A trust can be used to hold a family business for the benefit of your children. This is a great way of protecting their future stake in the enterprise, especially if they’re not old enough to manage it for themselves. The income can be used for your minor or adult children after you and your spouse have passed away.
If your family business is owned by you and your spouse, and you place it in a revocable trust, you and your spouse are known as the “Grantors.” The person who manages the Trust is called the “Trustee.” A Grantor can be a Trustee. It’s common for husband and wife to be “Co-Grantors” and “Co-Trustees.” Trustees can be family members or paid professionals.
The “Beneficiaries” are the individuals who are to receive the income from the family business placed in the trust. Beneficiaries are often the children of the Grantors. The Trustee has fiduciary responsibilities to manage the trust for the benefit of the Beneficiaries according to the terms written into the Trust document.
When the last surviving Trustee passes away, a “Successor-Trustee,” often the most capable child or a professional fiduciary, will take over the responsibility of managing the Trust. This person sees to it that the Beneficiaries’ interests are protected and they receive the trust income as intended by the Grantor. Upon death the trust becomes “nonrevocable,” so the Beneficiaries interest are locked in.
The Living Trust Source recommends that family businesses be held by in your family trust as a means of protecting each of your children’s interests.
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