FAQS Page 5


What type of card should I use for Trust expenses?
I recommend a personal Credit Card marked For Trust Use Only. Maintain a receipt for each expenditure and attach the receipts to the Credit Card bill and then the Trust can pay the bill. Only charge Trust authorized expenditures to this card. If using Bill Pay or direct Debit, print a copy of the payment receipt and attach that to the Credit Card Bill along with the receipts for each expenditure.

Why do I need to keep such a strict record of my receipts and payment methods?
Strict records must be kept in order to maintain full records of all authorized Trust expenditures. Unauthorized expenditures (personal expenses) will be charged to your Liability Account (Demand Note) or, if

Frequently Asked Questions

no balance is in your Demand Note, then a Form 1099 will be issued to a Trustee or a K-1 will be issued to a Beneficiary for the personal expenses paid by the Trust.

Can the Trust get a Credit card? Can Trust build credit? If so, can beneficiaries use it. If they can, is it considered cash?
No bank or credit card company will issue a credit card to a Spendthrift Trust since they have no way to collect on defaulted payments.

If a person has ordered a trust and does not pay for it until after the RV can they exchange just enough to pay for the trust and then put the balance of the currency in the trust to defer taxes?
Making a down payment on a trust does not give you a legally working Trust. The Trustee does not have the pages outlining what the Trustee legally can do. Once the RV takes place, purchase a full trust then transfer the currency certificate into the legitimate Trust. The Trust then exchanges the certificate for US dollars. The US dollars then go into the Trust bank account and then the Trust can use those dollars to pay for Trust expenses.

If a person exchanges currency and it’s not in the trust, is the tax based on the date of their receipt?
As with any asset sold, the basis is what was paid for the asset and the tax is a capital gain based on the date bought. If the Trust does not own the foreign currency certificate prior to the exchange, the gain is personal and reported on a personal 1040 tax return. *see Assets & Implications (1.)

If I put certificates into my trust before the RV and then take out cash, is the tax rate based on the date of the receipt or the date from when they exchanged the currency?
Any cash taken out of the Trust is 100% taxable income to the person taking the cash. A distribution after RV would be a K-1 Dividend Distribution. If the Trust held the currency more than a year, the dividends would be qualified dividends.

Would a K-1 still be issued at the end of the year if cash or currency before RV was moved between the trusts?
Funds moved between beneficial trusts is a taxable event requiring a K-1 unless a Note Payable (for funds) or Bill of Sale (for asset transfers) is properly executed.

If I put all the currencies I have bought into the trust, does that mean I could also take a tax-free draw from the trust from the principal?
Transfer the asset (currency) at your “Cost” (or “Basis”) and take a Demand Note. The principal payments on the Demand Note are just that and are not taxable income to you. The interest will be taxable income to you each year you hold the note.

When we exchange our currency, will it be drawn out tax free?
No. The gain on the RV will be Extraordinary Dividends and held in the corpus.

What percent of my total RV exchange should I hold in my personal account vs. my trust account?
Hold only 3 months’ worth of personal expense funds in your personal non-trust bank account. This will be the money used for Food, Fun & Fashion – again, 3 months’ worth. This is because any funds in the personal bank account can be seized or levied in a lawsuit. For example – I have all my Social Security and funds Direct Deposited into my Trust Bank Account so that the funds are untouchable and while I still have to pay taxes on that income, it can’t be seized or levied. Next, I Bank Transfer enough funds for each month to support my family’s monthly budget for the 3 F’s.

Can I donate to other Trusts as a beneficiary?
The word “Donate” only applies to a 501c3 organization. “K-1 Distributions” are made to another Trust or beneficiaries.

If an exchange was not taxable, can I still distribute it to the beneficiaries?
You can distribute an asset or funds, but the action will generate a taxable event (K-1 to beneficiaries and 1099’s to anyone else). I recommend a “Transfer” to the Trust at “cost” or “book value”. This will generate a Demand Note from the Trust to the person transferring the asset. The Demand Note gives that person a means of taking note principal payments from the Trust with no taxes due. Endowments have no basis or value and as such would not be recorded in the Trust’s Financials and would not be added to a demand note.

How do I document Trust expenses?
To document, keep any and all receipts. You must have receipts for ALL expenses of the Trust. The bank statement or credit card statement are not proof of the expense.

Should I keep gas receipts?

What is the function of the Trust?
The Trust functions for the benefit of a beneficiary(ies) and to maintain, operate and manage the Trust and the Trust assets. The Trustee is a fiduciary and cannot benefit from the Trust or its assets.