Page 90 - AAGLA-APR 2022

Member Update
The solution is to use a highly specialized type of “Non- Grantor Trust” that is not self-settled and that names the current owner as the Beneficiary (or one of several Beneficiaries). This type of specialized Trust can earn income from passive activities. In addition, this Trust can own investment properties (such as rent and lease income that is earned from apartment buildings, single-family residences, or commercial property), and pursuant to Section 643(b) of the Internal Revenue Code, defer the income tax liability in perpetuity - The income needs to be added to the corpus of the Trust (meaning it is not distributed to trust beneficiaries), and the trustee can use his or her discretion to declare the income as an extraordinary dividend. In other words, the Trustee can still use the income for the Trust’s benefit, such as for buying other properties, lifestyle such as medical, maintenance, support, education, etc.
By doing this, the current owner(s) of the property placed into trust would have a Non-Grantor, Irrevocable, Discretionary Trust that is not self-settled, established by a third-party settlor, and have the settlor name the current owner as a beneficiary. The current owner would then sell the property to the Trust and record that sale with the county without triggering a reassessment under Proposition 19.
The current owner’s heirs can then be added to the trust at any time. With this type of trust, the trust always maintains the ownership of the property, causing the capital gains that occur on a future sale to a third party to belong to the trust,
not their heirs. Although the trust has the same basis as the current owner(s), this causes no issues for the trust. Under Section 643(a)(3) of the Internal Revenue Code, if the capital gains are added to corpus and declared by the trustee to be an “extraordinary dividend,” no capital gains will occur. This means that neither heirs nor the trust will have to pay capital gains taxes upon the sale of the property.
There is another important topic to discuss...when the properties are placed into this type of Trust, they become insulated from potential suitors. This provides absolute asset protection from liens, levies and judgements, and is a superior mechanism for holding properties rather than a LLC or other structure(s)!
This highly specialized type of trust is the subject of copyrights and is proprietary to Platinum Trust Group. You can learn more about how it can help you mitigate taxes and have ironclad asset protection by watching the livestream replay at www.PlatinumTrustGroup.com/AAGLA.
Bruce Mack is a Licensed Financial Advisor, national speaker, author, real estate investor Co-Founder of the Platinum Trust Group. You can reach Bruce at (702) 371-2345. Dr. Gina Gaudio-Graves, PhD., J.D. is a retired attorney and a graduate of Notre Dame Law School, and holds a PhD. in Entrepreneurship and Business Strategy. Dr. Gina Gaudio-Graves is also the Operations Manager of the Platinum Trust Group.
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