The “Benefit Trust” is our nickname for the exclusive Non-Grantor, Irrevocable, Complex, Discretionary, Spendthrift Trust.
The legal and accounting team that carefully crafted this instrument have provided for ultimate flexibility and absolute compliance with IRS Code Section 634b.
You and your advisors may have questions. Here are the answers to some of the most commonly asked questions and concerns.
Does the Settlor have any rights or interest in the Trust?
No. The Settlor has no rights or beneficial interest in the Trust, and is not connected to the Trust assets in any way.
What can the Compliance Overseer do?
The Compliance Overseer can be the trustee (as long as he/she is not the Settlor of the Trust). The Compliance Overseer can appoint another party to be the trustee; however, the Compliance Overseer can still replace the trustee that he/she has appointed.
The Compliance Overseer can appoint or remove any beneficiary at will. However, the Compliance Overseer may never be a beneficiary.
The Compliance Overseer can also appoint his/her successor at any time during his lifetime.
If a Compliance Overseer does not appoint a successor, then upon his/her death, the office disappears. Yet, the existing appointed trustee and the beneficiaries remain the same.
Does the trustee have to disburse funds each year, and does he/she have to disburse in equal amounts to each beneficiary?
No. The discretionary component of the Trust gives the the trustee the option to disburse funds to the beneficiaries in equal amounts, unequal amounts or not at all at his/her absolute discretion.
Who can be a beneficiary?
The beneficiaries in a Spendthrift Trust may be anyone or any organization named in the Trust Documents.
Do I have to pay taxes when I give money or assets to the Trust?
No. When the Settlor or anyone else gives money or assets to the Trust for it to be capitalized or endowed, no taxable event has occurred. The Trust pays taxes only on what the assets earn unless deemed to be paid to the corpus according to the terms and conditions of the Trust, which is discretionary.
In addition, monies that the trustee distributes from the original endowment of the Trust to the beneficiaries are a nontaxable event for the Trust. The monies that the Trust earns are taxable unless deemed to be paid to the corpus according to the terms and conditions of the Trust.
Can I take my assets out of the Trust? Can a court seize them?
No. Once the assets are placed into the Trust, no court or entity can remove them. Spendthrift Trusts have proven to withstand court judgments, divorces, bankruptcies, and lawsuits. These trusts have been successful in preventing creditors from attaching trust assets.
Once you place your assets into the Trust, they become Trust property and you as grantor may not remove them. The Trustee, however, does have the authority to sell, lease or otherwise dispose of any Trust property in accordance with the provisions of the Trust.
Can a Trust make investments or do business?
Yes. Trusts can own and trade government securities, stocks, and bonds, gold precious metals or any other form of asset. The Trust can hold, buy or sell real estate and may own businesses.
Do the beneficiaries have to pay taxes on Trust distributions they receive?
Yes. The monies that are paid to the beneficiaries are a taxable event to the beneficiary from the endowment funds of the Trust according to their income level if earned income is the distribution; only the monies that a Trust earns from the endowment and are undistributed to the beneficiaries are taxable to the Trust if retained by the Trust unless deemed to be paid to the corpus according to the terms and conditions of the Trust. The “Super-B” Scott Compliant Trust is a discretionary Trust and complies with this IRS regulation.
What about tax returns for the Trust?
Trusts are required to file federal income tax returns. Form 1041 is used. However, a Spendthrift Trust is a complex Trust and the capitalizations or endowments of the Trust are not taxable events and deemed to be paid to the corpus according to the terms and conditions of the Trust.
Capitalizations or Endowments are retained indefinitely and only distributed by the trustees of the trust to the beneficiaries at the sole and absolute discretion of the trustees only. All capitalizations or endowments of a trust that are retained in the corpus are not a taxable event.
Why can't I find any reviews about this on Yelp?
This instrument has been sold under license from the law firm holding the copyright. any review would be attributed to the individual licensee or distributor. Further, the typical client for this structure is not the type of person who would post any information about it on Yelp or other social media sites. Remember that one of the primary reasons for implementing the structure is Privacy, so any social posting would be in conflict with that intention.
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