Information regarding Trust Structures and Corporate Trusts is provided in the following sub-sections:
Trust Structures are a contractual agreement where the trustees (fiduciaries) are given legal title to the trust property (real or personal) to administer it for the advantage of its beneficiaries who hold equitable title to the trust property. The beneficiaries receive certificates of beneficial interest as evidence of their interest in the trust, which is freely transferable when so stated within the Trust Indenture bylaws.
- Grantor - All Trusts have a grantor, sometimes called a Settlor or Trustor.
- Trustee - The Trustee can be any individual or organization that can take title to property on behalf of a Beneficiary.
- Beneficiary - The Beneficiary is the party or parties benefiting from the Trust.
There are practical factors to consider when choosing between a Corporation or Trust. A corporation is a statutory fiction and has requirements to file annual tax returns. Depending on the nature of a Trust's mission as a Property holder (real or personal), a Trust can be free from the requirement to file annual tax returns until an asset is divested from the indenture. Even then, in most cases the taxable liability falls upon the Beneficiaries of the Trust in direct proportion to their ownership of the beneficial interest.
In a relevant sense, Trust Structures can be viewed as a generic form of a corporation where the investors are also the beneficiaries. One of the most significant aspects of trusts is the ability to partition and shield assets from the trustee, multiple beneficiaries, and their respective creditors leading to its use in pensions, mutual funds, and asset securitization.
A Business Trust is considered a corporation for purposes of federal income tax and similarly under various state income tax laws. Profits and losses resulting from the use and investment of the Trust property are shared proportionally by the beneficiaries according to their interests in the Trusts. Nevada Corporate Associates doe not recommend using a Trust as a Business Trust. We only recommend them as Property Holding Trusts (Equipment and Land Trusts), where any applicable taxation is only applied upon the Trust divestiture and sale of the asset(s).
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