Donald Trump’s massive business holdings have been heavily scrutinized over the past several months. Yesterday I came across an article on NPR that reveals that he has put his business interests into a Revocable Living Trust.
A Revocable Living Trust does some things really well, especially when we are talking about drafting a comprehensive estate plan.
Unfortunately, shielding the owner of the trust who is President of the United States from the assets contained in that trust is not one of those things. But that’s ok because many of my clients aren’t considering running for or getting elected to the Office of the President of the United States.
Evidently, and this is not surprising, the “Donald J. Trump Revocable Living Trust”, which now holds Mr. Trump’s stake in his extensive businesses, says that the trustee’s of the trust “shall distribute” funds to Mr. Trump at his request. They also must send him cash when appropriate and “for his maintenance, support, or uninsured medical expenses.”
Let’s be clear about one thing. This trust wouldn’t even offer Mr. Trump any asset protection from lawsuits and creditors, let alone shielding him from his conflict’s of interest as President of the United States (POTUS).
But let’s say you aren’t the President, should you consider a revocable living trust?
Why a Revocable Living Trust is Good for Estate Planning
Here are just a few of the benefits of a revocable living trust that make it a great tool for estate planning, but bad for a sitting president.
- It’s revocable. That means that you can take the assets out of it at any time. For estate planning purposes, this is great, because it gives you a lot of flexibility in crafting or amending your estate plan.
- It operates under your personal social security number. For all intensive purposes, there really is no difference between you as a person and your trust. Your trust doesn’t file its own taxes, all the income is reported under your own personal social security number. It’s basically just a set of instructions about what to do with the assets in the trust (and who should manage the trust) if something happens to you.
- You can take income from the trust whenever you want. See #1 above. With a revocable living trust, you have a lot of flexibility about when and how you can take income out of the trust. Donald Trump is taking full advantage of this, even while he is donating his salary as President.
Why a Revocable Living Trust is Bad for a US President
The President of the United States must abide by a clause in the constitution called the “foreign emoluments” clause, which states that “no person holding any office … shall … accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.”
I realize this language is old school and somewhat confusing, but at its essence, it means that the President can’t accept payments from foreign countries or governments, as that would impact his or her judgment and the manner in which they might carry out their duties as the POTUS.
This is a problem for Mr. Trump because of his extensive business holdings, which include hotels and golf courses around the world as well as in Washington, D.C. Just think for a second about how environmental laws around the world could impact his golf courses, or how tax, employment, and other laws and regulations would affect his hotels in other countries.
Pretty scary, huh?
A revocable living trust doesn’t do anything to shield Mr. Trump from violating the foreign emoluments clause.
Historically, most presidents would either sell off all of their business holdings or place them into a “blind trust” in which they could not see what was in the trust or have any control over how the assets were managed.
By placing his assets into a revocable trust, Mr. Trump has done nothing to prevent himself from continuing to manage his business and indeed profit from them, while serving as President.
As Kathleen Clark, professor of law and ethics at Washington University in St. Louis said, “It’s a ploy, okay? It’s a public relations ploy to give people the impression that Trump has done something meaningful about the massive conflicts of interest he faces.”
Yep, that’s about right.
When You Get Elected President, Don’t Call Your Estate Planning Attorney to Shield Your Assets
It almost seems like Mr. Trump decided that now, as President, was the time to call up his estate planning attorney and make sure his affairs were in order.
Frankly, it’s a dangerous job, and I can understand why he might want to do that.
But a revocable living trust is an estate planning tool. It’s not a tool for a President to use to shield themselves from violating the Constitution.
So please Mr. Trump, call back your estate planning attorney and explain to them that you made a mistake and needed to draft a “blind trust”, not a revocable living trust.
They will know what you mean.
Interested in learning more about Revocable Living Trusts?
If you are interested in learning more about revocable living trusts and how they might fit into your overall estate plan, please feel free to give us a call at (919) 460-5422 to schedule your no-cost Wealth Planning Session (a $350 value). You may also complete our online contact form here.