40 JANUARY 2025 WorldWide Drilling Resource® https://LGWA.org Louisiana Ground Water Association Convention & Trade Show January 7-8, 2025 Paragon Casino Resort Marksville, Louisiana Exhibits Bingo Education Door Prizes Discount Code LGJ06GR Drilling Into Money Not Boring by Mark E. Battersby A Trust as a Rewarding Business Entity It’s not only the ultra-wealthy who can benefit from operating their business as a trust. In fact, there are a number of reasons for the growing interest in creating trusts for businesses. Trusts are unincorporated business organizations created for the benefit and profit of shareholders, who are known as trustees. In a trust, a trustee manages the drilling business and conducts transactions for the benefit of the beneficiaries. The trustee can be a supplier, distributor, manufacturer, or individual drilling contractor, including the business’s owner. The business owner can be the sole trustee of the trust which holds the business, as well as being a beneficiary - so long as he or she is not the sole beneficiary. While so-called Business Trusts are usually set up for individuals who may or may not be family members, a Family Trust is used when a family’s assets are held to run a family business. With a Family Trust, the trustee determines what to do with the operation’s assets and how to allocate capital gains and income to beneficiaries. The trustee can be a family member or a third party, while beneficiaries are family members or their businesses. There are a number of benefits for creating a Family Trust, including ensuring family members receive their share of the business and avoiding public disclosure of a trust’s assets. A Family Trust is essential for estate planning and ideal for drilling contractors, suppliers, distributors, and manufacturing business owners who want to continue the legacy of their business or hand over management to the designated person. The federal tax rate for a trust is 37% on undisturbed income over $14,450. This high tax rate incentivizes trustees to distribute income to the trust’s beneficiaries who may be in a lower tax bracket. Trusts offer several potential benefits - and potential pitfalls - compared to more traditional business structures. A trust can, for example, protect the business from creditors and lawsuits. A trust can also be used to transfer business assets to the owner’s heirs without going through probate. On the downside, trusts are expensive to set up and complex to maintain. They also require the trustee to undertake annual administrative tasks and, once established, can be difficult to dissolve or to make changes. Obviously, no drilling professional should assume a trust is the answer for their business. The advice of an estate planning professional, as well as the operation’s legal, tax, and accounting professionals, is extremely important. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com
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