Spendthrift Trust Establishment

 

Parties to the Spendthrift Trust:

1. Creator (Settlor, Settler, Trustor) – person who owns the property or assets that is to be transferred to and held by the trust. 2. Compliance Overseer and Protector – persons who assume oversight of the fiduciary responsibilities of Trustees. 3. Trustee – person who runs the regular operations of the trust. 4. Beneficiary – the person or entity that the trust creator intended to benefit from the trust estate. Beneficiaries have beneficial interest to the property or assets held in the trust.

Scott on Trusts Vol. 1 57.2, Vol 3 349 states that a creator or Settlor may reserve not merely a life interest and a power to revoke the trust in whole or in part and to modify the trust, but also a power to control the trustee in the administration of the trust.

This powerful tool was the catalyst, which our firm employed to copyright our Spendthrift Trust format. Our copyrighted trust document has the office of compliance overseer and protector of the trust. The powers of this position are to protect and direct the affairs of the trust, appoint and/or remove trustee’s, add and/or remove beneficiaries and to ensure that the trustee’s follow the provisions of the trust. The fact that a trustee can be replaced and governed by the Settlor or Creator, not only maintains the protection from judgments and creditors, but also assures the Settlor or Creator that his wishes will be carried out and that a successor will continue to govern and carry out their wishes after he is gone. However, in our copyrighted trust a Settlor may not be a Compliance Overseer.

Beneficiaries can now, for the first time, enjoy the knowledge that they will receive what has been placed in a trust for them, and for the first time they can be assured that their future is not in the hands of a trustee whom they do not relate to or have a personality conflict with. It also assures them that the wishes of the Settlor or Creator will be carried out for their benefit.

Spendthrift Trust Background

 

Spendthrift Trusts are not new innovations in the trust formation field. They have been around since the 1530’s. These trusts were first introduced in Europe to protect the estates of nobles and lords from attachment and escheat by creditors of all types so that the estates’ assets could be transferred to the beneficiaries.

Spendthrift Trusts were created and used to prevent courts, creditors, governments, agencies and any operation of law from transferring, levying or gaining access in any way to the assets and monies in these estates. The king and/or queen of the land were the protectors of these estates and the trustees were under the oversight of these majesties so that they could not misuse the business of the trust.
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Over the centuries the Spendthrift Trust has reigned as a very strong and popular type of trust. It has been tested more than any other trust due to the length of time it has existed and is superior to any other type of entity to protect assets and remain free from creditors attaching the assets.

What Is An Irrevocable Trust, And What Are Its Advantages?

 

When you create a trust, you decide whether the trust will be revocable or irrevocable. A revocable trust can be changed or even dissolved by you at any time. An irrevocable trust, however, can never be changed. The assets you put into it must stay there. And the only way to change the trustee is for that person to die or agree to resign. Why, then, choose to make your trust irrevocable? For tax advantages and legal protection. An irrevocable trust pays income taxes on what its assets earn if undistributed to beneficiaries at some point and is beyond the reach of creditors and judgments. When a person dies, the trust property is not part of an estate and will not be subject to death taxes. Conversely, revocable trusts offer no tax benefits at all and may be reached by creditors to satisfy judgments. If you want lots of flexibility, poor tax consequences and no legal protection, make your trust revocable. But if you want good tax consequences and complete legal protection, you must forego flexibility and form an irrevocable trust instead.

Different Forms Of Trusts

 

ASSETS PROTECTION TRUSTS are designed to protect a person’s assets from claims of future creditors. These trusts are frequently established in the U.S. and throughout the world.

CHARITABLE TRUSTS are established to benefit charities, causes, organizations or the public.

CONSTRUCTIVE TRUSTS are trusts established by operation of law. Fraud and bankruptcy are examples where trustees of the court hold equitable title of property.

EXPRESS TRUSTS are specifically created by the settler under a trust agreement or declaration of trust.

IMPLIED TRUSTS are determined by courts where a formal declaration of trust was not made but there was an intention on the part of the property owner that the property be used for a particular purpose or go to a particular person or cause.

IRREVOCABLE TRUSTS are trusts that cannot be altered, changed, modified or revoked after its creation. Once the creator transfers property or assets to the trust they can no longer take the property back from the trust.

LIVING TRUSTS (another term for the Latin “Inter Vivos” trusts) are trusts created during the lifetime of a settler, which can be altered, changed, modified or revoked. The creator is the trustee and beneficiary usually with relatives as other beneficiaries.

RESULTING TRUSTS are trusts created by operation of law, when the legal title of property is transferred, but the beneficial interest is to be enjoyed by someone other than the person who received the legal title.

SPECIAL NEEDS TRUSTS are trusts created for a person receiving government benefits in order not to disqualify the beneficiary from such government benefits.

SPENDTHRIFT TRUSTS are trusts established for a beneficiary, which does not allow the beneficiary to sell or pledge away his or her interest in the trust. Spendthrifts are beyond the reach of the beneficiaries creditors, until such time as the trust property is distributed out of the trust and placed in the hands of the beneficiary.

TESTAMENTARY TRUSTS are trusts created by the terms and conditions of a will.

 

 

 

 

 

 

 

Basic Types Of Trusts

 

REVOCABLE TRUSTS are those trusts that the creator chooses to end at any time.

IRREVOCABLE TRUSTS may not be terminated by the Settlor. To have favorable tax consequences, a trust must be irrevocable.

INTER VIVOS TRUSTS are trusts that are established during the lifetime of the Settlor.

TESTAMENTARY TRUSTS are trusts that are created by someone’s will to take effect when that person dies.

Investment And Confidentiality

 

There are no statutory controls or restrictions upon investments by trustees of trusts that may be empowered to invest trust funds in any part of the world. They may invest in either real or personal property of any nature, whether income bearing or otherwise.

Probate requirements for wills obviously involve making a public record of the terms of a will, and the distribution requirements similarly because of public record. Trusts however are not filed and are not on any public register and the name of the trust need not be relevant to the parties concerned.

History Of Trusts

In medieval times the “USE”, which was the forerunner of the trust, was brought into being by “A” transferring to “B” to the use of “C”. “B” then became the owner of the property in law and held the legal estate for the benefit of “C”.

The “USE” was most often used to overcome feudal dues arising on the premature death of a father leaving a male heir under legal age as well as enabling the disposition of land by will. The Statute of Uses of 1535 attempted to abolish the advantages of the USE but it was not successful; and by 1700 the USE had evolved into the trust of today.

The trust was used for many reasons: to tie up land or wealth for succeeding generations of the family and to make provisions for dependents. It was used also for many other
purposes, including dealing with the common law rule that a married woman could not hold property in her own right. This was overcome by vesting that property in trustees to hold in trust for her.

Trusts today are used for bypassing probate, preserving the estates for future generations, shielding assets from litigation, deferring taxes, management of assets and the replacement of wills and avoiding the complex legal estate system which can seriously reduce an estate under a writ. Trust law is unique in America and, of course English law from which we inherited it.

Trust Agreement Or Declaration Of Trust

These terms refer to a written document that sets forth the terms and conditions of the trust. Trusts differ usually in style and local practice.

● Typical provisions of a trust include the following:

● A statement of the purpose of the trust.

● The name or names of the trust creators.

● Whether the Settlor or anyone else may amend or revoke the trust.

● Who will serve as the initial trustee and who would serve in what order if the initial trustee becomes unable or unwilling to serve.

● The powers the trustee will have in terms of investment and management, and what discretion the trustee is to have in terms of releasing money or assets to beneficiaries.

● Who the beneficiaries of the trust are or how to determine them.

● Who will receive distribution of the trust estate.

● The termination and duration of the life of the trust.

● Provisions for legal matters.

General Principles Of a Trust

 

1. A trust is the legal entity that results when a Settlor, for the benefit of specified persons or entities, transfers assets to it and appoints a trustee to manage it.

2. The assets of the trust must constitute an entirely separate fund and are not a part of the personal estate of the trustee.

3. The assets of the trust do not form part of the Settlor’s legal estate.

4. The assets of the trust must not form part of the beneficiaries’ own legal estate.

5. The title to trust assets are held in the name of the trustee or in the name of the trust and the trustee has control of the assets.

6. The assets of one trust must be separate from the assets of another trust.

7. The trustees are under an obligation in respect of which they are legally accountable to manage, employ or dispose of the assets of the trust in accordance with the terms of the trust, as imposed by the Settlor in accordance with the law.

8. The Settlor of a trust may reserve certain rights and powers; and the fact that the Settlor may have rights as a beneficiary is not necessarily inconsistent with the concept of a trust.

9. Trusts are formed either during the Settlor’s life or by will when the Settlor dies.

10. Trusts may be revocable or irrevocable.

11. Trusts are discretionary where the trustee may distribute income and assets to all or any of the beneficiaries as the trustee chooses and no percent is assigned to any one beneficiary.

12. Trusts are non-discretionary when strict arrangements for specific distributions of
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Income and/or assets to or among the beneficiaries are set out as terms of the trust deed.

Copyrighted Spendthrift Trusts

 

In 1999 specialized terms and conditions for Irrevocable Spendthrift Trusts were created that were unique in that for the first time a control position was placed within the trust format that would allow a Settlor of a trust to govern the actions of a trustee and the conduct of the beneficiaries. These trusts meet all the requirements of the IRS, the concepts of the late Professor Austin Scott of Harvard Law School, the foremost authority on trust law and the codes and relevant statutes of the legal system.

The trust documents were copyrighted, beginning in 1999 and completed in the year 2000. This gave the copyrighted documents complete protection in marketing and the use of the trusts. In 2012 the Trust was updated and revised with reference to the IRC to take advantage of certain areas of the code.

The trusts provide complete asset protection, because the trust assets are exempt from a turnover order from any court of law or judge when used in a lawful manner. If a creditor brings an action against an individual or company that is operating in the structure of Spendthrift Trusts, and, even if they should get a judgment, they are unable to reach any assets that are within the trust. If an individual or business is sued in a damage case (as is the case with doctors, professionals and companies) and even, if they are assessed a huge award by a court for damages, the judgment is not enforceable as to the assets and bank accounts of the trust. The assets of the trust are secure.

Any assets, cash or property (intangible or tangible), when placed in the Spendthrift Trust are not taxable. This is an endowment which is a capitalization. Only the profits that the trust earns from the investment of assets are taxable. When assets, cash or property that are the endowment, are distributed to a beneficiary of the trust, it is not a taxable event for the trust. Only the profits that are earned from the assets of the trust are taxable unless they are distributed to a beneficiary at some point. All endowments are nontaxable events with regard to the trust.

Because of these key factors and the characteristics of these special copyrighted (intellectual properties) Spendthrift Trusts have now become the preferred entity for individuals and business concerns. With this in mind, the copyrighted trusts provide individuals and businesses complete protection, good tax consequences and ease of management that meet and exceed all the requirements and standards of the courts and the IRS.

This exciting product is designed for those clients who have the most to protect, and the susceptibility to liability that goes along with their success.

Once, exclusively, the asset protection and management vehicle of choice for captains of industry and the most prominent wealthy families in the United States, the Copyright Spendthrift Trust is now available to those clients whose lifework has earned them significant assets or will accumulate estates of means.

Written and designed by Attorneys in Dallas and Houston, Texas and New York, the Copyrighted Spendthrift Trust is especially popular with professionals, businesses, physicians, oil and gas exploration companies and others with significant exposure to liability lawsuits, to ensure protection of personal assets.

The Trust was designed with consideration to the recognized works of Professor Austin Scott, author of the definitive law on trusts, titled “Scott on Trust”, required study, generally, in the curriculum of leading law schools and the Restatement of Trusts.

The Copyright Spendthrift Trusts are in complete compliance with all Internal Revenue Service Statutes and Codes on Estates, Trusts and Beneficiaries, as well as with “Scott on Trust”. Relevant code sections are Title 26, Subtitle A, Chapter 1, subchapter 1, Part 1, Sections 59, 67, 543, 553, 927 Subpart A Section 641; Section 643, Subparts A, B, C and D, and including Section 651, Sections 672, 673, 674, 675, 676, 677 and 678.

Masters Copyrights LLC is the holder of the copyrights. By using this copyrighted format one has the unique opportunity to protect assets within the Copyrighted Spendthrift Trust. The Copyrighted Spendthrift Trust is a unique opportunity for you to legally protect those assets worked so hard to obtain