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Finance

The Trust: A Tool for Protecting My American Real Estate Assets

“Will” and “trust” are two terms you’ll often hear when you talk about wealth management in the United States. Both are useful estate planning tools that serve different purposes and can work together to create a comprehensive estate plan. But what is a trust and what is its goal?

By Maryline Lacorre 9 Feb 2021

Difference between wills and trusts

One of the main differences between a will and a trust is that a will does not take effect until after you die, while a trust takes effect as soon as you create it. A will is a document that indicates who will receive your property upon your death and designates a legal representative to carry out your wishes. In contrast, a trust can be used to begin distributing property before death, upon death, or after death. Another difference between a will and a trust is that the will goes through probate. This means that a court oversees the administration of the will and ensures that it is valid, and that the property is distributed as the deceased intended. A trust goes outside of probate, so a court does not need to oversee the process, which can save time and money.

The trust in detail

A trust is a legal arrangement whereby one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to another person, called a “beneficiary.” A trust generally has two types of beneficiaries: a group that receives income from the trust during their lifetime and another group that receives whatever is left after the death of the first group of beneficiaries. In some states, the term of a trust can even be perpetual. 


The goal of a trust is also very often the protection or the fructification of an estate. For example, a person can temporarily transfer the ownership of their real estate to a trustee whose purpose will be to lease it and collect the rents. In this case, the purpose of the trust is to manage real estate assets with a view to ensuring their profitability. The beneficiary is the grantor himself. In addition, the assets making up the trust patrimony are in principle safe from the personal creditors of the settlor or the trustee. As far as foreign investors are concerned, there is a so-called “hybrid” trust, which is a type created under the laws of one of the U.S. states without being considered a U.S. taxpayer.

What are the advantages of the trust?

Control of your wealth

You can specify the terms of a trust with precision, controlling when and to whom distributions can be made. You can also, for example, create a revocable trust so that the assets in the trust remain available to you throughout your life, while also designating to whom the remaining assets will be passed afterward—even in complex situations such as in the case of having children from several marriages.

Protecting your inheritance

A well-constructed trust can help protect your estate against creditors from your heirs or beneficiaries who may not be experts in money management. For example, if you make your child co-owner of real estate.

Confidentiality and cost savings

The approval is common knowledge; a trust can allow the transfer of assets outside of probate and remain private, in addition to potentially reducing the amount lost in court fees and taxes. In fact, some trust laws have been specifically designed to protect the identity of the settlor and its beneficiaries and require third parties to deal directly with the trustee. However, when it comes to third parties, such as opening a bank account or selling real estate, the existence of the Trust must be disclosed to some extent. For people who comply with the tax laws of their home country, a so-called hybrid trust cannot create any reporting obligations and may be exempt from the exchange of tax information.

Tax advantages

In order to achieve this double classification under tax law, the documents of the trust must meet certain technical requirements and precautions should be taken in the operation of the trust. A hybrid trust is fundamentally taxed like a foreign person: it is not taxed on income earned outside the United States, nor does it pay tax on interest and capital gains realized in the United States. Assets held in a hybrid trust can also avoid an inheritance tax of up to 40% when the settlor or beneficiaries die. Since the trust is created under U.S. law, the desired tax advantages in the U.S. are more likely to be met in the event of an audit or litigation, as trust law and tax law coexist in the same country and have evolved relative to each other.


Many types of trust exist, such as “marital,” “bypass,” or “testamentary.” It is a customizable tool to facilitate your wealth management. If you have any questions regarding the trust, please feel free to contact us.

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