Answers to your important questions.

We have incorporated tens of thousands of companies and currently have more than 41,000 clients worldwide. We were incorporated in 1998. You can peruse the many accolades from our clients on our home page and note that we update these almost daily!

What is a Family Limited Partnership (FLP)?

A Family Limited Partnership is an entity somewhat like a corporation. It is used to protect assets and keep them in the family. A certificate is filed with state authorities to bring the Partnership into existence. The Partnership has distinct identity and tax identification number. It can own assets and can conduct most activities that can be conducted by an individual or a regular corporation.

Who owns a Family Limited Partnership (FLP)?

Partners are the owners of Family Limited Partnerships. General Partners have a percentage of ownership and can generally control and manage the Partnership. They can make investment decisions and decide when and how much to distribute to Partners. A General Partner can be held responsible for any liabilities that the Partnership may have. Limited Partners have a percentage of ownership but have no voting or management participation rights. A Limited Partner should not have personal liability for any activities of the Partnership, much like a shareholder in a corporation is protected from any corporate liabilities. Typically, for example, a father would put assets into a Family Limited Partnership. He would own, say, 50% of the Partnership as General Partner. He could then gift 50% of the Partnership to his children by giving them Limited Partnership interests. He would thus control the partnership, but 50% of the assets and all income and growth thereon would be owned by his children.

Why is a Family Limited Partnership a Preferred Structure for Intrafamily Gifting and Ownership?

There are many advantages to using Family Limited Partnerships. These advantages include: #1 Controlled Distributions The General Partner can control the Partnerships and its distributions. Income and profits from the Partnership do not have to be distributed; they can be reinvested., #2 Restrictions Limited Partners can be restricted from transferring, selling or otherwise "losing" their ownership interest. #3 Valuation Discounts A discount can be used in calculating the value of Limited Partnership interest given to family members. For example, a 10% interest in a $1,000,000 Limited Partnership may be valued substantially less than $100,000 for gift tax purposes. Gifts of Partnership interest can qualify for the $10,000 per year annual exclusion if structured properly. #4 Creditor Protection A certain degree of a creditor protection is inherent in owning interest in a Limited Partnership. A Limited Partner's creditor(s) cannot directly levy upon Partnership assets and cannot "take" a Limited Partner's interest in a Partnership. Current law only allows for a "charging order" which requires that any monetary or financial distributions from the Partnership to a particular partner be given to that Partner's creditor(s). The response to such an order can be that the Partnership simply reinvests earnings instead of making distributions. #5 Arbitration to Settle Disputes A Family Limited Partnership Agreement can provide an arbitration provision to resolve any family disputes among Partners. The Partners simply agree in advance to have any disputes resolved by arbitration. The use of arbitration can avoid unwanted publicity or a possibly negative outcome in a jury trail that could otherwise be used to resolve disputes. There can also be a provision in the Partnership Agreement whereby a Limited Partner who brings an unsuccessful arbitration action against a General Partner would bear all costs of arbitration. This type of provision deters Limited Partners from bringing any frivolous or harassing actions against the General Partner. #6 Buy-Sell and Right of First Refusal A Partnership Agreement can include buy-sell and right of refusal provisions to prevent unwanted persons from becoming Partners. A buy-out provision can provide that Partnership interest may be bought by other Partners or the Partnership ar fair market value or at a discount. #7 Asset Protection in the Event of Divorce In the event a Limited Partner has a failed marriage, the Family Limited Partnership can be structured to protect assets and keep them in the family. The Partnership can be used as a means to segregate the spouse's property. Most courts are reluctant to award a Partnership interest to the other spouse in a divorce proceeding. In the event that the court does award a Partnership interest in a divorce proceeding, such events could trigger a by-out provision which would enable the Partnership interest to remain in the family. #8 Flexibility Unlike an Irrevocable Trust, a Family Limited Partnership can be very flexible. A Family Limited Partnership may be amended or terminated if all of the members agree to do so. #9 Reduced Costs Placing all assets into a Family Limited Partnership can reduce administrative costs. There are less costs involved with placing all family assets in a entity or trust than placing assets in several or trusts.

How can I benefit from "Minority Discounts" on Gifts?

Family Limited Partnerships are excellent gifting vehicle because children or beneficiaries can be given Limited Partnership interest that restricts their right to participate in management or financial decisions. The IRS has allowed "minority discounts" of up to 40% on Limited Partnership gifts due to their lack of control and marketability. The impact of these discounts can best be illustrated by example. Assume that John Doe has $1,200,000 in assets, three children, and will live until 2005. Upon his death, assuming that no Family Limited Partnership was established, John's estate would incur an estate tax of $235,000 and $965,000 would go to his beneficiaries. Using a Family Limited Partnership, assume that John gifts $50,000 per year to the Family Limited Partnership for 10 years. With the 40% "minority discount", John can gift assets worth $50,000 per year into a Family Limited Partnership for the benefit of his children while only using $30,000 worth of annual exclusions. Using a Family Limited Partnership removes $500,000 plus any future growth on these assets from his estate. Upon his death, the estate tax would be $37,000; a savings of almost $200,000! Minority discount estate tax savings can be even more drastic if a client can gift all or part of their $600,000 unified credit. For instance, if one was able to gift $1,000,000 to a Family Limited Partnership and take a 40% minority discount, the gift would only use their $600,00 unified credit while removing $1,000,000 of assets, plus any appreciation thereon, from their estate.

How is a Family Limited Partnership (FLP) Taxed?

A Family Limited Partnership is typically taxed like a regular partnership whereby all income and deductions flow to the partners pro rata, based upon their Partnership interest. This can be altered by agreement, and certain tax laws may effect the income and deductions that flow through to each Partner. The Partnership must file tax returns with the Federal Government and distribute K-1's to the individual Partners so that their share of the income and deductions of the Partnership can be shown on their individual 1040's. Unlike a regular corporation, there is no tax imposed on a Limited Partnership and, unlike an S Corporation, there is generally no tax when assets are conveyed from the entity to its partners. Limitations that apply to S Corporation ownership do not apply to Family Limited Partnerships.

What are possible complexities that should be addressed by tax advisor?

Some of the complexities that must be addressed when establishing a Family Limited Partnership include making sure that the Partnership Agreement is carefully drafted so the Partnership is qualified as such under Federal tax law, and that income and expenses of the Partnership are properly allocated between the General and Limited Partners. The General Partner must also be "adequately capitalized" according to state creditor law regulating partnerships can be significantly more complicated than other areas of Federal tax. It is definitely advantageous to use proper planning to avoid potential tax complications.

What does it cost to form, fund and maintain a Family Limited Partnership (FLP)?

Formation and maintenance costs are minimal compared to tax savings and overall security. In addition to legal fees, there are state registration fees. Partnerships formed using Delaware or Colorado law have out-of-pocket costs of less then $500. Not many of these partnerships are formed using Florida law because Florida charges .7 of 1% of the value of the assets used to form the Partnership, and then a specified amount per year to maintain the partnership. The Florida Department of Revenue regulations indicate that a documentary stamp tax of .7 of 1% of the value of real estate needs to be paid if real estate is transferred to a Partnership. Many tax attorneys now believe that these regulations are not valid and are applying for refunds for previously paid taxes. There may also be ways to make the transfer in a manner that would reduce the chances of an audit by the Department of Revenue.

Is a Family Limited Partnership (FLP) right for me?

A Family Limited Partnership is an excellent way to remove a significant amount of assets from your estate while retaining control of those assets. Family Limited Partnerships can be flexible and provide a means to keep assets in the family. How can a Family Limited Partnership help your family? Assume that a father sets up a Family Limited Partnership. He is a General Partner owning 1% and a Limited Partner owning 90%, and both of his children own 4.5%. The following protections can apply: 1. If the father is sued, creditors cannot seize Partnership assets ( assuming that the Partnership was set up before any creditor problems began). 2. If a child gets divorced or is subject to creditor claims, the divorced spouse or creditor (s) cannot obtain Partnership assets.

Is it costly to incorporate?

This is a common concern among many small business owners because they associate corporations with only the largest business entities. However, forming a corporation is very inexpensive. All of our packages are fully tax-deductible. Our consultants can show you how to completely offset your incorporating costs with real tax savings!

How long does the process take?

We can begin today and in some cases (like Nevada), have your corporation formed within 24-hours. All states differ in the turn-around time of their processing of your corporation. However, through relations with the various state offices, we strive to maintain the fastest turn-around times in the industry. Call and speak with one of our consultants to obtain the average turn-around time for any given state.

Do I have to be present to sign the paperwork when forming a new corporation or LLC?

In most cases, the answer is no. In most states, InCorp assigns itself as the "incorporator" and is able to file all of the paperwork without an officer signature. Some states require the officer's signatures on the Articles of Incorporation. In those cases, we will overnight the documents to you for your signature and have you return them to us, or use a facsimile signature to fulfill the requirement. In either case, you are not required to be present to form your corporation.

How do I get started and what information do I need?

Getting started is easier than you think! Click here to receive one of our information packets, or call us at 1-800-2INCORP (1-800-246-2677) today to speak with one of our consultants. We will give you a free consultation with no obligation to purchase!

What state should I incorporate in?

A lot of companies are out there touting the benefits of incorporating your business in Nevada, Delaware or Wyoming. However, in most cases, the solution just isn't that simple. Oftentimes, companies are required to register their business in the state they are located in and lose all of the benefits of incorporating. Meanwhile, you are out a lot of time and money. At Incorp Services, we analyze your business and structure you according to your needs and the laws of the states you are doing business in. Structuring a business for tax benefits and asset protection is very complicated and oftentimes a cookie-cutter solution just won't do. For more information on which structure is right for you, contact us or go to the information portion of our website.

What legal formalities are required to run a corporation?

First, the corporation is required to file Articles of Incorporation with the state it is registering in. After the company has been incorporated, the company must adopt a set of By-laws. Temporary officers and directors do this during the initial meeting of officers and directors. After the By-Laws have been created and accepted, stock must be issued with stock-subscription agreements. After the stock has been issued, a meeting of shareholders must take place where the shareholders vote on who will be accepted as the officers and directors of the corporation. To the average person, these procedures seem foreign and complicated, however they are very easy and we give you the tools you need to perform these functions efficiently.

Do I have to have a certain income before it makes sense to incorporate?

No. This is a common misconception among small-business owners, usually fostered by advice from an inexperienced accountant. Any seasoned advisor will tell you that incorporating is the first and foremost thing you should do when starting a business. Incorporating (or forming an LLC) will not only save you taxes (no matter what your income) but it will also limit your exposure to IRS audits by separating your personal and business expenses.

I am in a business where I am unlikely to be sued. Should I still incorporate?

Unfortunately, no business is safe anymore from lawsuits. The United States is the most litigious country in the world. In 1992 over 19 million civil lawsuits where filed in this country alone. This trend has been continuing and increasing since then. With the low costs of incorporating, it doesn't make sense not to do so considering the great risks one takes by being unprotected and exposed to litigation.

What is the difference between a "C" Corporation and an "S" Corporation? Which one is right for me?

A "C" Corporation is just a standard corporation filed with the state that you wish to incorporate in. It is subject to the federal corporate tax structure. An "S" Corporation is the same as a standard "C" Corporation but with an "S-Election" (form 2544) filed with the IRS. This entity is known as a pass-through entity, because the income of the corporation is "passed-through" to the individual very similar to a sole-proprietorship. For side by side comparisons on these entities, please visit the information section of our website by clicking here. Determining which entity is right for you is directly contingent upon the type and size of your business and your individual situation. In one of our free consultations, we will be able to assist you in determining which entity is right for you. Click here to have one of our consultants contact you immediately!

Who should be concerned about asset protection?

The more “attachable” assets we own, the more the reward for successfully securing a legal judgment against us. Anyone with significant accumulated assets is more likely to be sued over a dispute than someone with little or no exposed assets. Even families with modest assets may have a home, savings, personal property they expect to utilize for their family security are at risk of attachment.

What is an "attachable" asset?

Assets become attachable if they are titled (registered) in the name of the defendant to a legal complaint. The judge "attaches" a lien to the title of the property to recompense the plaintiff for damages awarded by the court. If the defendant fails to remit the assessed amount of money to the plaintiff, the awarded property is court re-titled to the plaintiff.

Under what circumstances could a court grant a judgment to a plaintiff?

If the plaintiff successfully argues that the defendant’s action or inaction caused damages directly or indirectly by negligence over events they could have or should have taken greater precaution to oversee. This theory of liability is so broad in scope so as to enable skilled attorneys to prevail in ascribing liability to almost anyone even remotely connected to the event.

I have never had a major claim I didn’t settle or have insurance cover. What should I do?

We cannot control what claims may be surfaced against your family in the future. All insurance companies have numerous exclusions from all property and liability policies. All insurance policies have internal limits on claims payout. Some insurance companies are reluctant to pay any sizable claims and end up being litigated, some win, some lose. Divorce, disputes in business and family are not covered at all. Plans are not expected to render you “bulletproof”, plans are designed to give you a leveraged position in negotiations based on the removal of the judgment tool reward normally relied upon by claimants.

Should an affluent person own nothing in order to thwart opportunists?

A well structured program enables ownership in a legal container (entity) that has impediments to attachment. Such entities permit the family to control the asset fully until an attack emerges. The insulative qualities of such containers make it expensive and difficult to outside penetration and thereby render the asset holder unattractive to claims seeking financial rewards.

What is the difference between INC and LLC?

"LLC" and "Corporation" have many of the same characteristics. The most important characteristic they share is that they both offer limited liability protection to its owners. Typically, shareholders are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder to pay debts of the corporation. In a partnership or sole proprietorship the owner's personal assets may be used to pay debts of the business. With an LLC, the members are not personally liable for the debts and obligations of the corporation. There are many important differences between the corporation and LLC. The entities are taxed differently. An LLC is a pass-through tax entity. This means that the income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. With a standard corporation, the corporation is a separately taxable entity. Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level.

What is the difference between a "C" and an "S" corporation?

All corporations start life as "C" corporations. As a benefit to small businesses, which meet certain criteria, the Internal Revenue Service allows them to apply (via form 2553) for "S" status. This means that the corporation will be taxed similarly to a partnership, with each shareholder reporting the profit or loss of the corporation on his personal tax return, in proportion to the percentage of shares he holds. This means that if there is a loss the shareholder can use it to offset his other tax obligations. If there is a profit it is taxed once, at the individual's tax rate, rather than twice (a "C" corporation will pay a tax on profits and individual shareholders will be taxed again when those profits are distributed as dividends.)

Are there any drawbacks to being an "S" corporation?

The main negatives are the restrictions. There cannot be more than 65 shareholders; non-resident or non-US citizens may not be shareholders; and the tax year is somewhat inflexible (it usually must end on Dec. 31). Additionally, another corporation cannot own an “S” corporation.

What is the difference between an "S" corporation and a Limited Liability Company?

In terms of reporting income, they are quite similar. The LLC is somewhat less restrictive than the "S" corporation. There can be any number of members, and there are few restrictions on who those members may be. They are also a relatively new entity, so there is not as great a definitive body of tax rulings on them as there is with corporations.

What do the terms "articles," "meeting" "bylaws" and "minutes" mean?

Articles of Incorporation The Articles of Incorporation is the primary legal document of a corporation; it serves as a corporation’s constitution. The articles are filed with the proper state government to begin corporate existence. The articles contain basic information on the corporation as required by state law. Organization Meeting The organizational meeting completes the formation of the corporation. At the organizational meeting, a number of initial tasks are completed such as: the Articles of Incorporation are ratified; the initial shares are issued; officers are elected; bylaws are approved; and a resolution authorizing the opening of bank account is passed. If the initial directors are named in the Articles of Incorporation, they can hold the organizational meeting. If they are not named, then the organizational meeting is held by the incorporator. Bylaws Bylaws are rules and regulations adopted by a corporation for its internal governance. They usually contain provisions relating to shareholders, directors, officers and general corporate business. At the corporation’s initial meeting, the bylaws are adopted. Bylaws are a private document not filed with any state authority. Minutes The Board of Directors and shareholders transact business at meetings, with decisions being typically made by majority vote. Certain formalities must be followed in holding Board of Directors and shareholder meetings. The meetings must be held pursuant to notice. Notice may be waived if the waiver is done in writing. The secretary or other person mailing the notice should complete an affidavit of mailing notice, and the minutes of the meeting should be recorded. The notice document, affidavit or waiver should all be attached to the minutes of the meeting.

Are directors' and officers' names a matter of public record?

Yes. Names and addresses are filed with the state and are therefore available to anyone. Nevada requires this filing annually. They do not require notification of intervening changes.

What is the responsibility of the president, treasurer and secretary?

What is the responsibility of the president, treasurer and secretary? The president is typically responsible for entering into contracts on behalf of the corporation; the treasurer is responsible for maintaining and accounting for corporate funds; and the secretary is responsible for observing corporate formalities and maintaining corporate records. In addition to these required officer positions, a corporation may also have vice presidents and/or assistant secretaries or assistant treasurers. Typically, the authority and responsibilities of each officer is described in the corporate bylaws and may be further defined by an employment contract or job description. The President: The president has the overall executive responsibility for the management of the corporation and is directly responsible for carrying out the orders of the Board of Directors. The Board of Directors usually elects him or her. The Treasurer: The treasurer is the chief financial officer of the corporation and is responsible for controlling and recording its finances and maintaining corporate bank accounts. Actual fiscal policy of the corporation may rest with the Board of Directors and be largely controlled by the president on a day-to-day basis. The Secretary: The secretary is typically responsible for maintaining the corporate records.

What are the directors' and officers' corporate liability?

Under normal circumstances, officers, directors, managers, etc. do not have personal liability for lawful acts of the corporation. In addition, in Nevada statutes, the owners are not the “appropriate” party to a lawsuit. The company may also indemnify any officer, director, manager, etc. from personal liability.

What is a Board of Directors?

The Board of Directors is essentially the management body for the corporation. Responsibilities of the Board of Directors include establishing all business policies and approving major contracts and undertakings. In addition, the board may also elect the president. The officers and employees under the directives and supervision of these directors carry out ordinary business practices of the corporation. The directors must act collectively for their votes and decisions to be valid. That's why directors may only act at a Board of Directors meeting. This, however, requires certain formalities. One such formality is that the directors all must be notified of a forthcoming meeting in a prescribed manner, although this can be waived or provided for in the corporation's Articles of Incorporation or bylaws. For a directors' meeting to be valid, there must also be a quorum of directors present. A quorum is usually a majority of the directors then serving on the board; however, the bylaws may specify another minimum number or percentage. The Board of Directors must meet on a regular basis (monthly or quarterly), but in no case less than annually. These are the regular board meetings. The board may also call special meetings for matters that may arise between regular meetings. In addition, boards may call a special shareholders' meeting by adopting a resolution stating where and when the meeting is to be held and what business is to be transacted. The first meeting of the Board of Directors is important because the bylaws, the corporate seal, stock certificates and record books are adopted. Board members, like officers, have a fiduciary duty to act in the best interests of the corporation and cannot put their own interests ahead of the corporation's. The board must also act prudently and not negligently manage the affairs of the corporation. Finally, the board must make certain that it properly exercises its authority in managing the corporation and does not abrogate its responsibilities to others. This means that the board must be very careful to document that each board action was reasonable, lawful and in the best interests of the corporation. This is particularly true with matters involving compensation, dividends and dealings involving officers, directors and stockholders. The record or corporate minutes of the meeting must include the arguments or statements to support the board's action and why must detail why the action was proper.

Can you change the directors or add new ones?

You can change or add new directors anytime. If you want the Secretary of State to record the change, you have to submit a new Annual List of Officers and Directors.

What do we do if there are more directors than the order form allows?

Simply attach an additional sheet with the additional officers or directors

If I have a Nevada corporation, but I am doing business in California, do I also need a Nevada business license?

Yes. With very few exceptions, you need a Nevada business license even if you are not doing business within the State of Nevada.

Can I receive instant credit by buying a shelf corporation that has established credit?

A "shelf corporation," by definition, has not had any business transacted or stock issued. Basically, it should have been "sitting on the shelf". There are some advantages to an Aged corporation for specific situations, but instant credit is not one of them. The lender would need to see the ability to repay the loan, assets that could be used as collateral, a proven record of ability to earn income, and other loan activity that has been paid on time. If you need "instant credit", look into one of Incorp's credit packages!

Can InCorp provide shelf corporations?

Yes! Incorp maintains a library of shelf corporations for various dates. Call today for a quote!

What is a "Corporation Sole"

A corporation sole can legally engage in any activities that any other non-profit corporation legally can. Corporation sole statutes, having come about largely because of the influence of the Roman Catholic Church, specifically reserve the office of corporation sole to Bishops, Archbishops, Cardinals, and other heads of church dioceses. A corporation sole is legally classified by all states that legally recognize them as non-profit corporations. For all practical purposes, the only difference between a corporation sole and a corporation aggregate is that the corporation sole doesn't have a board of directors -- it only has one ("sole") officer. Since corporate laws have changed in most states to now permit the formation of single-officer non-profit corporations, there is, for all practical purposes, no difference between them and the corporation sole. The IRS classifies corporation soles as non-profit corporations. Contrary to the urban legends being spread by corporation sole hucksters, the IRS does NOT classify any corporation sole as 508c1A mandatory exception organizations. For tax purposes a corporation sole is treated no differently than any other non-profit corporation. Whether you choose to organize as a corporation sole or a corporation aggregate is legally and for tax purposes the same result. It simply makes no difference one way or the other. If you can do it with a non-profit corporation aggregate you can do it with a corporation sole. If you can't do it with a non-profit corporation aggregate you can't do it with a corporation sole, and if you do try to do it you might get charged with tax fraud.

Are there any tax implications?

No, plans are tax neutral in that all income and estate taxes are recognized by the beneficiaries of the plan.

Is all this legal?

Absolutely! All programs comply with US and international laws and are disclosed to all authorities with jurisdiction to require disclosure.

What is the cost of such planning?

Basic plans (domestic) are generally six to ten thousand dollars complete. Mid-range insulation (domestic) for families with diverse assets are ten to sixteen thousand dollars complete. Sophisticated programs are generally offshore domiciled and designed to utilize a series of impediments toward invasion. Such plans are forty to as high as seventy-five thousand dollars depending on number of distinct businesses and complexity of holdings.

Will my day to day life be impacted?

A well designed program is no more difficult to live with and administer on a day to day basis than you would ordinarily have.

How long does the planning and executing process take?

Most plans are fully functional within 90 days of inception.

Can I get a brief phone consult to determine the appropriateness of further pursuit of asset insulation planning?

Certainly, a brief email describing your concerns and current structure will be responded to by telephone or email as you prefer.

What is a Trust?

A trust is a legal arrangement used in estate planning that provides for the management and distribution of your property when you die. The trust is usually evidenced by a written document called a "Declaration of Trust" or "Trust Agreement," whereby one person, called the "trustor" or "grantor," transfers property to another person, called the "trustee," who holds the property for the benefit of another person, called the "beneficiary." The obligation of the trustee is to conserve and protect assets transferred to the trust, and to collect income and distribute or accumulate it as prescribed in the trust instrument. The typical living trust is revocable and amendable by the grantor during his or her lifetime. During his or her lifetime, the grantor is also the trustee and beneficiary. As trustee, the grantor can manage and control the trust property; as beneficiary, the grantor receives all of the benefits of the trust assets. Upon the death of the grantor, a "successor trustee" (child, friend, bank, etc.) takes over as trustee and follows the trustor's instructions, which are set forth in the trust, concerning the distribution of property and the payment of taxes and expenses.

What is an irrevocable trust?

An irrevocable trust is an arrangement in which the grantor departs with ownership and control of property. Usually this involves a gift of the property to the trust. The trust then stands as a separate taxable entity and pays tax on its accumulated income. Trusts typically receive a deduction for income that is distributed on a current basis. Because the grantor must permanently depart with the ownership and control of the property being transferred to an irrevocable trust, such a device has limited appeal to most taxpayers. Irrevocable trusts, however, are useful in life insurance planning. For instance, a properly structured irrevocable life insurance trust can avoid probate costs and fees, and estate taxes on the insurance proceeds paid to the trust upon the grantor's death. Irrevocable trusts are also useful in providing children, especially those over age 14, with a fund for education or other specific planning purposes. Again, the trust is usually funded with "after-tax" dollars through a gift. The annual gift tax exclusion (an exclusion for gifts of $10,000 or less per year per donee) does not apply to gifts of a future interest (such as a gift to a trust), so the so-called "Crummy" trust provisions must be properly applied to make the gift a "present" interest. Drafting such clauses requires expertise.

What is a Grantor?

This is the person who sets up the trust. This would be you. The grantor has many names such as the creator, settlor or trustor. As the grantor, you have full control to manage or change the trust at any time.

What is the trustee?

The trustee is the person who will manage the assets in the trust. Again, this will most likely be you while you are alive. When a trust is created, the trustees are usually the same individuals as the grantor. For married couples, usually the husband and the wife both act as co-trustees. You do not have to be your own trustee if you do not want to or do not feel you are able to. You can name a child or friend or even an institution to manage your affairs for you while you are alive.