You've heard the phrase trust fund, baby, right? Silver spoon in hand with the future already secured. But what if we told you that the real magic isn't the money, it's the system that protects it?
This is the most misunderstood financial tool in the world. Today, we're talking about trust funds and the real reason the rich use them. Welcome to Alux.
Trust fund 65 blue eyes. That is probably the general picture that you have in mind when you hear trust fund. Am I right?
Spoiled kid, Lamborghini, Instagram famous, the whole spiel. But you know, that's actually the exact opposite of what trust funds are made to do. Because you see, trust funds are not about spoiling someone overnight.
They're about controlling wealth across time. It's how the rich make sure the money they earned, invested, and protected doesn't vanish in one generation. And here's what most people don't realize.
Making millions is the easy part. Okay? Keeping it for more than one generation is the problem.
A trust fund is essentially a legal system, a set of rules that says this money doesn't move unless I say so, even if I'm not around anymore. Trust funds allow the rich to delay access to money until a certain age. Control how that money is used.
education, property, business, and enforce those decisions through a third party who isn't emotionally attached to the beneficiary. And there's one more reason. It's the most powerful of them all.
And we'll get to that. Sit tight. So, the rich use trust funds because, well, they don't trust their kids.
This is about discipline at scale. They're saying, "I built this empire, and I'm not letting one idiot in the bloodline blow it all. " Now, according to data, more than nine out of 10 people worth over $30 million have at least one trust fund in place.
In fact, this is one of the first things they do once serious money enters the picture. You see, there is a curse plaguing wealthy families. It's called the shirt sleeves to shirt sleeves in three generations curse.
So the first generation is workingclass in shirt sleeves. They work hard and build a fortune. The second generation grows up wealthy, benefits from success, but doesn't understand what it took to get there.
The skill is lost. Then comes the third generation. They inherit whatever money is left.
They don't have any skills and they lose it all, ending back into the working class, back in shirt sleeves. It's a full circle of hard work, wealth, then back to hard work again because wealth wasn't preserved. The same idea exists in many cultures.
In Scotland, they've got a saying, "The father buys, the son builds, the grandchild sells, and his son begs. " Studies show that wealthy families lose 70% of their wealth by the second generation, and by the third, 90% is gone. This prompted the rich to be extremely careful with the fortune they build.
Even celebrities and athletes, people you might assume are reckless with money, have gotten smarter. The money from endorsement deals, royalties, and even properties, everything goes into trust funds. Like Shaquille O'Neal telling his oldest son, "I'm rich.
We are not rich. " But how does this process work exactly? Well, step one, you create the rule book, the trust document.
Everything begins with a trust agreement, the legal document that outlines the rules of the game. This is where the grtor, the person setting up the trust, writes down what assets will go into the trust, who will receive them, the beneficiaries, under what conditions they'll receive them, and who is in charge of enforcing those rules, the trustee. This document becomes law and once it's signed, it is legally binding.
Step two, you appoint the enforcer, the trustee. Now, the trustee is like a human firewall. They're the one who makes sure everything goes according to plan.
You can pick a family member, a lawyer, or a bank or trust company. Step three, you fund the trust. This is the part where you actually put stuff into the trust and that means transferring ownership of real estate, cash, stocks, business interests, artwork, crypto, even intellectual property.
As a matter of fact, celebrities will start putting their voice, image, and digital identity into trust funds. Just imagine scrolling Netflix in like 2080 and seeing Morgan Freeman narrates the AI civil war. Anyways, back to the topic.
There are multiple types of trust funds, but these are the main ones. So, there's the revocable trust. You can change it, cancel it, or update it any time while you're alive.
Great for avoiding probate and keeping things private, but still a part of your estate for tax purposes. Then there is the irrevocable trust. Once it's created and funded, you cannot take it back.
But here's the trade-off. those assets are no longer yours, which means they're no longer taxable when you die. This is the go-to strategy for reducing estate taxes and protecting wealth.
There's the GRT, the grantor retained annuity trust. That's where you're putting assets like stocks into the trust. You receive annual payments for a few years.
The leftover growth passes on to your heirs tax-free. It's a favorite tool among billionaires who expect big returns. There's the spend thrift trust for the heir who well let's just say can't be trusted.
This provides limited payouts over time protecting them against reckless spending. And there is the charitable remainder trust. So you get income during your lifetime then the rest goes to charity.
It's a major tax advantage today with a legacy move at the end. And you could even set up a generation skipping trust where you skip your kids entirely with all of the wealth going to your grandkids. And this is where things get really interesting in the conditions.
You can write almost anything you want into that trust provided it's legal and enforcable. For example, you could say, "My child gets $50,000 a year, but only after they turn 30. " Or, "Distribute $100,000 only if they graduate college.
" or cut off access entirely if they marry without a prenup or match whatever they earn in their career dollar for dollar. After all that's said and done, all that's left is to fill up the vault with your fortune. And that, dear Aluxer, is where the real magic happens.
This is one of the main reasons people use trust funds. Because you see, once you transfer ownership of your assets to a trust, those things no longer are legally yours. And if you don't own them, well, the government can't tax them like they're still a part of your estate.
This is the kind of stuff a mentor can guide you through. But not everyone has access to quality mentors in person. And that is why we created the Alux app.
We find and pay highle advisers their exorbitant fees on your behalf. And we have them coach the people in our community for a fraction of the cost. You get access to all of it through the Alux app.
But it's not cheap, okay? We've paid literally millions of dollars to the smartest people in the world, and you can get access to all of it for only $1. 99 a year.
Hundreds of thousands of CEOs, founders, creators, business owners, and anyone with the entrepreneurial grit to make something of themselves are just proof of how valuable the app is. So, go to alux. app right now to download it.
After you've got it on your phone, since you're a subscriber to our YouTube channel, scan the QR code on screen and you'll get 25% off the yearly plan as a big thanks from us to you. All right, moving on. Trust funds are built to outsmart the system.
Now, Alexir, have you heard of the Walton family? That's the family that owns Walmart. They are one of, if not the richest family in the world.
They collectively own more than $600 billion worth of assets spread across three generations. The wealth is held in a complex web of trust funds and private holding companies. And the main goal is to preserve the wealth and minimize taxes.
And here's how that works. So, when it comes to avoiding estate taxes, when someone dies, the government takes a bite out of their estate. It's called the estate tax.
And in the US, it hits anything above 13. 6 6 million at a brutal 40% rate. Translation, you die and the government takes almost half of what you spent a lifetime building.
Don't worry though, your Steam account is safe. Nobody's taxing your 600 unplayed games. Then there's something called freezing asset values.
So, let's say your company is worth $1 million today, but you expect it to grow to 10 million. If you put it into a trust now, your estate is only taxed on the $1 million, even if it skyrockets later. The growth, well, that belongs to your heirs, completely tax-free.
Then there's the GRT trust fund that we mentioned earlier. It's a tool that lets you gift future growth of an asset to your heirs while still getting paid in the short term. So, here's the move, okay?
You put $10 million into a GRT. You receive annual payments for say 5 to 10 years. Any gains above a set interest rate go to your heirs tax-free.
If the investments perform well, your heirs can receive millions and the IRS gets almost nothing. You ever wonder why every rich billionaire out there has a charitable foundation? Well, you can put money into a charity trust.
The trust invests that money. It uses the investment returns to pay you a fixed stream of income. You no longer own the money.
It legally belongs to the trust. And when you die, whatever is left over goes to the charity. But you still get income for years and a tax deduction upfront.
There are dozens more structures like these, aluxer, but we're not turning this into a legal seminar for you. Okay. The point is, trusts are the legal infrastructure the rich use to minimize taxes across generations.
Do it right and you get families like the Waltons, still growing their fortune decade after decade. Do nothing and you get what happened to Prince. He died with no trust, no will, no plan.
What followed was years of legal chaos, court fights, and wasted money. The world of trust funds is pretty complex and we just scratched the surface today. At least you know what's going on though.
But that brings us to the real question. What are you building that is worth protecting? Because that's what a trust fund really is.
Not a loophole, not a flex. It's a shield, a luxer, a structure, a way to make sure the effort you put in now still matters decades from this point. It takes 7 to 10 years to build something truly valuable, but once you do, you'll want to make sure it doesn't vanish the moment you're gone.
You might not need a trust fund today, but just knowing they exist and how they work should shift your thinking. It means the game is deeper than most people ever realize. It means there's a next level and now you're one step closer to it.
We hope you learned something valuable here today, Alexer. We'll see you back here next time. Until then, take care, my friend.
