far exceeds the gain.
• The legal battle over a disputed contract takes considerable effort. The time and expense are only worthwhile for significant reward, and one you are assured to get.

Ignorance and the Red Flag

The International Bankers know the potential power of a properly set up Common-Law Irrevocable Trust and at times the IRS may test the Trustees and other members of the Trust to see if they are knowledgeable. Further, because of the sophistication of the Irrevocable Common-Law Trust, The IRS suspects most people involved with it have no idea how both the administration and tax laws apply.

Screwball Trusts

When it comes to Trusts, lack of education can be heartbreaking. Although this chapter focuses on the misuse of the Common-Law Trust, Statutory Trusts can be equally faulty. You might ask yourself if these people who lost to the IRS were guilty of fraud, or guilty of not knowing enough about Trust structuring to know how to handle accounting. Being ill advised is obvious, but not investigating further and reading court cases is their responsibility. The “scam” Trust promoter is often ignorant of their own errors. Mixed up with Trusts are the controversies about taxing. Some believe Trusts hold a key to avoid the IRS. It is a matter of knowledge, and skilled administration that makes a Trust successful. The cases presented here display the lack of correct information We summarize five cases, leaving the more legally inclined to get all the details from the sites given. One of these reports reveals a clever scheme, and others are simply sad. They show a tangled understanding of Trusts. This results in an improper application of basic Trust principles.

Partial Surrender

Because most people will not put all assets into an Irrevocable Trust, many provisions are not applicable to joint property relinquished prior to putting assets into an Irrevocable Trust. Section 6 of the Probate Code is the only portion we address. The other areas subject to waiver are at your own discretion, but are not directly applied to assets placed into Trust.

Keys to the Future

We have given you information to build an empire, and at the very least, to pull your family together to create security and a better future. The implications of taking action to reformat your family into to a business are vast. Here are the keys to create your own reality and form an interlocking support network. The one magic ingredient you need, though, is the right leader.

We touched on this in Volume I. We wrote about the person who has the ability to bring in the money and to hook-up that person to share the wealth for the family. Using those who do not have financial shrewdness, but have other talents, can contribute to a stronger family basis.

Agreements Equal Cash Flow

We know some of you doubt you can write a contract. Our answer to you is, “Sure you can. There is enough legal software around, and you can figure it out. You do not have to run to a lawyer every time you need a contract.” In our chapters about legal issues, we include a discussion of contracts. We also include examples in the Appendix.

Some of the other Topics covered are:

Trustee Training
The Grantor’s vision
Trust Indenture
Creating and maintaining Trust minutes
Moving together as a Unit
Trust Members and their responsibilities:

• Executive Secretary
• Grantor or Settlor
• General Manager
• Trustees
• Beneficiaries
• Protector

Guardianship
Acceptances and Resignations
Trust Certificates
Banking documentation
Investment documentation
Certification of Trust
Pour-over Will
Durable Power of Attorney for Health Care