Understanding the Difference Between Statutory and Common-Law Trusts

There are plenty of ways for entrepreneurs to protect themselves and conduct their business through a limited liability company, C corporation, S corporation, or trusts. For any business owners looking for more protection and privacy, this is where trusts comes into the picture. A trust is a contract between two parties that aim to grow assets for the trusts’ beneficiaries. Depending on how strong a trust is built, it can last for many years and create generational wealth. The trustee’s goal is to make logical investments to grow the trust’s assets and funds. The parties involved in a trust have control of what type they plan to work with.

The Uniform Statutory Trust Entity Act controls statutory trusts, but they are based on state laws, so they can vary by state. This trust intensifies privacy when doing business since the beneficiary of this trust is private. LLCs, S corporations and C corporations are public entities so their beneficiaries are not private. Statutory trusts are extensively used for real estate that family members are passing down along with some assets. Individuals who have a net worth of over a million dollars should consider statutory trusts as it can be simple to set up and a quicker option than a common-law trust.

Common-law trusts are often called pass-through trust agreements since the profits made are passed onto the beneficiaries. This trust offers privacy and security just as statutory trusts. Common-law trusts are based on progressive tax and estate planning rules which helps people get more of the money that they work for. The accounting and legal regulations are very different, which is why these trusts are filed using . Common-law trusts are rooted in private contracts and nothing can come in the way of that. Statutory trusts, on the other hand, are filed at a federal jurisdiction level which means rulings can be made for changes. One of the downsides of common-law trusts is the price you have to pay to find experts to help you.

There are many trusts to choose from but considering they all offer different things it’s essential to know which meets your needs. Before making a decision do some research and lay out the pros and cons of various trusts.

Originally published at https://jeffreyfryan.com.