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Choosing the Right Legal Entity for Your Business - Exploring Trusts

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Although not technically a business structure, trusts can protect business assets and control, manage, and distribute them according to the trust documents. Placing your business assets into a trust has significant benefits but also some drawbacks. Before taking this step, learn all you can about the different types of trusts, how they work, and their limitations.

According to IBISWorld, more than 4 million companies are in the trust business. Due to the growing awareness and popularity of trusts, new companies are opening every day. The demand for trusts has grown significantly among adults aged 50 or older. The trust and estate market is estimated at $290.1 billion and growing.

Setting up a trust takes careful planning and strategy, and you would want the help of an estate planner or trust company to cover all your bases. There are different types, and you should be aware of them all to choose the best one for your situation. Further down this page, you can learn about what a Trust is, the different types, how it works, how they are taxed, and the unique features and benefits of a Trust.

What is a Trust?

What is a Trust?

A trust is a type of legal entity that differs greatly from other types of business structures. When you (the trustor or grantor) set up a trust, you grant someone the legal right to hold your assets on behalf of yourself or your beneficiaries. The person or entity with that legal right is called the "trustee." Trusts can be set up in several ways, specifying exactly when and how to pass on the assets. The trustee must manage the assets according to the specifics documented in the trust.

Trusts are typically set up to protect assets from probate and ensure they are distributed according to the trustor's wishes. They also help with taxes and creditors.

There are many different types of trusts, but they all fall into one of the three categories below:

  • Living or Testamentary – A living trust is established while you are living, and you can use and benefit from the assets while you are alive. Once you pass away, the assets will immediately be transferred to your heirs.
  • Revocable or Irrevocable – A revocable trust can be changed or terminated while you are still alive. An irrevocable trust cannot be altered or terminated once it is in place. Living trusts are typically either revocable or irrevocable. Testamentary trusts are usually irrevocable.
  • Funded or Unfunded – With a funded trust, the trustor places all their assets into the trust during their lifetime. An unfunded trust is just the agreement, and the assets get transferred into it upon the trustor's death.

Purposes of a Trust

Although trusts used to be considered only for wealthy people, many regular families or businesses now set up trusts to protect their interests. Some of the reasons people set up trusts for their own financial assets or business assets are:

  • Protection – One of the most common reasons people set up trusts is to protect their financial assets from creditors or others. Once the trust owns assets, creditors cannot come after them. In some cases, the grantor puts the family assets into a trust to protect them from a family member who might be inclined to sell them or squander them away.
  • Estate Planning – Trusts help care for beneficiaries after the original owner dies. They can also pay to take care of physically or mentally disabled adults.
  • Privacy – Many trusts are held private and can protect the financial details about a person's wealth and assets.
  • Tax Savings – Trusts help avoid certain taxes, which can save a lot of money.
  • Avoiding Probate – Trusts also help avoid probate. When you set up a trust, everything in it passes directly to the beneficiaries without any involvement from the courts.

What Are Some of the Most Common Types of Trusts?

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Trusts come in many forms, and each one will vary based on the grantor's wishes. Some of the most common types of trusts in the U.S. include:

Credit Shelter Trust

A credit shelter trust, also known as a "bypass trust or family trust," is created to allow the grantor to bequeath an amount up to, but no more than, the state-designated estate tax exemption. For example, if the state has a cap on gifts of $150,000, the trust will gift that amount to a child or other person named in the trust upon their death. The rest of the estate passes tax-free to the spouse. As long as the assets remain in the trust, they remain free of estate taxes.

Generation-Skipping Trust

A generation-skipping trust is designed to pass along the assets to your grandchildren (at least two generations after you). Using this type of trust, the beneficiaries avoid paying generation-skipping and estate taxes on the assets.

Insurance Trust

An irrevocable insurance trust holds a life insurance policy that protects it from taxes. No one can borrow against it or change beneficiaries. Once the grantor dies, the life insurance policy can be used to pay estate costs.

Charitable Lead Trust

A charitable lead trust designates some assets or amounts to go toward charities upon the grantor's death. Typically, these benefit a specific charity or nonprofit organization. The remainder of the estate will be distributed to heirs. Used as an estate planning tool, in some cases, the trust will provide income to the designated beneficiaries for a specific amount of time and then donate the proceeds to charity. These types of trust also avoid estate and gift taxes.

Qualified Terminable Interest Property (QTIP) Trust

QTIP trusts are used to provide the surviving spouse with lifelong income. After the spouse dies, the children will get the remainder. These types of trusts are often used in second marriage situations to protect assets earmarked for children or an ex-spouse. These also help to maximize tax benefits.

Grantor Retained Annuity Trust (GRAT)

A GRAT trust is an irrevocable trust set up by a grantor who funds it with specific assets or "gifts." Its purpose is to delay the appreciation of assets whose value is quickly rising. Again, it helps with taxes.

Spendthrift Trust

A spendthrift trust protects financial assets from creditors and prevents family members or the beneficiary from frittering away the wealth. The trust controls how and when the assets are distributed and prevents the beneficiary from selling their interest in the trust.

Blind Trust

A blind trust is set up without the beneficiaries' knowledge. The trustee manages all financial assets and coordinates with the grantor/trustor until death. Once they die, the assets are passed along. The purpose of a blind trust is to avoid conflicts of interest.

Special Needs Trust

When a grantor has a family member or dependent who receives government benefits like Social Security disability payments, they set up this trust to allow them to receive income without forfeiting the government payouts. It is typically used when the parent has a physically or mentally disabled adult child and wants them to continue to be cared for after they are gone.

Totten Trust

A Totten trust is a unique arrangement in which the trust is created during the trustor's lifetime, and the trustor acts as the trustee. It can only be used for bank accounts, not physical assets. This type of trust is sometimes called a "payable-on-death" trust. The most significant advantage is that it avoids probate upon the grantor's death. This type of trust is sometimes called a "poor man's trust" and does not require a legal document. It costs nothing to set up and can be established by changing the title on the bank account with language such as "In Trust For," or "Payable on Death To," or "As Trustee For."

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Trusts come in many forms, and each one will vary based on the grantor's wishes. Some of the most common types of trusts in the U.S. include:

Credit Shelter Trust

A credit shelter trust, also known as a "bypass trust or family trust," is created to allow the grantor to bequeath an amount up to, but no more than, the state-designated estate tax exemption. For example, if the state has a cap on gifts of $150,000, the trust will gift that amount to a child or other person named in the trust upon their death. The rest of the estate passes tax-free to the spouse. As long as the assets remain in the trust, they remain free of estate taxes.

Generation-Skipping Trust

A generation-skipping trust is designed to pass along the assets to your grandchildren (at least two generations after you). Using this type of trust, the beneficiaries avoid paying generation-skipping and estate taxes on the assets.

Insurance Trust

An irrevocable insurance trust holds a life insurance policy that protects it from taxes. No one can borrow against it or change beneficiaries. Once the grantor dies, the life insurance policy can be used to pay estate costs.

Charitable Lead Trust

A charitable lead trust designates some assets or amounts to go toward charities upon the grantor's death. Typically, these benefit a specific charity or nonprofit organization. The remainder of the estate will be distributed to heirs. Used as an estate planning tool, in some cases, the trust will provide income to the designated beneficiaries for a specific amount of time and then donate the proceeds to charity. These types of trust also avoid estate and gift taxes.

Qualified Terminable Interest Property (QTIP) Trust

QTIP trusts are used to provide the surviving spouse with lifelong income. After the spouse dies, the children will get the remainder. These types of trusts are often used in second marriage situations to protect assets earmarked for children or an ex-spouse. These also help to maximize tax benefits.

Grantor Retained Annuity Trust (GRAT)

A GRAT trust is an irrevocable trust set up by a grantor who funds it with specific assets or "gifts." Its purpose is to delay the appreciation of assets whose value is quickly rising. Again, it helps with taxes.

Spendthrift Trust

A spendthrift trust protects financial assets from creditors and prevents family members or the beneficiary from frittering away the wealth. The trust controls how and when the assets are distributed and prevents the beneficiary from selling their interest in the trust.

Blind Trust

A blind trust is set up without the beneficiaries' knowledge. The trustee manages all financial assets and coordinates with the grantor/trustor until death. Once they die, the assets are passed along. The purpose of a blind trust is to avoid conflicts of interest.

Special Needs Trust

When a grantor has a family member or dependent who receives government benefits like Social Security disability payments, they set up this trust to allow them to receive income without forfeiting the government payouts. It is typically used when the parent has a physically or mentally disabled adult child and wants them to continue to be cared for after they are gone.

Totten Trust

A Totten trust is a unique arrangement in which the trust is created during the trustor's lifetime, and the trustor acts as the trustee. It can only be used for bank accounts, not physical assets. This type of trust is sometimes called a "payable-on-death" trust. The most significant advantage is that it avoids probate upon the grantor's death. This type of trust is sometimes called a "poor man's trust" and does not require a legal document. It costs nothing to set up and can be established by changing the title on the bank account with language such as "In Trust For," or "Payable on Death To," or "As Trustee For."

Who Is Eligible to Operate as a Trust in the US?

Although anyone can set up a trust with the proper legal documentation, only specific individuals or entities can act as the trustee for a trust. Both individuals and legal entities can act as trustees. Some other details include:

Individuals

As the grantor or trustor, you can name yourself as the trustee of your revocable trust. This gives you complete control over your assets during your life, and then the remainder will be distributed according to your wishes once you are gone.

You can also appoint family members or friends to serve as trustees. Choose someone you trust who fully understands your wishes and will carry out the trust agreement as you intended. However, remember that trust administration can be tricky, and having a legal professional with expertise in handling trusts is best.

You may appoint an attorney, accountant, or private fiduciary as your trustee due to their expertise in trust administration and relevant laws.

Institutional Trustees

Banks and trust companies are frequently used as trustees, offering expertise and professionalism in managing trust assets and growing wealth. These professionals also know the legal requirements and can provide you with impartial continuity of service over the life of the trust.

You can also use corporate trustees. The term refers to banks and trust companies that provide professional, unbiased management and can intervene in family relationships to smooth over any issues while objectively carrying out your wishes.

Another option is to use a limited-purpose national trust bank. The Office of the Comptroller of the Currency (OCC) charters and regulates these entities, allowing them to exercise fiduciary powers across all states and administer trusts from any state.

Important Considerations When Choosing a Trustee

Trustees are legally bound to manage the trust assets according to the trust document and applicable laws. Use careful consideration when choosing who to act as your trustee. Find someone reliable, trustworthy, and with the expertise to carry out the role's duties. The trustee must also be able to communicate effectively with beneficiaries. The trustee must administer the trust impartially and avoid situations where their personal interests conflict with the beneficiaries' interests. Many trustees can offer professional advice and help you grow your assets while they are in the trust. It's best to consult with an estate planning attorney or trust professional for guidance before setting up your trust and selecting a trustee.

There is no minimum wealth requirement to establish a trust. You don't have to have a specific net worth or even be wealthy. Anyone can set one up as long as they have assets to protect.

A trustee must have the legal capacity to enter into an agreement, understand and fulfill the duties outlined in the trust document and by law, and be willing to manage the trust assets for the benefit of the beneficiaries.

How to Set Up a Trust

Anyone with assets can set up a trust. However, setting one up takes careful planning and a few key steps. Follow the steps below to set up a trust.

Steps to Set Up a Trust

  1. Determine the Type of Trust – The first step is determining the type of trust you want to set up. There are many to choose from. Pick the one that best aligns with your situation and goals. Depending on whether you want to change it later, you can select a revocable or irrevocable trust.
  2. Pick Assets for the Trust – Select the assets you want to fund the trust with. Some examples are cash, bank accounts, real estate, investments, insurance, and personal property. All of the assets must be transferred into the trust's name, and the trust will legally own them.
  3. Select Your Beneficiaries – Decide who will be listed as your beneficiaries in your trust. You can choose family members, friends, or even charities.
  4. Choose a Trustee – Choose a qualified, reliable person or entity to manage your trust and act as trustee. There are dozens of trust companies that manage trusts. You can also use a bank or an attorney.
  5. Draft the Trust Agreement – Work with an estate planning company or lawyer to draft your trust agreement. Clearly spell out your wishes and how you want your assets managed and distributed. Determine the trust terms, who your beneficiaries are, list the trustee, and how things will work after your death.
  6. Sign and Finalize the Trust – As the grantor, you must sign the finalized trust agreement with the trustee and any witnesses your state requires. Some states require the trust to be notarized as well.
  7. Fund the Trust – Transfer the chosen assets into the trust to fund it. Some assets, like bank accounts, require you to open a specific trust account and transfer the funds into it.

A trust offers several key advantages, making it an attractive estate planning tool. The most common benefits of a trust include:

  • Avoiding Probate – Trusts can avoid the probate court process, which can be time-consuming, expensive, and a matter of public record. Probate can delay beneficiaries taking control of assets, whereas a trust makes it instant.
  • Privacy – Trust documents are not public records, unlike wills, keeping your financial matters private.
  • Control over Asset Distribution – Trusts allow you to dictate how, when, and to whom your assets are distributed, even after your passing, ensuring your wishes are complied with.
  • Asset Protection – Certain types of trusts, especially irrevocable trusts, can help protect assets from creditors, lawsuits, and other claims.
  • Tax Benefits – Trusts can be structured to minimize estate taxes and other tax liabilities, potentially saving your beneficiaries a significant amount of money.
  • Flexibility – Revocable trusts offer flexibility, allowing you to change the trust agreement terms while you're still alive.
  • Estate Planning – Trusts can be used for a wide range of estate planning purposes, including managing assets for minors, providing for special needs individuals, and addressing complex family dynamics.
  • Peace of Mind – By establishing a trust, you can have peace of mind knowing that your assets will be managed and distributed according to your wishes, ensuring the best outcome for your beneficiaries.

What Are the Key Disadvantages of a Trust?

Along with some huge benefits, a trust has some significant disadvantages. It's all about balancing what matters most. A trust can help in a big way, but you must be careful of the downside.

  • Cost and Complexity – Setting up a trust can be more expensive than a will and involves more paperwork and legal expertise. Complex trusts, like irrevocable or dynasty trusts, can further increase costs and complexity.
  • Loss of Control – While revocable trusts allow you to maintain control over assets during your lifetime, irrevocable trusts do not. Once assets are transferred to an irrevocable trust, you typically relinquish control.
  • Maintenance and Management – Trusts require ongoing maintenance, including ensuring assets are correctly titled and managed. Failure to transfer assets or maintain records can render the trust ineffective.
  • Asset Transfer and Retitling – To make a trust effective, assets must be transferred to the trust, often requiring retitling or legal documentation. This process can be time-consuming and costly.
  • Potential for Disputes – Trusts can lead to family disputes if beneficiaries don't understand the trust terms or feel the trustee is managing assets unfairly.
  • Tax Implications – Trusts can have complex tax implications, potentially requiring higher tax rates or additional compliance requirements.
  • Limited Protection from Creditors – Not all trusts offer protection from creditors; even in some cases, assets within the trust may be vulnerable to claims.
  • Choosing the Right Trustee – Selecting an appropriate trustee is crucial, and a poor choice can undermine the trust's purpose.
  • Borrowing Difficulties – Trusts may face challenges when borrowing money, as lenders may require personal guarantees from trustees or find the trust's structure complicated.

Trusts vs. Other Types of Business Structures

Trusts are legal entities but differ widely from other types of business structures. The chart below examines the characteristics of sole proprietorships, partnerships, LLCs, and corporations.

CharacteristicSole ProprietorshipPartnershipLLCS-CorpTrust (C-Corp)
FormationQuick and simple with no filing requirements with any government agency.Simple to create with no legal filing requirements.More expensive to create and requires filing with the state.An S-Corp is more costly to establish, and it requires state filing.It is more expensive to establish and requires filing with the state.
Cost of FormationNoneNoneThe cost of the state filing fee is usually between $100-$150.The cost of registering an S-Corp with the state can be anywhere between $20 and $800.The average cost to register a C-Corp in the United States is $633.
Business NameCan operate under the owner's name, or a fictitious name using a DBA.Can operate under the owner's name, or a fictitious name using a DBA.Must register an official company name with the state that is established and secured.Must register an official company name with the state that is established and secured.Must register an official company name with the state that is established and secured.
TaxationPass-through taxation, where all everything is filed under the owner's personal taxes.Filed under the partners. Each partner claims their income and losses on their personal returns based on their percentage of the business.Pass-through taxation, where everything is filed under the owner's personal taxes. If there are multiple owners, taxation is treated like a Trust.Each owner declares their share of profits/losses on their personal returns. Income is allocated based on owner percentage. Owners can use corporate losses to offset other types of income. Fringe benefits are limited to owners who own more than 2% of the shares.The C-Corp is a separate taxable entity that must file returns. Owners split profits and only declare their portion on personal income tax returns. Owners can deduct fringe benefits as business expenses.
LiabilityThe owner is personally liable for all business actions, liabilities, debts, and damages.Owners are personally liable for all business debts.Business is its own entity; therefore, the owner(s) are protected against personal liability.Owners have limited liability for personal debts, and business legal issues.Owners have limited liability for personal debts and business legal issues.
Operational RequirementsNo operational requirements are necessary.No operational requirements are necessary.More formal requirements than an LLC but not as strict as a C-Corp.Much easier to maintain than a Trust. Annual member meetings and a report are required.Annual meetings are required, and members must vote on changes. Shares of stock must be sold to raise capital.
ManagementFull control of all decisions, management, and operations.Each partner has equal control and decision-making ability unless it's a limited partnership.An operating agreement outlines how each member can manage the company.Managed by a group of directors that shareholders vote in.Managed by a group of directors that shareholders vote in.
Raising CapitalCan be challenging and the owner often has to invest his/her own money.Each partner can invest, and more partners can be added to raise additional capital.Managers can sell interest in the business to raise capital based on operating agreement restrictions.Can sell shares of stock to raise capital.Can sell shares of stock to raise capital.
Transferability of InterestNoNoPossible based on the operating agreement restrictions.Yes, as long as IRS regulations about who can own stock are honored.Shares of stock can be easily transferred.

How is a Trust Taxed?

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The taxation of trusts can be complex and depends on the type of trust and its structure. A tax attorney or trusts specialist can help determine the best type for you and review the tax implications when establishing it.

Trusts are either grantor or non-grantor trusts.

  • Grantor Trusts – The grantor maintains control over the assets and is typically responsible for the income tax. Revocable living trusts are often grantor trusts.
  • Non-Grantor Trusts – These are separate tax entities. Simple Trusts must distribute all income annually, with beneficiaries usually paying the taxes. Complex Trusts offer more flexibility, with taxes potentially paid by the trust, beneficiaries, or both.

Trusts are typically taxed using higher tax brackets at lower income levels than individuals are. For example, as of 2025, the top federal rate is 37% for income over $15,650. Trusts may also face the 3.8% Net Investment Income Tax on undistributed investment income.

Profits from asset sales may be subject to capital gains tax, depending on whether the gain is long-term or short-term. Some examples of long-term rates range from 0% to 20%, depending on the gain amount. Capital losses can offset gains.

Income distributions are also taxable. Beneficiaries typically pay taxes on distributed income at their individual rates, and the trust can deduct these distributions. Generally, distributions from principal are not taxable to beneficiaries as they are assumed to have been previously taxed.

Other Trust Tax Considerations

The trustee is responsible for tax obligations and filing necessary returns like Form 1041. Trusts may also be subject to state income and property taxes based on where they are administered. Trust assets may be subject to estate tax upon the grantor's death, though most trusts will not be.

Some Other Deductions Allowed in a Trust Are:

Some of the deductions allowed when filing trust taxes include:

Administrative Expenses

These are expenses incurred during the administration of the trust that would not have been incurred if the property weren't held in trust. They are as follows:

  • Tax preparation fees for the trust's income tax return (Form 1041).
  • Attorney fees related to estate and trust administration.
  • Trustee fees and commissions.
  • Appraisal fees, if required for trust administration (e.g., for distributions or tax return preparation).
  • Fees paid to a personal representative or fiduciary for administering the trust.
  • Investment advisory fees are specific to the trust.

Income Distribution Deduction

Trusts that distribute income to beneficiaries can claim a deduction for the amount of income distributed, up to the amount of distributable net income (DNI). DNI limits the amount of income that can be deducted by the trust and taxed to the beneficiaries. Beneficiaries receiving income distributions generally pay income tax on that income at their individual tax rates.

Specific Deductions

Some of the specific deductions available to trusts include:

  • Charitable Deductions – A trust can deduct gross income or capital gains donated to a qualified charity if the trust document requires or permits it.
  • Depreciation, Depletion, and Amortization – Trusts can deduct these expenses related to assets held by the trust, which are then allocated between the trust and its beneficiaries.
  • Theft Losses – If trust property is stolen or destroyed, the trust can deduct the property's fair market value as a casualty or theft loss.

Other Deductions

Additional deductions that may be available include:

  • Interest Expenses – Trusts may be able to deduct certain interest expenses, such as investment interest or qualified residence interest.
  • Taxes – State, local, and real property taxes may be deductible.
  • Estate Tax Deduction – Sometimes, a portion of the estate tax paid can be deducted on the trust's income tax return.
  • Net Operating Losses (NOLs) – Trusts may be able to deduct NOLs.

Pros and Cons of Trust Taxation

Depending on your goals, the way trusts are taxed can be beneficial or potentially negative. Review the pros and cons below before deciding whether to create a trust.

Pros

The advantages of trust taxation include:

  • Estate Tax Reduction – Irrevocable trusts can be used to remove assets from your taxable estate, potentially reducing or eliminating federal and state estate taxes upon your death. This is particularly beneficial for high-net-worth individuals.
  • Gift Tax Exclusion – Strategic gifting of assets to an irrevocable trust can utilize the annual gift tax exclusion, reducing your taxable estate over time. Currently, the annual gift tax exclusion is $19,000 per recipient.
  • Income Tax Minimization – Trusts, especially certain types like grantor trusts, may allow income to be taxed at the grantor's lower personal income tax rate, or in some cases, the income can be accumulated within the trust and taxed at the trust's rate. Distributing income to beneficiaries in lower tax brackets can also reduce the overall tax burden.
  • Capital Gains Tax Deferral/Minimization – Certain trusts, like Charitable Remainder Trusts (CRTs), can help defer capital gains taxes on the sale of appreciated assets. In some cases, the trust assets may receive an increase in basis upon the grantor's death, reducing capital gains tax for beneficiaries if they sell the assets later.
  • Generation-Skipping Tax (GSTT) Reduction – Trusts designed to pass wealth to grandchildren or future generations can minimize or avoid the GSTT.
  • Charitable Giving Benefits – Charitable trusts allow you to support charities while potentially receiving income and estate tax deductions.

Cons

The disadvantages of trust taxation include:

  • Higher Income Tax Rates (for trusts) – Trusts can reach the highest federal marginal income tax rate at much lower income levels than individuals.
  • Trust Taxation – The income generated by trust assets may be subject to taxes at the trust level, with potentially less favorable rates than individual income tax rates.
  • Potential Gift Tax Liability – Contributions to certain types of trusts, like irrevocable trusts, may be subject to gift tax requirements during your lifetime.

Tax laws vary considerably depending on the state where the trust is established. Check with a professional to see how these laws will impact your trust.

Use the table below from the IRS to be sure you are filing the correct forms:

IF you are liable for:THEN use Form:
Income tax1040, U.S. Individual Income Tax Return
or 1040-SR, U.S. Tax Return for Seniors
and Schedule C (Form 1040 or 1040-SR), Profit or Loss from Business
Self-employment taxSchedule SE (Form 1040 or 1040-SR), Self-Employment Tax
Estimated tax1040-ES, Estimated Tax for Individuals
Social Security and Medicare taxes and income tax withholding941, Employer's Quarterly Federal Tax Return
943, Employer's Annual Federal Tax Return for Agricultural Employees
944, Employer's Annual Federal Tax Return
Providing information on Social Security and Medicare taxes and income tax withholdingW-2, Wage and Tax Statement (to employee)
and W-3, Transmittal of Wage and Tax Statements (to the Social Security Administration)
Federal unemployment (FUTA) tax940, Employer's Annual Federal Unemployment (FUTA) Tax Return
Filing information returns for payments to nonemployees and transactions with other personsFind forms in E-file information returns and A guide to information returns
Excise taxesFind forms in Excise tax

How to Convert a Trust

Sometimes, trust owners decide to convert the trust to an LLC or another trust. They may see some benefits in transferring the assets into a different vehicle, such as better protection or more control.

Some of the reasons you may want to convert include:

  • Asset Protection – Protecting assets from creditors, lawsuits, or divorce and shielding business assets from potential liabilities.
  • Estate Planning – Avoiding or minimizing probate after death and ensuring a smooth transfer of assets to beneficiaries.
  • Tax Optimization – Minimizing estate taxes, reducing income or generation-skipping transfer taxes.
  • Administrative Issues – Trusts can be challenging to maintain and complex.
  • Flexibility – Updated financial goals may necessitate a change.

Decanting is a method of converting a trust, in which the trust is converted to another type of trust with more favorable terms, merged with another, or modified.

Other times, people will combine an LLC with a trust, providing asset protection from the LLC while also benefiting from the estate planning advantages of a trust, such as probate avoidance and privacy.

It's crucial to consult with an experienced estate planning attorney or financial advisor before converting or modifying a trust. They can help determine the best course of action based on individual circumstances, goals, and risk tolerance. The process can have significant legal and tax implications, so expert guidance is essential.

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