Establishing a liquidating trust
Rather, several structural factors and initial strategies played crucial roles in maximizing the payout for the beneficiaries of the liquidating trust.This article highlights those factors, which turnaround practitioners should consider in structuring and negotiating a liquidating trust to facilitate a trustee's ability to maximize recoveries for creditors.Since probate is a court proceeding open to the public, those who want to keep their affairs private may want to place assets in a living trust, which, in most states, is not subject to public scrutiny.
He explained that since a living trust is revocable -- it can be dissolved at any time by the grantor -- its assets receive no special treatment for tax purposes, either while the grantor is alive or after death.However, not every liquidating trust is structured in a manner that allows its trustee to achieve that goal easily.Recently, the liquidating trust created at the confirmation of the liquidating plan of Farmland Industries, Inc., paid out more than 100 percent of the allowed claims of unsecured creditors.You can set up a trust fund with the assistance of a trust and estates attorney, or you can draw up the documents yourself.THE use of a revocable living trust is often touted as a way to avoid the time and expense of probate -- and, by some, as a way to lower taxes -- when leaving a house and other property to heirs. "For most people, there is probably no reason to make a revocable living trust," said Ralph Engel, a Manhattan trusts and estates lawyer. Engel said a living trust is a legal device -- created by a document known as a trust agreement -- that acts as a holding bin for property and other assets. He said that when property is transferred to heirs using a will, the will is generally subject to probate.
So, he said, if all of a person's assets are in a living trust, they pass to beneficiaries without being subject to probate. Any assets not specifically owned by the trust, he said, could be subject to probate, undermining the reason for creating it in the first place.