Trusts have no requirement for compensation when items are put in them. I really cannot believe how many people on here have zero clue what they are talking about regarding Trusts. Trusts exist so that you can put items in and control them while shielding them from counting as assets, especially after you die. If you were “compensated”, then that compensation would be taxable income, in which case you just eliminated one of the major benefits of having a trust in the first place. You have heard about the “death tax”? Trusts are how you avoid it. Trusts are also the mechanism to keep you from losing your business when you get sued. Create a Corp (C or S), then a Trust, and the ownership shares of the Corp are then owned by the Trust. You have several businesses ... great, the Trust owns them all. Now, if your business gets sued, they can only go after the assets of the one business, not all of them, and they can only go after you personally for that which you dont have protected in the trust. That is the wifes problem. Billions in the Trust, which she benefitted from for years (lower taxes), but now it is inconvenient for her because she wants half of what is in the Trust ... but she cannot touch it because she is not the Trustee.
First among them is you, I'm afraid. I'm an attorney having extensive experience with trusts. Where to start?
Trusts have no requirement for compensation when items are put in them.
Correct.
Trusts exist so that you can put items in and control them while shielding them from counting as assets, especially after you die.
Trusts are used for many purposes, including shielding property from creditors, controlling disposition of assets, avoiding probate, and minimizing estate taxes. Depending on the purpose of the trust, sometimes the grantor can control the assets during the grantor's lifetime and sometimes the grantor can't. In order for a gift to a trust to be a completed gift for estate and gift tax purposes, the grantor can't retain any significant control over the trust.
If you were “compensated”, then that compensation would be taxable income
It depends. One can gift property to a trust or sell property to a trust. It the trust provides compensation for the transfer, it's only taxable if it's a taxable transaction. For example, if I buy real estate for $800 and convey it to the trust for $800 at a time when it's worth $800, there will be no tax because there is no gain or gift associated with the transfer. If I convey that same property to the trust at a time it is worth $1,300 in return for payment of $1,000 I will recognize capital gain of $200 and have made a gift, potentially subject to gift tax, of $300.
You have heard about the “death tax”? Trusts are how you avoid it.
Nope. The estate tax and gift tax are unified. Gifts to trusts are subject to the gift tax. One can use a trust to help minimize "death taxes" by gifting appreciating property to the trust. That shields post-gift appreciation from tax, but not the value of the property at the time contributed.
Create a Corp (C or S), then a Trust, and the ownership shares of the Corp are then owned by the Trust. You have several businesses ... great, the Trust owns them all. Now, if your business gets sued, they can only go after the assets of the one business, not all of them, and they can only go after you personally for that which you dont have protected in the trust.
That is silly. The purpose of a corporation is to shield the owners from personal liability. You set up a corporation for each business and you are done. Having the corporations owned by the trust accomplishes nothing except significantly complicating matters.
Billions in the Trust, which she benefitted from for years (lower taxes)
Nope. Trusts do not have lower taxes. The rates are generally the same as for individuals, but the maximum rate is reached much more quickly for trust income.
but now it is inconvenient for her because she wants half of what is in the Trust ... but she cannot touch it because she is not the Trustee.
Nope. It looks like most of the wealth was created in Texas, which is a community property state. As such, she was the owner of half of the assets contributed to the trust. If her husband transferred those assets without her consent, the transfers are potentially void. A court has the ability to reverse the transfers.
(Don't worry, I won't send you a bill for educating you on these matters. Consider it a public service.)