UBCNews - Business - Can An Express Trust Help You Preserve Wealth? Expert Shares Insights

Episode Date: March 10, 2026

Welcome back, everyone. Today we're tackling something that could literally save your family's wealth for generations. Did you know that 70% of wealthy families lose their wealth by the second generation, and a staggering 90% have depleted it by the third? The Freedom People City: Tempe Address: 1753 E Broadway Rd Ste 101 Website: https://thefreedompeople.org

Welcome back, everyone. Today we're tackling something that could literally save your family's wealth for generations. Did you know that 70% of wealthy families lose their wealth by the second generation, and a staggering 90% have depleted it by the third? Those numbers are sobering. And here's another one. More than 80% of Americans want to leave money or assets to loved ones, yet only around one-third have a formal plan in place.

that's where express trusts come in. So let's start with the basics. What exactly is an express trust? An express trust is a legal and lawful financial instrument designed for perpetual wealth protection. What makes them unique is they're treated as separate legal entities for tax purposes, giving them significant powers and protections. They're structured to provide strong asset protection.

Interesting. So how does that actually work? Express trusts are established through a legal act that creates a separate estate. You transfer assets to this estate and they're administered by trustees for the benefit of your designated beneficiaries. For non-granter trusts, the trust is considered its own taxpayer and must produce its own separate tax return. Right. And there are different types, correct? Exactly. There are two main types. First, testes. First, testamentary trusts, which are created upon your death through a will.

The trustee manages the property according to your instructions for the beneficiaries. These can help defer and reduce estate taxes while protecting your estate from seizure by your heirs' creditors. Got it. And the second type is living trusts, also called intervivos trusts. These go into effect during your lifetime and can remain active after you pass. They're often used to hold company shares during an estate freeze, finance buy-sell agreements, or maintain control over assets when you're not quite ready to hand over the reins. Now, a question I know many listeners are wondering,

doesn't express trust need to be registered in the United States? Great question. In the U.S., express trusts generally don't need to be registered with a central federal or state authority to be legally valid. Their private legal relationships. However, non-granter trusts typically need to obtain an employer identification number from the IRS and file annual income tax returns using Form 1041 if they generate income. That point about private legal relationships sets up our next piece, how trusts interact with government oversight.

but first a quick word from our sponsor. The Freedom People is dedicated to personal liberty and empowerment, offering a full-featured platform that allows organizations to legally minimize government overreach. If you're concerned about preserving your wealth, managing your assets, and maintaining control over your legacy with minimal government interference, check out what the Freedom People can offer. Learn more at the Freedom People.org. Picking up on private legal relationships, how to express trusts actually get taxed.

It depends on whether the trust is classified as a grantor trust or a non-granter trust. Granter trusts are disregarded for tax purposes. The grantor reports all income, deductions, and credits on their personal tax return. And here's something important. While many grantor trusts are revocable, an irrevocable trust can also be structured as a grantor trust for income tax purposes. And non-granter trusts. Those are usually irrevocable and considered separate legal entities.

The trust pays taxes on retained income or beneficiaries pay taxes on distributed income. Here's the catch. Non-granter trusts face highly compressed tax brackets. They reach the top 37% federal rate at just $15,200 of income. income in 2024. Wow, that's significantly lower than individual brackets. So the trust hits the top rate before most people even file their taxes. That's wild.

Definitely. That's why many people design distribution rules that shift taxable income to beneficiaries who may be in lower brackets. It can affect how overall income is taxed between the trust and the people receiving distributions. So to everyone listening, If you're thinking about estate planning, why would you choose an irrevocable express trust over something simpler? Well, irrevocable trusts are highly effective in reducing estate taxes. Assets transferred into them are no longer considered part of your taxable estate,

especially important for estates exceeding the federal exemption. That's $13.6.1 million in 2024. Trusts can remove future growth from your taxable estate, helping reduce future estate tax exposure. In other words, the appreciation happens outside your estate, which shields it from estate taxes down the line. I see makes sense. They also provide strong protection for assets, safeguarding them from creditors and lawsuits. I remember working with a client who owned a successful business. He was worried about liability exposure and wanted to make sure his kids inherited something regardless of what happened.

An irrevocable trust gave him that peace of mind. That's powerful, but I imagine there's a trade-off, right? Once it's irrevocable, you can't just change your mind. That's exactly right. Once established, irrevocable trusts are very difficult to change or dissolve. The grantor typically forfeits ownership and authority over the trust and its assets without beneficiary or court permission. That's why it's vital to plan carefully up front. So what are the essential steps someone should take if they want to establish and express trust?

First, you need a declaration of trust or trust agreement that clearly identifies the grantor, trustee, beneficiaries, trust property, lawful purpose, trustee powers, and distribution provisions. For the trust to be valid, it must satisfy the three certainties, certainty of intention to create the trust, certainty of the subject matter or property, and certainty of the objects, meaning the beneficiaries or purposes. Right, and you mentioned filing requirements earlier. Yes, non-granter trusts must file Form 1041 if they have $600 or more in income or a non-resident alien beneficiary. These trusts need to obtain an EIN or taxpayer identification number from the IRS.

Granter trusts, however, may use the grantor's Social Security number. The trust then issues Schedule K-1 forms to beneficiaries to report their share of trust. income for their personal returns. Have you ever wondered how trusts play into generational wealth transfer beyond just taxes? Trusts are actually a fundamental tool for generational wealth transfer. They allow you to control how and when beneficiaries receive assets, potentially reducing estate taxes, and providing structured wealth management for up to 80 years. You can protect assets from seizure by creditors,

manage assets for minor beneficiaries, and even preserve important family assets from generation to generation by allowing beneficiaries to inherit the use of property rather than the property itself. That flexibility is remarkable, and I bet it helps prevent the dreaded third-generation wealth depletion we talked about at the start. You know, one more thing worth mentioning. Some trusts can appoint a protector. This person, is authorized to appoint new trustees and review their annual accounts, ensuring uninterrupted administration, even if circumstances change. So we've established that express trusts offer privacy, asset protection, and tax advantages.

They bypass probate, give you control over your legacy, and can adapt to complex family situations. The key is understanding whether a grantor or non-grantor structure fits your needs and working with professionals to get the documentation right. Exactly. Express trusts operate under constitutional common law principles, offering improved privacy and flexibility compared to statutory trusts. Assets held in properly structured trusts transfer to beneficiaries without going through probate court proceedings, which can be lengthy, costly, and public. The trust becomes the legal owner in records.

while internal structures remain confidential. This has been an eye-opening conversation. Thanks so much for breaking down express trusts in a way that actually makes sense for folks trying to protect what they've built. My pleasure. Remember, wealth preservation starts with understanding your options and taking action before it's too late.