Placing business assets in a trust can offer many benefits. A trust can help with asset protection, estate planning, and managing the business after an owner’s death. However, trust law can be complicated, and it would be best to seek advice from a qualified professional. Whether you live in Illinois or New York, here are a few steps to placing business assets into a trust.
Step 1: Seek Professional Guidance
You should seek advice from a qualified attorney or financial advisor specializing in placing business assets into a trust and estate planning before making any decisions. They can:
- Provide an assessment of your individual circumstances.
- Determine if a trust is appropriate for you.
- Offer assistance throughout the process.
Step 2: Determine the Type of Trust
Different types of trusts are available, each with unique benefits and points to consider. When it comes to business assets, two popular options are revocable living trusts and irrevocable trusts.
A revocable living trust lets you maintain control over your business assets while you’re still alive. You can make changes or cancel the trust if necessary. Once you pass away, the trust becomes irrevocable, and the designated beneficiaries receive the assets.
On the other hand, an irrevocable trust means you give up ownership and control of your assets once they are placed into the trust. While these trusts offer greater asset protection, tax benefits, and the potential to be exempt from estate taxes, they require careful consideration and professional guidance due to their permanent nature.
Step 3: Draft the Trust Document
When creating a trust, work closely with your attorney to ensure that all terms and conditions are clearly outlined. You might want to include the following items in the trust document:
You need to list all business assets that will be transferred to the trust, such as real estate, equipment, intellectual property, stocks, or ownership interests.
Also, choose a trustee to manage the trust and its assets. Whether an individual, professional trustee, or trust company, you will want to consider their expertise, reliability, and ability to fulfill their duties.
One of the most critical details is determining who will benefit from the trust assets, such as yourself, family members, business partners, or charitable organizations. You must specify how and when assets will be distributed.
You will want to provide detailed instructions on how the business assets should be managed, operated, and invested within the trust. These guidelines can detail running the business, distributing profits, or making investment decisions.
Finally, you will want to include provisions for unforeseen circumstances, such as the trustee’s or beneficiaries’ incapacity or death. In these plans, you need to designate successor trustees or alternative beneficiaries to ensure the smooth continuation of the trust.
Step 4: Fund the Trust
To transfer business assets into a trust, you must legally transfer real estate ownership, business interests, intellectual property, and financial accounts. This step involves preparing, signing, and recording deeds, executing legal documents such as stock assignments or partnership transfer agreements, and updating ownership records of financial assets.
Step 5: Review and Update
You need to review your trust document regularly to ensure it reflects your goals, current circumstances, and any new laws or regulations. Be sure to update the trust as necessary, mainly if major changes in your business, personal life, or legal environment exist.
Bielski Chapman, LTD. Can Help with Your Trust
Trusts have many benefits, but consulting with a professional is necessary to ensure compliance with laws and determine the best structure for your needs. At Bielski Chapman, LTD, we have experience helping clients in New York and Illinois when they need to place business assets into a trust. Please call our office at (312) 583-9430 to schedule a complimentary 15-minute consultation.