Lending money to my own Trust, then withdrawing it, I am the Only party in the Trust.

[sceptre4444]

I am considering starting this Nevada Trust, for investment. I will be Grantor, My Nevada company will be Trustee, I will be the only Beneficiary. I however, live in Canada.

I wish to avoid some of the legalish issues because they are so expenisve for me to resolve. There are no CPAs where I live, and legal advice is extremely expensive since from here it is considered international legal advice. That's why I'm here.

I don't know how much I will place into this Nevada trust. Probably not much. Certainly not my House nor my assets (if I did I would use a Canadian Trust, Obviously I pay no US taxes currently). I would like to borrow money here in Canada, then place it into the Trust, and invest the funds in the Trust's name. Say the amount the Trust starts with is $10. Let's say that amount I borrow afterwards and place into the Trust is 10K.

The objective would be to earn a return on the $10,0010.00

1) One question I have is, assumbing I made a small positive return, a capital gain say $100, and the investment ended, how do I withdraw the funds? After all 10 would be the seed, 10K would belong to the grantor and I assume could be withdrawn without issue, and $10 would be capital gains, which may be left in the Trust, but likely wouldbe withdrawn also (to me) to avoid having the Trust pay Tax (I'm under the understanding a Trust pays no Tax IF it pays out every each year to its beneficiaries).

Of course the 10K is being withdrawn to me as GRantor - return of the Loan (no Tax?) and $10 is also being withdrawn to me as Beneficiary (Tax implications)

When I describe this to anyone / either side of the border I get different answers, if it doesn't work then why setup the Trust, I say, often they say thats the chance I take - but of course they get paid even if my Trust turns out to be a useless setup.

2) I understand it would be wise to get a ITIN and send the proposed trust A W8BEN. So trust doesn't have to withold tax when sending me (beneficiary) income (stock trading income).

3) In this process i require a Company to act as Trustee, though it has no other purpose, Do I need to fulfill any Nexus Requirements (Nevada or possibly Wyoming, I don't expect the Trust to pay tax but just in case it does I picked a non tax state.)? Does a Trustee require a business license?

 

[army judge]

Please, don't do this, don't even try it.

What you're attempting to do could be misconstrued (to your detriment) by federal tax authorities on either side of the border.

That doesn't even begin to address what greedy state and/or provincial tax authorities might try to collect.

Don't think schemes of this variety haven't been tried before.

You don't want the aggravation, angst, and anxiety this will inure to your financial and emotional lives.

 

[sceptre4444]

Hello, I sense that administratively this setup is awkward, that's why i've posed my question before taking an action. But I have to admit you caught my attention by referring to the above as a 'Scheme'. You likely meant nothing by it (you did say Misconstrued), but it did feel like I was lumped into a crowd of tax evaders. You must remember, whatever funds get removed by a beneficiary (me) are fully taxed and subject to the US/Canada Tax treaty.

My understanding is that Trusts where one person holds all positions ie Living Trusts are extremely common in your country (but not mine).

 

[army judge]

I didn't judge it.

I don't care who cheats their government.

I do encourage everyone to obey the law.

It isn't, however, my job to enforce the law.

That said, what you propose is a scheme.

Is it a legal scheme?

That isn't within my purview to judge.

However, I'll give you some "free" legal advice.

Abandon the pursuit, of what, you call a "trust".

By the way, it isn't a "living trust" that you've described.

This is a living trust!!!


A living trust, also known as a Revocable Living Trust or a Family Trust is a legal document that holds title or ownership to your real property and assets. When you create a Revocable Living Trust you transfer ownership of your assets to the trust. Transferring assets is typically called "funding." When you transfer title you DO NOT relinquish any control. You can still buy, sell, borrow or transfer.

To many the living trust looks a lot like a will. It includes the details and instructions for how you want your estate to be handled at your death. However, unlike a will a properly funded trust:

Does not go through probate.
Prevents the courts from controlling your assets at incapacity.
Gives you control over the assets you leave to your minor children or grandchildren.

http://www.estateplanninglinks.com/epl_course/living_trust.htm

Hello, I sense that administratively this setup is awkward, that's why i've posed my question before taking an action. But I have to admit you caught my attention by referring to the above as a 'Scheme'. You likely meant nothing by it (you did say Misconstrued), but it did feel like I was lumped into a crowd of tax evaders. You must remember, whatever funds get removed by a beneficiary (me) are fully taxed and subject to the US/Canada Tax treaty.

My understanding is that Trusts where one person holds all positions ie Living Trusts are extremely common in your country (but not mine).

 

[army judge]

You might be asking about a nevada assets protection trust.



http://www.wealthstrategiesjournal.com/articles/2009/03/the-estate-analyst-nevada-nizi.html



Wouldn't it be great to be able to write your own trust?! No attorneys, no CPAs, nobody. While this is not possible in most states, Nevada has a solution for this problem.*A Nevada Asset Protection Trust (NAPT) is an irrevocable trust set up under Nevada's special law that allows a
settlor to set up a trust for his or her own benefit and which can generally protect assets from the settlor's creditors two years after transfers of assets to the trust. Note: In order to use Nevada's law, there must be at least one Nevada trustee, whether an individual, a trust company or a bank.

 

[sceptre4444]

Who can I speak with to determine if I will get into trouble if i set this type of thing up? Everyone has an opinion.....

I may be trying to do something for legitimate business reasons but the instrument/technique I have chosen also be used in a negative way.

I still cannot identify what it is that I'm doing wrong. Brokerages have an area on the form when you do an application that says for 'Trusts' also for corporations or Partnerships. But regardless it sounds Mucky,mostly because I'm from another country. I don't know if it is illegal or not, but most people would say it is but they not know if it is or not.

I have a signing agent in Nevada, an attorney to sign for my company/ trustee.

But regardless if this is a living trust or whatever, How do you handle withdrawing funds where the Grantor and Beneficiary are the Same person? THat is why i brought up the Concept of Living Trust, to demonstrate that it must be a common situation -NOT that my proposal necessarily is one type of trust, I don't think it matters what type of trust mine is , But I want to know how i deal with removing and adding funds when GRantor & Beneficiary are the Same?

 

[sceptre4444]

Spoke to a Lawyer here where i live, he said what the problem is that people use this type of thing to SWITCH tax paying juristictions, ie to go from where they pay one rate of tax to where they can pay a lesser amount. However for me whether I use A US trust or A Canadian TRust or no Trust I still end up paying Canadian Taxes, but it gets more mucky with a US trust.