There comes
a time in most of our lives when we acquire enough assets to begin
worrying about how to protect them. Let’s assume that you are
about to put some of your hard earned money into a large yacht to be
based in Orange County and chartered out for income. You would
prefer that the whole world not know about it. You do not want
your other personal assets exposed, if your yacht went down with
America’s favorite family on board. There are legal
techniques, some old, some very new, with which to accomplish both of
these purposes.
In this
article we will learn how to acquire assets without disclosing our
identity. In next week’s article, we will learn a very new
legal technique to acquire assets without exposing the remainder of
our assets. In the third, and last, article of this weekly
series, we shall put both techniques together and purchase assets
anonymously and safely.
We have all
heard of trusts. Trusts do many things, from avoiding probate
and reducing estate taxes to managing wildlife areas and purchasing
museum art. Did you also know that trusts are used for privacy?
Today, your assets and identity can be easily discovered. For
example, copies of real estate deeds with the owners’ names are
recorded in the public records of every county in the United States.
The Internet will only make it easier to discover the identity of your
assets.
How do we
hide our assets from increasingly prying eyes? Answer: the
trust. You, as grantor, create a trust, where the trustee is
some other person, your attorney, accountant, or other trusted person,
and you are the beneficiary. You retain the right to direct the
trustee in matters concerning the acquisition, management and
disposition of the property. The trust should be revocable for
reasons stated later.
The main
purpose of the trust is privacy. The name of the trustee
is recorded in the public records, not your name. No one will
know who the actual owner of the property is except you, your
attorney, and the trustee. If the trustee lives in a different
state or country, then it becomes even more difficult for others to
determine that you are the owner. Of course, you would have to
disclose that you were the owner by court order. In addition,
you must still report income and other tax matters concerning such
property on your personal income tax return.
A trust does
not have to be registered with the state, as do corporations and other
business entities. The trustee controls the trust records and
the identity of the beneficiaries. A trustee should not disclose
this information without a court order. These trusts may also be
used for personal property, such as cars, boats, leases, and even bank
accounts and corporate stock. A trust is a tool to
keep your financial matters private in the “information age”.
If the trust
is revocable, the IRS treats these trusts as “tax neutral”, and
there are no tax consequences of transferring property into the trust.
The result will be much different if you transfer the property into
other entities, such as corporations. As always, consult your
trusted accountant and attorney with respect to your individual
circumstances, as this article has been prepared for informational
purposes only, does not constitute legal advice, and is not guaranteed
to be correct, complete or up-to-date.
In the
next
article, we learn how to acquire an asset without exposing our
other assets to its liabilities. In the third
article, we put the two tools together to increase both the
privacy and safety of our assets.
Disclaimer:
The purpose of this article is to provide information, rather than
advice or opinion. It is accurate to the best of my knowledge as of
the date of the article. I have no duty to update this article. The
information, examples and suggestions presented in this article have
been developed from sources believed to be reliable. This article
should not be viewed as a substitute for the guidance and
recommendations of a retained professional and should not be construed
as legal or other professional advice. In addition, I do not endorse
any actions addressed herein, unless they are produced or created by
me. I recommend consultation with me or other competent legal
counsel and/or other professional advisors before applying this
material to any particular factual situations.
