Can A Trust Be The Grantor of Another Trust

Can A Trust Be The Grantor of Another Trust

Yes, a sui juris (independent) trust can be the grantor for another trust; however, there are often complications that arise from such a structure. Many often use this type of trust to create a trust web, which could inadvertently create multiple holes in the structure's inherent protections.

For example, TRUST A creates TRUST B, TRUST C and TRUST D which all have interlinking UCC-1/PSA contracts. TRUST A, being the grantor, must disclose all of its trustees, proving unanimous approval of TRUST B, C and D's creation. Should these entities be brought in court, the trustees from TRUST A will be shown to be similar, if not exact matches, of all other trusts. This fails the "Smell Test", it could also open up "Fraudulent Conveyances" issues regarding transfers of assets between these trusts, including "in-persona conjuncta aequiparatur interesse proprio" meaning "a person united equal one's own interest." This equates to the trusts be void ab initio (void from the beginning). In short, if a trust created by another trust is to be used in a trust web - avoid it!

NOTE: The primary use of a trust creating another trust, is to direct a new board of trustees to sub-manage specific trust assets without the original trust's oversight or control. This is primarily useful when a large trust res holds multiple organizations or stocks and the trust wishes to diversify such portfolios with a new board of experts.
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