Why do rich people put their money in a trust?

To prevent the legalization of inheritance by court order and preserve privacy. Protect the trust assets of beneficiaries creditors. To maintain, preserve and manage unique assets such as forests, art, mining interests and vacation properties. Trusts can be useful wealth management tools, especially for tax and estate purposes.

You don't have to be a billionaire to justify costs or reap benefits, so be sure to ask your lawyer or accountant if they might be right for you. Many people see trust funds as tools to protect the wealth of the very rich or to provide their heirs, sometimes ridiculed as “trust funds for infants with independent income, freeing them from the need to earn a living.” For example, wealthy but not necessarily ultra-rich parents and grandparents create college trust funds to pay for children's post-secondary education. Lawmakers later added a gift tax as a means to prevent wealthy people from passing their fortunes to their children and grandchildren before death. For example, a grandparent can liquidate a trust with money that will be invested by his fiduciary child for the beneficiaries of his grandchildren.

ProPublica counted only those people whose tax records or public returns explicitly mentioned GRATs or other trusts commonly used to evade gift and inheritance taxes. One way rich families can transfer assets from one generation to the next is through a GST trust, a generation transfer tax trust, according to Waltenberger. In cities like Toronto and Vancouver, it's not uncommon for people to be millionaires simply because of the value of their home. According to the analysis, more than half of the country's 100 richest people have used GRATs and other trusts to avoid wealth tax.

More than a century ago, amid growing inequality and the rise of stratospherically rich families such as the Mellons and the Rockefellers, Congress created wealth tax as a way to raise money and cut the fortunes of the rich when they die. The gap between rich and poor in America has widened and dynastic wealth, which Warren Buffett has lamented, may be a factor. However, for families who are not ultra-wealthy, there are alternative vehicles that may be more efficient than college trust funds. When that tax rate is applied to transferable assets, it somehow redistributes the wealth of the very rich.

UGMA accounts are limited to money and financial securities, while UGTA accounts may contain tangible and even risky assets, such as works of art and real estate. The purposes of a trust may vary, but many people set up trusts to ensure that their children and descendants will be cared for after death, according to Rosen-Prinz.