A living trust is a legally binding agreement between the person who creates the trust (the Grantor) and the person designated to manage the trust (the Trustee). The agreement transfers legal ownership of assets from the Grantor to the Trustee, who must hold and manage these assets for the benefit of a third party (the Beneficiary).
As the name implies, a personal property trust is a living trust that is established to hold title to personal property. A personal property trust is also a self-directed trust, meaning that the Grantor is also the Beneficiary of the trust.
The Beneficiary of a personal property trust has control over the trust assets via a power of direction over the Trustee. In this way, a personal property trust enables you to control and benefit from the trust assets, even though you have transferred legal ownership to the Trustee.
Personal property trusts are primarily used to protect the identity of those who own assets for which a title must be registered publicly. The assets held in a personal property trust are owned in the name of the trust, not your own.
This provides a level of personal liability protection and makes a personal property trust great for real estate investors, stock traders, and anyone else who engages in business activities or personal matters that expose them to a significant amount of liability.
A personal property trust can be used to hold all types of assets, such as cars, boats, recreational vehicles, and so on. Here are some example of assets for which you may want to use a personal property trust:
You can also use a personal property trust alongside a land trust for added personal liability protection. This is referred to astrust stacking and involves creating a personal property trust and then having that trust create a land trust. This method will enable you to enjoy anonymity of ownership even in states that require the identity of the trust Grantor to be disclosed.
Personal property trusts are primarily used to protect the identity of an asset's owner, but they also enable the assets they hold to avoid probate. This can save your estate and its heirs a great deal of time and money.
Probate assets are any and every asset that you own in your own name alone when you pass away. Examples of probate assets include:
Probate assets must go through the probate court process in order for ownership to be transferred to your heirs. However, any asset held in a personal property trust (or any other living trust) when you die, will skip probate and pass on directly to the trust Beneficiaries.
One of the disadvantages of a personal property trust is that probate may still be required for any asset that you leave outside of the trust and that you own in your own name when you die.
Furthermore, because one of the main purposes of a personal property trust is privacy, you need to use a 3rd party Trustee (and pay them).
Finally, since a personal property trust is not a state-registered entity, the state does not give it any asset protection capabilities as it does with corporations and LLCs.
Personal property trusts are useful when you don’t want others to know what own or and for keeping certain transactions separate from the rest of your personal finances. For more information and for help with determining if you can benefit from a personal property trust, consult with an Experienced Wyoming estate planning attorney.