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A “trust” is nothing more than a “contract.”

As in any contract, someone must initiate the contract (Grantor or Trustee).

The contract (trust) must specify the who, what, where, when, why, and other conditions.

Finally, the contract is for the benefit someone or something (beneficiaries: wife, children, grandchildren, church, other charitable organizations, etc.).

There are three elements to the “trust” document: Grantor, Trustee, Beneficiaries

The “Grantor”

He’s the guy with the buck$.

The grantor’s motivation is to get asset(s) out of his name for either some or all of the following:

* Asset protection / wealth preservation

* Reduce potential frivolous lawsuits

* Elimination of the “probate jail process” (see definition, below)

* Elimination of estate taxes

* To gain some tax benefit or some other tax deferral benefit.

If the “Grantor” initiates the trust (contract), it’s called a “Grantor Trust,” otherwise it’s called a “Non-Grantor Trust.” To me, it’s just legal garbage so lawyers can charge more.

If the “Grantor” wants to retain certain control over his asset(s), it’s called a “Revocable Trust” otherwise, it’s an “Irrevocable Trust.”

Revocable / Irrevocable has significant asset protection and tax differences.

“Revocable,” is like the kid next door that brings the ball to play basketball with the other kids. Everything is fine, as long as he makes the rules, and he makes the rules as he goes along. If you don’t agree, he takes the ball and goes home. Ball game over.

One name given to a revocable trust is the “Living Trust.” The sole purpose of the revocable living trust is to “eliminate the probate jail process.” Control is like the kid with the basket ball. It’s still his ball. Therefore, there’s absolutely no tax benefit and no asset protection / wealth preservation benefits.

The grantor of a revocable trust can be sued for all assets held by the revocable trust, and must pay all the taxes. Personally, I think the “Living Trust” is a sham perpetrated on you by shameless professionals.

“Probate jail process” is the process where the state takes control over your assets (estate) upon your death because “you” the owner of the assets, now dead, did not specify who should have received your assets subsequent to “your” death.

Naturally, this is a money making risk-free bonanza for lawyers, accountants, appraisers, judges, federal and state tax agencies who will consume up to 70 to 80 % of your estate. “Probate Jail.”

The federal government stakes their first and largest claim between 37 to 55% of your assets. States are second in line, then the courts, lawyers, appraisers, accountants. Finally, what’s left go to your heirs.

Currently only a few Americans prepare for this “estate death tax trap.” The federal government (your largest heir) takes the biggest chunk up to 55%. Only Japan has a higher rate of 70%. Germany takes a maximum of 40%, while Australia and Canada, take nothing.

The “Trustee”The trustee is the guy who manages your trust assets. The trustee is bound by the trust document (contract) and he has a duty to protect trust assets for the beneficiaries. Great care should be taken in your selection of your trustee. The trustee can be your lawyer (worst person you would ever trust), your accountant, best friend, or any-one you trust who’s not a relative by blood or marriage. You may have more than one trustee. I usually recommend two trustees in all cases of $500,000 or more. The trustee of an “Irrevocable Trust” has sole discretion over trust assets. Your selection of your trustee must be a carefully planned decision. The significant item to remember is that an “Irrevocable Trust” gets the assets completely out of your (Grantor’s) name and in return you get complete asset protection, elimination of probate, elimination of estate or inheritance taxes, in certain cases a tax deduction for the assets contributed to the trust, and finally, under certain conditions other uncommon tax benefits not otherwise available. Examples of irrevocable trusts are: the Ultra Trust® the Medallion Trust® theVertex Trust® the Charitable Remainder Trust, the Charitable Lead Trust. Additional: In cases of substantial assets, you may add one other safety measure, “the Trust Protector.” The trust protector’s sole function is to hire and fire trustees, at will and without explanation.

3.

“Beneficiaries” The beneficiaries is the reason for the trust (contract). Your beneficiaries are the guys that will enjoy the benefits of your trust assets. They include, wives, children, grandchildren, charitable organizations of every color and variety. The length of your beneficiaries is unlimited. Beneficiaries could include the original grantor, but that would be self defeating. Generally, trusts are irrevocable. The grantor gives-up his assets to gain asset protection, elimination of probate, elimination of estate taxes, and gain certain uncommon tax advantages. Any degree of control by the grantor will render the trust revocable and subject to court discretion. The period of time of the trust depends on the selection of your trust’s legal jurisdiction.. Most states and countries have rules against “perpetuities.” That’s to say that your trust must have an end.

That’s the quickie on trusts. The trust document (contract) can be as little as three pages and as long as fifty pounds of paper. The more complicated you make it, the more complicated it is to administer. Simplicity is the key.

Trust assets may include, your personal residence, your investment account, other real estate, your business, limited only by your valuable assets you wish to contribute to your trust.

The trust generally obtains a federal identification number and files it’s own tax return. Distributions to beneficiaries, may or may not be taxable, depends on the nature of the underlying assets.

Finally, a trust may be a business, however it’s difficult for others to do business with you, since the trust is really a “private contract” between the grantor, the trustee, and your beneficiaries. Your business partners would more likely ask for a complete copy of the trust agreement and they would have their attorney look it over. As a consequence, most will not do business with a trust, but they will do business with other recognized legal entities such as a Limited Liability Company, Corporation, partnership, etc. for which the trust may own.

An irrevocable trust, is an asset protection fortress when it’s the owner of your sub “S” stock, a limited liability company, the general partner of a limited partnership, the general partner of a family limited partnership, the shareholder of an international business corporation, or other recognized legal entities.

https://www.barclayswealth.com/insights/volume12/future-attitudes-to-later-life.htm#header

The research has highlighted an interesting and, perhaps, unexpected phenomenon amongst wealthy individuals across the world. Instead of planning a conventional retirement or making plans to retire early, most of our respondents aspire to keep on working in some form – to become a Nevertiree rather than a retiree.

 

Some 60% of respondents say they envision always being involved in commercial or professional work of some kind, whatever their age.

 

 

 

Credit Suisse to cut another 1,000 jobs

Coutts to drop RBS brand UBS Chairman Villiger Under Pressure To Name Permanent CEO Credit Suisse to cut another 1,000 jobs More women hold top banking jobs, but numbers are still low  Wealthy urged to leave more to good causes Bahrain wealth fund to target more liquid investments China to make law on philanthropy Northern Trust Named Best Private Bank in U.S. Four in ten wealthy people forced to work longer Should you step into the world of private banking?  U.S. Bank Wealth Management Ranked among “Top 40 Wealth Managers” by Barron’s Fat cats become skinnier Italian government buys 19 Maserati supercars despite austerity cuts DBS discusses private banking strategy

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“Strong growth in the emerging markets, a need to invest in channels such as internet services, and compliance requirements of new regulations such as Basel III, are all fuelling global growth in technology investment.”

 

Ovum senior analyst Jaroslaw Knapik.

Japan’s Nikkei share average rose on Wednesday, rebounding from a three-day losing streak in a broad rally sparked by gains on Wall Street after the Federal Reserve’s pledge to keep rates near zero for another two years, though investors remained cautious as the yen regained steam.

(Reuters) – Japanese policymakers voiced growing alarm on Tuesday as the yen scaled highs seen before last week’s intervention and global stockmarkets crumbled under mounting fears of a new financial crisis.

Finance Minister Yoshihiko Noda on several occasions repeated the mantra that he was watching markets closely as the dollar slid below 77 yen, under levels that spurred Tokyo to take action on August 4.

He indicated that authorities would wait to see market reaction to U.S. Federal Reserve decisions later in the day (2:15 p.m. EDT) before deciding whether to act again.

Bank of Japan Governor Masaaki Shirakawa showed similar levels of concern, telling parliament he needed to be particularly mindful of the risks that a strong yen poses to the Japanese economy.

“Several measures are available, depending on the outcome of the FOMC meeting, and since this could have a big impact on Japan we need to respond flexibly,” Noda said when asked about the chance that the yen could rise after the Fed meeting. “I want to coordinate with the BOJ and respond as appropriate.”

While the yen climbed, global stock markets went into a nosedive as the U.S. government’s loss of its top credit rating and a piecemeal response to Europe’s sovereign debt woes frayed investor nerves.

Demographic and economic changes in Japan are driving an increasing demand for offshore investments, presenting a growing opportunity for Australia’s funds management industry, according to a report released last week.

The report, by PwC Australia and the Australian Government trade agency Austrade, notes that Japanese households have doubled their exposure to foreign investments from $216bn to $477bn in the past five years. This is out of a total pension and financial asset pool of $18,900bn.

 

“Japan already has the oldest population in the world and the highest life expectancy,” says Andrew Wilson, wealth management leader for PwC Australia and one of the authors of the report.

“You combine these two with a shrinking population and a stagnant local market, and some would say Japan is facing a pensions crisis that will be their biggest social and economic challenge.”

Mr Wilson says Australia is currently the “second most popular destination” for Japanese investors outside of the US. The two countries have a strong economic relationship dating back several decades that is a strong basis for further growth.

According to the report, Japanese investments in Australia have quadrupled over the past five years to $53bn, or 5.4 per cent of investment trust assets. The vast majority – 95.5 per cent – of these investments are in Australian bonds and other fixed income assets.

“Relatively stronger returns, asset management expertise, and a stable regulatory environment provide compelling reasons for Japanese institutions and investors to choose Australia over others,” says Mr Wilson.

“We expect interest in Australia will continue as Japanese investors increase their exposure to higher-yielding foreign investments.”

The report highlights four competitive advantages for Australia’s fund industry: the size and sophistication of an industry driven by two decades of compulsory pensions saving; the attractiveness of sectors such as resources and Australian government bonds; geographical proximity; and government support to develop Australia as a regional financial centre.

Mr Wilson says Japanese investors use several routes to access Australian assets. One is for pension funds to appoint sub-advisers with a mandate to invest in particular offshore markets.

Others have chosen a fund of funds approach, while some Australian fund managers have set up offshore funds – typically in jurisdictions such as the Cayman Islands – into which retail investors could invest.

Nine of the top 10 retail asset managers in Japan are domestic players – with Fidelity the sole foreigner ranked at number nine. These managers offer more than 3,300 funds and have moved to offer more foreign product in recent years.

The report says 63 per cent of Japanese household savings are held by people over the age of 60, but are largely in cash and other low risk and low yield products. Wealthy Japanese are a particularly attractive market, it notes, as there are 1.6m of them holding a combined $3,300bn in assets, or 40 per cent of total wealth.

“Japan’s wealth management market will be a future battleground between Japan’s megabanks and foreign fund managers,” says Mr Wilson.

“As this wealth passes to the next generation, Japan’s inheritance tax laws will saddle many with considerable tax obligations.

TOKYO (Dow Jones)–Aozora Bank Ltd. (8304.TO) said Monday it has agreed to buy a 100% stake in Japan Wealth Management Securities through a share swap.

The midsized lender, in which U.S. investment firm Cerberus Capital Management LP owns more than 50%, said it will acquire the Tokyo-based retail brokerage firm from Singapore’s Temasek Holdings’ unit, Normanton Investment Pte. Ltd. and management of Japan Wealth Management. The deal is worth about Y500 million.

Aozora Bank plans to merge Japan Wealth Management with Aozora Securities after closing the deal, expected in early October.