I recently went to a RE conference and there was a company there called Platinum Trust Group (platinumtrustgroup. com) that told us about proprietary irrevocable spendthrift trust. Basically, they're saying that this is the best and most full proof way of protecting your assets. I said I have an umbrella insurance already as well as a living trust and they said that those are still very penetrable but what they have is absolutely not penetrable mainly because it is a third party entity and not tied to your social security. And also that it has amazing tax advantages... whatever property you have in the trust, if you sell it, you don't incur capital gain tax on it and you also don't have to do 1031 exchange.
Just wondering if anyone has had experience using this trust or familiar with this company.
Hi Kat, I recently saw a vlog by Bruce Mack and was also very curious about the Platinum Trust product. I just finished a 1hr consultation with Bruce and thought I'd share my thoughts. I'm not a professional or even an expert in trusts, tax, or law, so please keep that context in mind.
The trust appears to be based on a structure originated in the 50's with a Harvard attorney (http://masterstrust.com/history_of_trusts.html) and later copyrighted.
It claims to provide "bullet proof" asset protection through irrevocable transfer of assets to the trust. This eliminates exposure of assets in the trust to your personal liability. It also avoids liability arising from assets within the trust (eg slip/fall at a property held in the trust) since the trust is a "fiduciary relationship" and is not defined as a judgement debtor and so cannot be sued.
Secondly, the trust claims deferral / elimination of capital gains and regular income (eg rent payments) if correctly categorized by "allocating them to the corpus" (ie to the principal assets in the trust).
However, it also claims to allow one to keep control and receive certain restricted benefits from said assets which seems contradictory to the underlying principle of an irrevocable transfer. Bruce explained the mechanisms which allows the trust to achieve this, and they seem plausible. However, I am wondering if this is simply "form over substance" and whether such mechanisms are defensible in court or to the IRS. Several citations were provided provided to support this, and statements that there is very long case history around this.
In the end, I couldn't make any conclusions about the legitimacy of such a trust. Although Bruce has many citations and references that support the purported benefits of the trust, I am not able to assess whether they are valid. I would be very interested in hearing the opinion of those more expert than me. Taking the substantial expense (it is definitely not cheap) and effort to form the trust only learn that it is invalid is a bit too risky for me.
@Kat Hughes If your intent is protection, and you have a HNW to protect, $1MM net worth or more, don't mess around with purely DAPT. Stick with the world gold standard in a Cook Islands Asset Protection Trust or the hybrid Domestic Component Bridge Trust if you don't have a reason to go purely offshore by using a connecting "migration" clause.
This gives you the best of both worlds, the flexibility and ease of a DAPT with the power and strength of the Cook Islands if and when you need it. They are Irrevocable Self Settled Grantor Trusts.
You are basically creating a FAPT and creating a bridge back domestically. The trust is anchored as both, and classified domestically by maintaining IRS compliance with USC section 7701.
Anything purely domestically like a NV Asset Protection Trust can never get away from a judges actual authority or the US Constitution Full Faith and Credit Clause. DAPT work for the residents of those States. So for example, if you are a CA resident and you use an out-of-state NV asset protection trust, it really will not do you any good. A recent case Kilker vs Stillman (2012) dropped the hammer on this. This was a case where a CA resident created a NV Asset Protection Trust. 4 years later he was sued. The court discarded the choice of law clause since not a resident of NV and applied a 10 year look back, and also created a new legal standard called "reasonably foreseeable creditors." This is the case docket. https://www.leagle.com/decision/incaco20121126043 This case was then upheld in the court of appeals. And even those residents of states that have established Self Settled Spendthrift Asset Protection Trust legislation are piercing them. Look at Battley vs Mortensen (2011). Case docket here. http://www.akb.uscourts.gov/op...
Judges can do whatever they want. Its the sad fact of our modern legal system.
Hi Brian, thanks for the thoughtful inputs. I am curious on your opinion on the very specific kind of trust promoted by Platinum Trusts. It claims bullet proof asset protection as well as tax benefits in a single trust that seem ideal for real estate investors.
It is apparently not a self-settled DAPT, instead using a 3rd party "Settlor" to create a Non-Grantor trust. Below is a summary of the mechanisms. I wonder if you see any glaring issues with the assertions:
@Howard Woo https://www.biggerpockets.com/member-blogs/12891/89347-asset-protection-trusts-domestic-vs-foreign this article will sum it up. This question has been asked and answered by other attorneys so I don't want to rehash it. Basically, anything domestically, it does not matter what it is, will never be able to stop the Constitution and the full faith and credit clause. No such thing as bullet proof. Ask them to guarantee that in writing and if you loose your lawsuit if they will indemnify you? And if you are setting up a system to avoid taxes, that is fraud and if challenged in court would not hold up. Asset protection has to be designed to be tax neutral, hence why all big firms who have high net worth clients and investors us irrevocable tax neutral self settled spendthrift grantor trusts, either foreign or connected to a domestic counter part. Anything purely domestically like a NV Asset Protection Trust etc can never get away from a judges actual authority or the US Constitution.
@Howard Woo it sounds very interesting. I’m looking to discuss it with a tax attorney.
I am looking into the Platinum Trust Group and their options as well. Meanwhile I have been talking with a Wealth Counsel attorney about forming a trust, talking with ProVision Wealth and WealthAbility about tax and legal planning and advising. Each company has a different take on asset protection and taxation strategies. Platinum Trust Group proposes the most expensive option, but also seems to cover all of the bases of the others. I don't know where to turn. It seems no matter where you turn with this, each person says "that other company is doing it all wrong, you should do it my way (and pay me instead)."
Each person seems to have good advice and recommendations when I talk to them, but as soon as I talk to someone else, they have good information and good criticisms of the others. Do you all have any more information in follow-up to the posts above? Any recommendations on where I could turn for unbiased, personalized information and advice?
@Scott Emsley it depends on your entire situation and holdings, your entire profile etc. and please don't start listing that in a public forum. Generally, I am not a big fan of anything purely domestic. Especially if you have a net worth of $1MM +. If asset protection is the desire, then you should be looking into strong asset protection trusts that combine both a domestic component and an offshore component. A hybrid basically. Combine the best of both worlds. Anything purely domestic, just does not have the ability to level the playing field in court, when it matters, and against judgments. and then when you are talking about deferring taxes etc, that should not be done out of your asset protection strategy. Then you open yourself and your system up for an attack based on fraud and tax evasion. That is why true asset protection planning is always tax neutral. Anonymity does not work once you are sued. Its really only good for doing business and keeping your name off public record. But once you are sued, it does nothing for you. So the system you set up better be strong and seen as very effective and impenetrable in court and to the other parter. That is why for the HNW world, the offshore component has always been the global world standard. You can actually look at over 40 years of case law on those. Then it comes down to your state and jurisdiction on your asset protection trusts and how they hold those up and to what point (if its just domestic). Grantor trusts also give you more flexibly as an investor. Best of luck. I know I put a lot to think about in a small space. But did not want to over load.
@Scott Emsley @Howard Woo In my opinion it does not appear to be a real thing. It appears to me to meet the definition of an abusive trust scheme.Their claims simply do not make any tax sense whatsoever, except in the context of an abusive trust as defined by the IRS. I advise clients to avoid any type of planning which makes the type of claims this website makes. https://www.irs.gov/businesses/small-businesses-self-employed/abusive-trust-tax-evasion-schemes-facts-section-i
Abusive trust arrangements typically are promoted by the promise of such benefits as:
- Reduction or elimination of income subject to tax.
- Deductions for personal expenses paid by the trust.
- Depreciation deductions of an owner's personal expenses paid by the trust.
- Depreciation deductions of an owner's personal residence and furnishings.
- A stepped-up basis for property transferred to the trust.
- The reduction or elimination of self-employment taxes.
- The reduction or elimination of gift and estate taxes.
Abusive trust arrangements often use trusts to hide the true ownership of assets and income or to disguise the substance of transactions. Although these schemes give the appearance of separating responsibility and control from the benefits of ownership, as would be the case with legitimate trusts, the taxpayer in fact controls them.
I don't care what asset protection system you set up, You got to pay your taxes that you are legally required to pay. Asset protection cannot be about tax avoidance.
Wow @Brian Bradley !! Thank you, thank you, thank you. In my viewpoint this trust fits all of those IRS.gov data points on abusive trusts. That would have been a very costly mistake for me. I know that you are not an attorney in Colorado (where I reside), but I would like to take this conversation offline and pick your brain a bit, if you are willing.
Hey @Brian Bradley
Thanks for the research and response, I think it’s great people are having a discussion on this. Your response is lacking one key factor, which is that our Business Trust is a Non-Grantor Trust, which is very different from a Grantor Trust. All of the income earned by the business is fully reported. However, because of the fact that the Business Trust is structured as a pass through Trust, all income is either taxed to the Business Owner it to the Beneficial Trust. We are able to utilize the provisions of the Internal Revenue Code to defer taxes on a substantial portion of the business income.
With our Trusts, we report every penny of income. All of that income is taxed. It's just that we are able to use provisions of the tax code to defer taxes on passive income in perpetuity.
There is an article written by a Nevada attorney that goes on to explain that the IRS, in many of its publications, goes to great lengths to distinguish between abusive trusts and legitimate trusts. See http://mvprogress.com/2008/05/28/abusive-trusts/.
I should also point out that when you invest in our Trust, we can also set you up with a complimentary consultation with a Licensed Tax Attorney. After your meeting, if you wish, she can provide you with a written opinion letter that discusses how the Trust will work on yourparticular situation, and the tax implications for you.
This should give you some peace of mind to know that you can rely on what Platinum Trust Group has shared with you.
For more reading, at the bottom of the IRS page, you'll find a link to a table of contents located at https://www.irs.gov/businesses...
You'll see in that table of contents a link to a section on taxation of Non-Grantor Trusts located at
As you'll see in the Taxation of Non-Grantor Trusts article, it states: "If the trust is not a sham and is not a grantor trust, the trust's income (reduced by amounts distributed to beneficiaries) is Taxable." This is true with our Trust as well. But those taxes are not paid until the Trust terminates.
Bruce Mack, Platinum Trust Group