FAQS Page 8


I have a brokerage account and do investing. Should I invest inside the Beneficial Trust or should I do that inside a Business Trust?
I recommend all Family Trust assets/investments be transferred to the Beneficial Trust. The Spendthrift Trust provides a lot more asset and legal protection and income tax advantages. Investments would then be done through the Spendthrift Trust. A Business Trust is not needed for investments. All investments can be owned by the Spendthrift Trust.

As beneficiaries, can my son, his wife and daughter have the Trust pay for their house rent, leased cars and college/school needs and overhead such as insurance, maintenance, utilities, etc.? If yes on the leased car, does the Trust have to be the one leasing car?
The Trust must own or be on the lease for the house or vehicle. Only the

Frequently Asked Questions

beneficiaries can benefit from the Trust. As above, the Trust must be reimbursed for any personal use of a Trust Asset used by the Trustee. This would only apply to a small portion of the house and vehicle used for personal use by the Trustee– i.e. sleeping, eating, using the vehicle for food or clothing shopping. The Trustee is the caretaker of the house or vehicle, so all other expenses for the house or vehicle would be authorized Trust expenses. The Trust must own the vehicle or be on the lease agreement. Education, training, medical and wellness of a beneficiary are authorized Trust expenses. All expenses for a minor, underaged or incapacitated beneficiary are Trust expenses.

Do I need a statement when I get a notary?
Most notaries will need to have a statement that the person signing the document is the person appearing before them.

Notary vs. Witness.
The bank can notarize any papers that require notary. You must use a third- party Witness for papers that require a witness. A person who is a Beneficiary or might be a Beneficiary in the future should not be the Witness.

Do I need a Bill of Sale notarized within the state the property is being sold in?
The notary is only notarizing the signatures not the effective date or origin of the transactions stated on the document. When you sign the document, have it notarized anywhere and at any time.

Can a Trustee be paid for their services?
Yes – and would receive a 1099 for this compensation. The Trust could set up a Payroll account and pay the Trustee through a W-2 but this would create additional reporting (W-2, W-3, 941, 940 & State UI). I would recommend 1099 Contract Labor and an Independent Contractor Agreement be drawn up.

Can a Trustee be paid?
Yes. If the Trustee takes funds out of the Trust, the Trust pays for the personal expenses of the Trustee, or if the Trustee lives in a Trust owned residence and operates a Trust owned vehicle and does not pay rent for the personal use of these assets the amounts for personal use will be added to a 1099 issued to the Trustee. This is where a Demand Note to the Trustee can be used to pay for these unauthorized expenses.

Can this trust buy or rent a future retirement home for beneficiary?
Yes, but The Rental Agreement must in the name of the Trust or legally Assigned to the Trust for the Trust to be able to pay the Rent.

How will the IRA withdrawal effect my personal return if I put my IRA in the Trust?
Qualified Plans (Retirement Plans) cannot be put into the Trust. Distributions from a Retirement Account (SS, 401K’s, 401B’s, IRA’s, Roth’s, Etc.) can be direct deposited into the Trust to “fund” the Trust and add to your Demand Note, but the income reporting will still be on your personal tax return.

Can I sell items that I bought with my Trust to my clients?
Business inventory should be kept outside the Trust and then when sold would be income in the business.

What can be done to reduce the tax on my income?
I would get a Business Trust and contract the work from the Trust. Then have all assets and intellectual property used by the business owned by the Beneficial Trust. The Business Trust would then lease the use of those assets from the Beneficial Trust converting some of the Contract Labor Income to Lease Expense in the Business Trust and Lease Income in the Beneficial Trust. This Lease Income in the Beneficial Trust would be declared Extraordinary Dividends and no current taxes paid.

Must all expenses for the beneficiary be specifically paid for by the trustee?
Yes. You may have expenses paid by personal funds, but they must be reimbursed by the Trust and the Trust maintains the receipt of the expense. Try not to do this as common practice. Try to have the Trust pay Trust expenses directly to the third party.

Is the income received from a rental home business considered Passive income?
Yes, if the Trust owns the rental property. Then, any rental operation is Passive Income and is Tax deferred by the Trust.

Can the EPA come after the Trust for any reason?
The Trust is bullet proof from any legal action, except for negligence. Therefore, you must carry insurance on all property owned by the Trust.

Can I transfer the money from LLC account into ST bank account once a year, after LLC tac return is filed?
If an account payable was established, then the payments can be made the next year. The LLC’s Lease Payments for equipment and intellectual property should be made monthly per a per-established lease agreement. The lease agreement must be established the accounting period before the payments are made. The LLC’s 90% LP income can be distributed any time. A K-1 will dictate the amount of income to the trust even if not actually paid to the Trust. Income payments in excess of the 90% shown on the tax return would create a real problem.