Trusts Why do we need them?

Most people associate trusts with charities and foundations, structures set up to provide for the poor, the underaged, or people or concerns that cannot take care of themselves. Actually trusts are a structure the ultra-wealthy created to protect their assets.

The Problem In our society, unfortunately the way things are set up, ownership is a liability. Trusts allow control without ownership and assets without liability. In the past any Tom, Dick or Harry can do an asset search on the Internet for a $100 and determine what you own and what you potentially are good for.

Today this compounded with identity theft, phishing, pharming, and similar criminal schemes which are rampant, it makes sense to keep valuable assets out of one’s personal name or from being reported under one’s social security number or other identifier.

Thus if you are on record as owning a company, a business or real estate you are a prime candidate for being the target of a frivolous lawsuit. What the litigant is extremely well aware off is the fact that you would rather pay off a fraudulent claim than get dragged through a lengthy and costly court proceeding.

Fact: The concept of direct ownership is a middle class value that does not really serve us - we, in our middle class thinking, want ownership because we think we will have control and the use of things. However with ownership is attached taxes, licenses, permits, registration and other responsibilities which can not only be annoying but burdensome. Furthermore you are open to lawsuits and levies which can take it all away from you. Apparently every 30 minutes in North America someone is being sued, the risk of being sued being proportional to how much you owe. Do you want that risk?

Knowing that all you have built up in your family, your company or your estate is prone to liability is not a comforting thought so the question one might ask is how do I divorce myself from all liability and still retain control?

This reminds me of Nelson Rockefeller's famous statement to paraphrase, "I control everything but own nothing". Divorce yourself from ownership and you divorce yourself from liability.

The solution is to use the traditional approach of the ultra wealthy using IBC's, Corporations & Trusts. This makes use of the fact that rather than operate as a person you operate your affairs using corporations and trusts that you create and therefore control from a distance. A corporation interfaces with local and offshore jurisdictions in doing business. The trust receives the assets generated by the corporations and IBC's it owns and as such is a depositor of wealth. Companies like persons can also be sued but with a trust your assets are legally protected.

In a typical trust, equity or assets are moved into the trust by whoever sets up the trust - the settlor. As such since the trust owns the assets the assets are protected in the sense that since no one has ownership there is no liability. The management of the trust is governed by "Trustee(s) - 1 or more parties who are entrusted by the settlor to manage the trust on the behalf of third parties who stand to benefit from the trust. This third group, otherwise known as beneficiaries, as they are not tied to the management of the trust nor are they owners of the assets, have no responsibility. As such they benefit from the assets in the trust but are protected from liabilities that might otherwise exist if the assets remained in the corporation(s) or IBC(s) or in their personal ownership.

Caution however must be exercised here as federal state and provincial legislation are constantly changing certain transfers to trusts and types of trust have been voided.