Junior Rutledge

Saturday, June 27, 2020

What Are The Advantages Of Private Placements?

One major advantage of a private placement is that the issuer isn’t subject to the SEC’s strict regulations for a typical public offering. With a private placement, the issuing company isn’t subject to the same disclosure and reporting requirements as a publicly offered bond. Furthermore, privately placed bonds don’t require credit-agency ratings. Another advantage of private placement is the cost and time-related savings involved. Issuing bonds publicly means incurring significant underwriter fees, while issuing them privately can save money. Similarly, the process can be expedited when done in a private manner. Furthermore, private placement deals can be custom-built to meet the financial needs of both the issuer and investors.

Some Advantages Of A Private Placement

• Speed in raising finance: If a company goes in for a fresh issue through public issue there are lot of procedures to be followed which take a lot of time. On the other hand, it is possible to raise resources through private placement within 1 or 2 months.
• Low cost: The company need not spend money in preparation and printing of prospectus, printing of application forms, transporting them to different places, advertisements of the issue in the media etc
• Confidentiality: The Company can maintain strict confidentiality. In the case of issue through prospectus many disclosures have to be made. But in the case of private placement disclosures made are less and they are made to a select few. Therefore confidentiality can be maintained.
• Small amounts can be raised: Even small amounts can be raised through private placement.
• Stable market: The private placement market is more stable when compared to the stock markets. Volatility is less and issues are marketed in a professional manner.
• The primary advantage of the private placement is that it bypasses the stringent regulatory requirements of a public offering. You have to conduct public offerings in accordance with SEC regulations; however, investors and the issuing company privately negotiate the private placements. Furthermore, they do not have to register with the SEC, do not require the issuing company to publicly disclose its financial statements, and ultimately avoid the scrutiny of the SEC.
• Another advantage of private placement is the reduced time of issuance and the reduced costs of issuance. Issuing securities publicly can be time-consuming and may require certain expenses. It forgoes the time and costs that come with a public offering.
• Also, because the investors and the issuing company privately negotiate private placements, they can be tailored to meet the financing needs of the company and the investing needs of the investor. This gives both parties a degree of flexibility.
Now, let’s look at the disadvantages of private placement. The main disadvantage of private placement is the issuer will often have to pay higher interest rates on the debt issuance or offer the equity shares at a discount to the market value. This makes the deal attractive to the institutional investor purchasing the securities.
• Small businesses face the constant challenge of raising affordable capital to fund business operations. Equity financing comes in a wide range of forms, including venture capital, an initial public offering, business loans, and private placement. Established companies may choose the route of an initial public offering to raise capital through selling shares of company stock. However, this strategy can be complex and costly, and it may not be suitable for smaller, less-established businesses.
• As an alternative to an initial public offering, businesses that want to offer shares to investors can complete a private placement investment. This strategy allows a company to sell shares of company stock to a select group of investors privately instead of the public. Private placement has advantages over other equity financing methods, including less burdensome regulatory requirements, reduced cost and time, and the ability to remain a private company.

Regulatory Requirements for Private Placements

When a company decides to issue shares of an initial public offering, the U.S. Securities and Exchange Commission requires the company to meet a lengthy list of requirements. Detailed financial reporting is necessary once an initial public offering is issued, and any shareholder must be able to access the company’s financial statements at any time. This information should provide enough disclosure to investors so they can make informed investment decisions. Private placements are offered to a small group of select investors instead of the public. So, companies employing this type of financing do not need to comply with the same reporting and disclosure regulations. Instead, private placement financing deals are exempt from SEC regulations under Regulation D. There is less concern from the SEC regarding participating investors’ level of investment knowledge because more sophisticated investors (such as pension funds, mutual fund companies, and insurance companies) purchase the majority of private placement shares.

Saved Cost and Time

Equity financing deals such as initial public offerings and venture capital often take time to configure and finalize. There are extensive vetting processes in place from the SEC and venture capitalist firms with which companies seeking this type of capital must comply before receiving funds. Completing all the necessary requirements can take up to a year, and the costs associated with doing so can be a burden to the business. The nature of a private placement makes the funding process much less time-consuming and far less costly for the receiving company. Because no securities registration is necessary, fewer legal fees are associated with this strategy compared to other financing options. Additionally, the smaller number of investors in the deal results in less negotiation before the company receives funding. The greatest benefit to a private placement is the company’s ability to remain a private company. The exemption under Regulation D allows companies to raise capital while keeping financial records private instead of disclosing information each quarter to the buying public. A business obtaining investment through private placement is also not required to give up a seat on the board of directors or a management position to the group of investors. Instead, control over business operations and financial management remains with the owner, unlike a venture capital deal.

Reasons to Issue A Private Placement

• Privacy and Control: Private placements enable companies that value privacy to remain private. In contrast to public debt and equity offerings which require public filings, disclosures of company information and financing documents and terms private placement transactions are negotiated confidentially, and public disclosure requirements are limited. With a private placement, companies would not be beholden to public shareholders.
• Long Maturities: Private placements provide longer maturities than typical bank financing arrangements. They are ideal for companies seeking to extend or layer their refinancing obligations out beyond the typical 3-5-year bank tenor. Additionally, longer maturities often allow for limited amortization, which can be attractive to companies seeking to invest in capital assets, acquisitions and/or invest in projects that have a longer investment return runway.
• Fixed Rate: Typically, private placements are offered at a fixed-interest rate, minimizing interest rate risk. Through a fixed-rate financing, companies can avoid the concern commonly associated with floating-rate coupons, should underlying interest rates rise. A fixed coupon generally allows companies to allocate the cost of debt capital for specific project financings, acquisitions or large capital investment programs. “Creating capital access in both the private debt and bank markets can allow companies to optimize their access to debt capital.”
• Diversify Capital Sources: Private placements help diversify a company’s sources of capital and capital structure. The stable investment appetite shown by insurance companies and other large institutional investors in the private placement market is typically independent from many of the market variables that impact bank market lending activity. Since the terms of private placements can be customized, these transactions are typically crafted to complement existing bank credit facility capacity as opposed to directly competing with these relationships. Creating capital access in both the private debt and bank markets can allow companies to optimize their access to debt capital. Diversification of financing sources becomes particularly important during market cycles when bank liquidity may be tight.
• Additional Capacity: Many companies issue private placements because they have outgrown their borrowing capacity and need capital beyond what their existing lenders (banks, private equity firms, etc.) can provide. Private placements typically focus on cash flow lending metrics and can be completed on either a secured or unsecured basis, depending on the issuer’s existing capital structure.
• Buy-and-Hold: Private placements are typically “buy-and-hold,” meaning the debt investment wouldn’t be purchased with the intent to sell to another investor. Thus, private placement borrowers benefit from the ability to create a long-term relationship with the same investor throughout the life of the financing.

• Ease of Execution: Private placement financings are regularly completed by both privately-held, middle-market companies as well as large public companies. These transactions provide issuers with access to capital on a scale that rivals underwritten public debt offerings, but without certain pre-conditional requirements, such as ratings, public registrations or minimum size restrictions. For public companies, private placements can offer superior execution relative to the public market for small issuance sizes as well as greater structural flexibility.
• Cost Savings: A company can often issue a private placement for a much lower all-in cost than it could in a public offering. For public issuers, the Security and Exchange Commission (SEC) related registration, legal documentation and underwriting fees for a public offering can be expensive. Additionally, in contrast to banks that often rely on ancillary services and fee generation to enhance investment return, private placement lenders rely exclusively on the yield from the notes that they purchase. Taking into consideration the yield-equivalent savings on avoided underwriting fees, in conjunction with the yield premium often associated with first time issuers and small issuance premiums, private placements can provide a very attractive alternative to the public debt market. “In many cases, private placements are completed with a single large institutional investor.”
• Fewer Investors: Unlike issuing securities on the public market, where companies issuing debt securities often deal with hundreds of investors, private placement transactions typically involve fewer than 10-20 investors, and in many cases, are completed with a single large institutional investor. This approach can materially simplify the investor tracking burden for issuers as well as allow them to concentrate their investor-relationship efforts on a few key financial partners.
• Familiar Pricing Process: The process for pricing private placements debt transactions is very similar to that of public securities. The coupon set for fixed-rate notes issued reflects the underlying U.S. Treasury rate corresponding to the tenor of the notes issued, plus a credit risk premium (a “credit spread”). This process allows for general transparency as to the approach that institutional investors undertake when establishing the economics of the transaction.
• Speed of Execution: The growth and maturity of the private placement market has led to improved standardization of documentation, visibility of pricing and terms as well as increased capacity for financings. As a result, the private market can accommodate transactions as small as $10 million and as large as $1-$2 billion. That, when combined with standardized documentation and a smaller universe of investors, fosters quick execution of an investment, generally within 6-8 weeks (for an initial transaction, with follow-on financings executed within a shorter time frame). As noted, it can be much faster to issue a private placement versus a public corporate bond (particularly for first-time issuers) due to the elimination of prospectus drafting, rating agency diligence and registering requirements with the SEC.

Restrictions Affecting Private Placement

The SEC formerly placed many restrictions on private placement transactions. For example, such offerings could only be made to a limited number of investors, and the company was required to establish strict criteria for each investor to meet. Furthermore, the SEC required private placement of securities to be made only to “sophisticated” investors—those capable of evaluating the merits and understanding the risks associated with the investment. Finally, stock sold through private offerings could not be advertised to the public and could only be resold under certain circumstances. In 1992, however, the SEC eliminated many of these restrictions in order to make it easier for small companies to raise capital through private placements of securities. The rules now allow companies to promote their private placement offerings more broadly and to sell the stock to a greater number of buyers. It is also easier for investors to resell such securities.

Although the SEC restrictions on private placements were relaxed, it is nonetheless important for small business owners to understand the various federal and state laws affecting such transactions and to take the appropriate procedural steps. It may be helpful to assemble a team of qualified legal and accounting professionals before attempting to undertake a private placement. Many of the rules affecting private placements are covered under Section 4(2) of the federal securities law. This section provides an exemption for companies wishing to sell up to $5 million in securities to a small number of accredited investors. Companies conducting an offering under Section 4(2) cannot solicit investors publicly, and the majority of investors are expected to be either insiders (company management) or sophisticated outsiders with a preexisting relationship with the company (professionals, suppliers, customers, etc.). At a minimum, the companies are expected to provide potential investors with recent financial statements, a list of risk factors associated with the investment, and an invitation to inspect their facilities. In most respects, the preparation and disclosure requirements for offerings under Section 4(2) are similar to Regulation D filings. Regulation D which was adopted in 1982 and has been revised several times since consists of a set of rules numbered 501 through 508. Rules 504, 505, and 506 describe three different types of exempt offerings and set forth guidelines covering the amount of stock that can be sold and the number and type of investors that are allowed under each one. Rule 504 covers the Small Corporate Offering Registration, or SCOR. SCOR gives an exemption to private companies that raise no more than $1 million in any 12-month period through the sale of stock. There are no restrictions on the number or types of investors and the stock may be freely traded. The SCOR process is easy enough for a small business owner to complete with the assistance of a knowledgeable accountant and attorney. Rule 505 enables a small business to sell up to $5 million in stock during a 12-month period to an unlimited number of investors, provided that no more than 35of them are non-accredited. To be accredited, an investor must have sufficient assets or income to make such an investment. According to the SEC rules, individual investors must have either $1 million in assets (other than their home and car) or $200,000 in net annual personal income, while institutions must hold $5 million in assets.

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It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

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Problematic Areas Of Foreclosure

Foreclosure is the process lenders use to take property from borrowers. By taking legal action against a borrower who has stopped making payments, lenders try to get their money back. For example, they take ownership of your house, sell it, and use the sales proceeds to pay off your home loan.

How Foreclosure Works

When you buy expensive property, such as a home, you might not have enough money to pay the entire purchase price up front. However, you can pay a portion of the price with a down payment, and borrow the rest of the money (to be repaid in future years). Homes can cost hundreds of thousands of dollars, and most people don’t earn anywhere near that much annually. Why are lenders willing to offer such large loans? As part of the loan agreement, you agree that the property you’re buying will serve as collateral for the loan: if you stop making payments, the lender can take possession of the property in order to recover the funds they lent you. To secure this right, the lender has a lien on your property, and to improve their chances of getting enough money, they (usually) only lend if you’ve got a good loan to value ratio.

Consequences of Foreclosure

The main problem with going through foreclosure is, of course, the fact that you will be forced out of your home. You’ll need to find another place to live, and the process is stressful (among other things) for you and your family. Foreclosure can also be expensive. As you stop making payments, your lender will charge penalties and legal fees, and you might pay legal fees out of pocket to fight foreclosure. Any fees added to your account will increase your debt to the lender, and you might still owe money after your home is taken and sold if the sales proceeds are not sufficient (known as a deficiency). Foreclosure will also hurt your credit scores. Your credit reports will show the foreclosure, which credit scoring models will see as a negative signal. You’ll have a hard time borrowing to buy another home for several years (although you might be able to get certain government loans within one to two years), and you’ll also have more difficulty getting affordable loans of any kind. Your credit scores can also affect other areas of your life, such as (in limited cases) your ability to get a job or your insurance rates.

How to Avoid Foreclosure

Foreclosure is a last resort for lenders who have given up hope of being paid. The process is time-consuming and expensive for them (but they can try to charge those fees to you), and it is extremely unpleasant for borrowers. So how can you avoid it?

• Communication: it’s always a good idea to communicate with your lender if you’re having financial challenges. Get in touch before you start missing payments and ask if anything can be done. If you start missing payments, don’t ignore communication from your lender you’ll receive important notices telling you where you are in the process and what rights and options you still have. Speak with a local real estate attorney or HUD housing counselor to understand what’s going on.

• Explore alternatives to keep your home: if you know that you won’t be able to make your payments, find out what options are available to you even if you think it’s too late. You might get help through government programs geared towards struggling borrowers. Your lender might offer some kind of loan modification, which would make your loan more affordable. You might even be able to work out a simple payment plan with your lender if you just need relief for a month or two (if you’re in between jobs, or for surprise medical expenses, for example).

• Alternative ways to leave your home: Foreclosure is a long, unpleasant, expensive process that damages your credit. If you’re simply ready to move on (and you want to at least try to minimize the damage), see if your lender will agree to a short sale. This allows you to sell the house and use the proceeds to pay off your lender even if the loan isn’t completely repaid. Your credit will still suffer, but not as bad as it would after foreclosure. If that doesn’t work, another less attractive option is a deed in lieu of foreclosure.

• Bankruptcy: Filing for bankruptcy might or might not help if you’re facing foreclosure. The issues are complex, so speak with a local attorney to get accurate information that’s tailored to your situation and your state of residence.

• Scams: Because you’re in a desperate situation, you’re a target for con artists. Be wary of any unsolicited offers to help you avoid foreclosure, and choose carefully who helps you. Start seeking help from HUD counseling agencies and other reputable local agencies. Know the signs of foreclosure rescue scams.

Foreclosure is generally a slow process. If you miss one or two payments, you’re probably not facing eviction. That’s why it’s important to communicate with your lender if you’ve fallen on hard times – it might not be too late. The details vary from lender to lender and laws are different in each state, so the description below is a rough overview and might not be exactly what you’ll experience, read all of your notices and agreements carefully and speak with an attorney or HUD housing counselor to make sure you know what’s happening. The entire process could take a year or two, or it could move much faster.

• Notices start: once you’ve missed payments for three months, many lenders consider your loan in default. This is when things get critical. You will, of course, receive communications as soon as you miss a payment (or two), and those communications might include a notice of intent to move forward with the foreclosure process.

• Judicial and non-judicial states: Depending on what state you’re in, you’ll have more time (and receive more notices) than others. There are two types of states – judicial states and non-judicial states. In judicial states, your lender must bring legal action against you in the courts to foreclose. This process takes longer, as you often have 30 to 90 days in between each event. In non-judicial states, lenders can foreclose based on the agreements you’ve signed with them, and a judge is not involved. As you might imagine, things move much faster in non-judicial states. In either type of state, you can fight the foreclosure in court in a judicial state you’ll generally be served with a summons, but in a non-judicial state you’ll need to bring legal action against your lender to stop the foreclosure process. Speak with a local attorney for more details.

• Stopping the process: In most states, lenders are required to offer borrowers some kind of a relief to stop the foreclosure process. Whether or not those options are realistic or feasible is another matter. Lenders might say that you can reinstate and stay in the home if you make all (or a substantial portion) of your missed payments and cover the legal fees and penalties charged so far. You might also have an opportunity to pay off the loan in its entirety (which will only happen if you manage to refinance or find a huge source of money).

• Auction and eviction: If you’re unable to prevent foreclosure, the property is made available to the highest bidder at auction. If nobody else buys the home (which is common), ownership goes to the lender. At that point, if you’re still in the house (and haven’t made arrangements to protect the house), you face the possibility of eviction and it’s time to line up new accommodations. Local laws dictate how long you can remain in the house after foreclosure, and you should receive a notice informing you how long you can stay. Ask your former lender about any “cash for keys” incentives, which can help ease the transition to new housing (assuming you’re ready to move quickly).

Facing a foreclosure can be daunting prospect for people in trouble with their mortgages, especially when they are unsure of what to do. Across the country, six out of 10 homeowners questioned said they wished they understood their mortgage and its terms better. The same percentage of homeowners also said they were unaware of what mortgage lenders can do to help them through their financial situation. The first step to working through a possible foreclosure is to understand what a foreclosure means. When someone buys a property, they typically do not have enough money to pay for the purchase outright. So they take out a mortgage loan, which is a contract for purchase money that will be paid back over time. A foreclosure consists of a lender trying to reclaim the title of a property that had been sold to someone using a loan. The borrower, usually the homeowner living in the house, is unable or unwilling to continue making mortgage payments. When this happens, the lender that provided the loan to the borrower will move to take back the property.

How do Foreclosures Relate to Debt?

Some people facing foreclosure find themselves in this position because of mounting debt that made it harder to make their mortgage payments. A foreclosure can add to your financial problems if your state allows a deficiency judgment, which means the borrower owes the difference between what is owed on the foreclosed property and the amount it eventually sells for at an auction. Thirty-eight states allow financial institutions to pursue borrowers for this money. In cases when a lender does not use a deficiency judgment, a foreclosure can relieve some of your financial burden. Although it is a loss when a lender takes the home you partially paid for, it can be a start to rebuild your finances. It is a good idea to work with a financial adviser or a debt counselor to understand what kind of debt you may incur during a foreclosure.

If you are thinking about going into foreclosure, there are a number of things to consider:

• A foreclosure dramatically affects your credit score. Fair Isaac, the company that created FICO (credit) scores, drops credit scores from 85 points to 160 points after a foreclosure or short sale. The amount of the drop depends on other factors, such as previous credit score.

• Get in touch with your lender as soon as you are aware that you are having difficulty making payments. You may be able to avoid foreclosure by negotiating a new repayment plan or refinancing that works better for you.

• States have different rules on how foreclosures work. Understand your rights and get a sense of how long you can stay in your home once foreclosure proceedings begin.

• Look out for scammers hoping to profit from your misfortune. If you decide to work with a company to help you through your foreclosure, get everything in writing and understand the fees and contract involved.

How Long Does Foreclosure Take in Utah?

For many homeowners, foreclosure is an unfortunate reality; and one that’s entirely outside of their control. But how long does foreclosure take? It will actually vary depending on any number of circumstances. The length of foreclosure time is actually relatively flexible. And believe it or not, there may be options available that can help diminish its long-term effects. “What many people don’t realize is that the stipulations of a foreclosure are different from state to state. “Also how you purchased your home, as well as any personal relationship with a lender” can influence the effects of reducing or stopping foreclosure in Utah.

Right of Redemption

Utah law maintains a grace period known as the “right of redemption,” which can allow you to purchase property back during instances of judicial foreclosure (where proceedings occur through the courts; as in the case of mortgages serving as property liens.) Payment is made in full of the sum of the unpaid loan, plus additional costs. Courts can extend the redemption period, in some cases up to two years; but it’s important to keep in mind this only occurs under judicial foreclosure, which is less common in Utah.

You Have Limited Time to Avoid Foreclosure

No news is never good news when you are behind on your mortgage payments. Your bank could be starting the foreclosure process and completing the necessary documents to take your home away from you. You might have already received notification that your home is entering the first phase of the foreclosure process. This does not mean that you will lose your home forever. Many homeowners give up prematurely and do not try to avoid foreclosure because they are not informed of their foreclosure law rights. There is help available. You do have options to save your home. Every day that you wait to seek help reduces your chances of staying in your home. The first step to defeating foreclosure is learning about your rights as a homeowner. You cannot sweep foreclosure letters under the rug and forget about them. Banks are vicious and know that you do not understand the foreclosure process or how to stop it. If you are falling behind on your mortgage payments, foreclosure is not your only options. There are several strategies that can be used to avoid foreclosure and minimize damage to your credit.

• Reinstatement
• Re-Finance
• Repayment Plan
• Special Forbearance
• Loan Modification
• Partial Claim (FHA only)
• Sale/Leaseback
• Pre-Foreclosure Sale
• Utah Short Sale
• Deed-in-lieu of Foreclosure
• Bankruptcy
Government Programs to Lower Your Payment
• Making Home Affordable
• Home Affordable Modification Program(HAMP)
• Principal Reduction Alternative (PRA)
• Second Lien Modification Program (2MP)
• FHA Home Affordable Modification Program (FHA-HAMP)
• USDA’s RHS Special Loan Servicing
• Veteran’s Administration Home Affordable Modification (VA-HAMP)

Foreclosure Lawyer Free Consultation

When you need legal help with foreclosure in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506

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4.9 stars – based on 67 reviews

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Friday, June 26, 2020

Special Occupations Tax

Class III NFA Weapons/Title 2 firearms are not as commonly known nor as straight forward as the Title 1 firearms. All class III /title 2 weapons fall into 1 of 6 different categories.

• Machineguns,
• Short Barrelled Rifles (SBRs),
• Short Barrelled Shotguns (SBSs),
• Suppressors,
• Any Other Weapon (AOWs) and
• Destructive Devices.

All title 2 firearms are regulated by what’s known as the National Firearm Act or what we refer to as NFA. One could spend months reading about NFA but I’ll hit the major misconception – which are, contrary to the assumptions by many individuals AND even law enforcement, that NFA weaponry:

• Is legal in almost every state. Most all 6 categories above are allowed in just about all states within the Continental United States. A few states restrict machinegun ownership, others may restrict short barrelled shotguns (SBSs) or suppressors, etc.

• One does not need to obtain a “Class III” weapons license to own. In fact, there really is no such thing as a class III NFA weapons license. When a Title 1 FFL dealer pays what is known as a Special Occupation Tax, he/she then becomes a SOT that can then deal in NFA/Title 2 weapons. SOTs have several classes too and they are based on the type of FFL license you currently hold. The term Class 3 comes from when a normal Type 1 (standard dealer) FFL holder pays his SOT tax. He becomes a Type 3 SOT hence the term Class 3.

• Transferring ownership of an NFA weapon – All NFA weapons regardless of category (machineguns, silencers, etc.) are controlled during their transfer from one person/entity to another. These weapons transfer to another entity on what is called ATF tax forms. Each ownership transfer MUST be approved by the ATF before the transfer takes place. This approval takes sometimes many months. Generally individual transfer is approved in 3-4 months, dealer to dealer in 3-4 weeks. When the ATF approves the transfer, they cancel a tax stamp and this is why you sometimes hear some say class 3 stamp. Transfers from/to individuals require a one-time $200 tax stamp to be paid for EACH transfer (AOWs require just a $5 stamp). These are considered tax paid transfers and usually are on an ATF form 4. Dealers can transfer to other dealers using a tax free Form . If a person buys NFA weapon(s) or item from someone outside his/her domicile (home) state, the weapon must be transferred 1st to a SOT holder within the buyer’s state, similar to a Title 1 firearm transaction. It must go to a FFL/SOT dealer in the buyer’s state before going to the buyer.

• Making of NFA weapons. In 1986 President Ronald Reagan signed a bill that basically stopped the making of any new machineguns. The Firearm Owners Protection Act, which would loosen restrictions on gun ownership with the reopening of interstate sales of long guns on a limited basis, legalization of ammunition shipments through the U.S. Postal Service (a partial repeal of the Gun Control Act), removal of the requirement for record keeping on sales of non-armour-piercing ammunition, and federal protection of transportation of firearms through states where possession of those firearms would otherwise be illegal, also contained an amendment, The Hughes Amendment which prohibited civilians from owning any machine gun manufactured after 1986. All the other 5 categories (SBRs, SBSs, Silencers, AOWs and Destructive Devices) however can still be made, even by an individual, if he/she first applies for and receives permission to do so. They will file an ATF Form 1 (maker form) and pay a $200 make tax fee. A civilian can still legally own any machinegun that was created PRIOR to May, 1986 as long as they get approval on the ATF form 4 discussed above. Remember that no civilian can possess a machinegun manufactured AFTER May 1986 except for law enforcement and military so there is a finite quantity available.

• Utah is a special state when it comes to Class III NFA weapons. Part of the Form 1 or Form 4 approval process requires that you need to get local Chief Law Enforcement Official (Sheriff or Chief of City Police) to sign off on your form. Well, several years ago, a bill was passed in TN that makes it a SHALL SIGN state which means the Sheriff or Chief MUST sign approval for your transfer unless there is something in your NCIS background check that would otherwise prevent it. No other state does this. Some officials have erroneously associated their approval with liability on their part. When in all actuality, the signoff in the ATFs eyes is ONLY to state that the individual has nothing negative in his or her NCIS check. Corporations (LLC, INC, etc.) and Trusts (Revocable) do NOT need LEO signoff or fingerprints (still need ATF approval) however they may have tax implications.

• An interesting and widely unknown fact, since the NFA went into effect in 1934, there has only been ONE, yes, ONE single felony committed in the whole United States since 1934 that involved a legally registered NFA firearm. And it was committed ironically by a crooked police officer who went to a drug house and shot someone on the premises. He used his legally acquired UZI sub machinegun to commit the crime. You hear all the time of machineguns and sawed off shotguns in the news but these have all been by individuals possessing an illegal, non registered weapon. There are millions of records of legally owned entries on the NFA registry too, so it’s not like we’re talking just a few hundred or thousand potential individuals.

Six (6) distinct types of Class III NFA weapons

• Machineguns – Often referred to as full-autos, automatics, etc… any firearm which fires more than 1 bullet for each individual pull of the trigger.

• Short Barrelled Rifles (SBR) – Rifles with barrels less than 16″.

• Short Barrelled Shotguns (SBS) – Shotguns with barrels less than 18”.

• Silencers (Suppressors). Silencers/Suppressors are never portrayed accurately in the movies. If the bullet speed breaks the sound barrier, you WILL hear a pop. Suppressors are meant to alter the signature of a weapon so that it sounds like something else and/or the sound heard doesn’t mark the shooter’s position as easily as a non-suppressed weapon. .22 cal firearms can be suppressed very well though. You can make them so quiet that the action cycling produces more sound than the fired bullet does. With other calibers, sub sonic ammo can be used to lessen the signature as the bullet leaves the barrel. Best analogy I can give is a normal suppressed 5.56/223 from an AR15 will sound more like a .22 cal. rifle being fired.

• Any Other Weapon (AOW) – these are usually things that don’t meet the other criteria above. Put a fore grip on a pistol, guess what? You JUST made an AOW weapon and if the proper paperwork and approval were not obtained prior, you have violated NFA regulations and possess a contraband weapon that carries severe fines and penalties. Other common AOW classifications are these wallet holsters you see that are meant to be/could be fired while the weapon is still in the holster. Pen guns are another example. AOWs are a little special in that the transfer tax for them is only $5.00. Ironically, the “maker” of the AOW still has to pay a $200 maker Form 1 fee just like he/she would to make a SBR, SBS or Silencer.

• Destructive Devices (DDs) – these are self explanatory, but the ATF has classified several classes of shotguns now as destructive devices. The infamous ‘Street Sweeper’ shotgun is considered a DD by the ATF and falls into the title 2/NFA realm.

ATF forms usually used in dealing with these weapons

• ATF Form 1 – Maker Form – used by non manufactures to make NFA weapons – for civilians, only Short Barrel Rifles, Short Barrelled Shotguns, Silencers and AOWs can still be made (after May 1986). The ‘one time’ tax stamp for this form is $200. Maker will receive an approved form back from ATF and he/she can then make the item in question. Once made, if transfer of ownership is ever needed, this would be facilitated on a Form 4 below.

• ATF Form 2 – Manufacturer Registration Form – used by manufacturers only.

• ATF Form 3 – Dealer to Dealer tax-free form. Any SOT can transfer to any other SOT tax free NFA weapons he/she has in their possession/ownership. This is usually done when someone buys an item and it is transferred from a dealer in one state to a dealer in the buyer’s state to facilitate the approval/filing process.

• ATF Form 4 – Tax paid to/from individual form – used when a NFA item is transferred TO or FROM an individual. Even if the individual transfers the said item to a SOT holder/dealer, there still is a $200 transfer tax. Once the SOT has it, they can transfer it back out to another SOT holder tax free (Form 3) or directly to another individual in their state on a tax paid (Form 4).

• ATF Form 5 – Used to transfer NFA items to police departments for official use – tax fee transfer. Dealer use only.

• ATF Form 5320 – Used in the Interstate Transportation of all Title II firearms. If you are traveling between states, you WILL need to fill this form out a few weeks in advance. NFA weapons must remain in the possession of the registered owner so short of just a few exceptions; you may not permit anyone to have possession of your weapon without you being in immediate presence.

What is an SOT?

An SOT is a taxpayer (entity) with an FFL that has registered with the federal government and paid an annual tax. The status as an SOT applies to the entity (business). This means that a business can get more than one FFL and it can rely on its status as the same SOT. The SOT tax must be paid every year by July 1st, and the cost of the FFL and SOT registration varies per FFL Type and, in some cases, by annual sales. Unfortunately, if you decide to become an SOT on June 1st, you’ll either need to pay again for the next year on July 1st or you’ll need to wait until July 1st to start the next SOT tax year.

How to Become a Class 3 Dealer?

This is what most people are wondering about when they ask “How do I become a Class 3 License?” The first step is to become a Federal Firearm Licensee. After you have your FFL, you’re ready to register as an SOT and pay the appropriate tax:

Ensure that You Have the Correct FFL/Business Structure

You must ensure that you set your business up properly and got the correct type of FFL. If you took our course, don’t worry – you’re all set! If you want to be a dealer, you may use a Type 7 manufacturer’s license. The opposite isn’t true – a Type 1 dealer may not manufacture firearms. NFA firearms will be registered to the entity. We recommend using an actual business entity (a corporation or LLC) for liability purposes, but being a sole proprietor does have one benefit for some. If you decide to go out of business and give up your FFL, then all of the firearms, including NFA firearms (except post-1986 machine guns), can transfer freely (no transfer tax) to you as an individual. This is because the NFA firearms are registered to the SOT (the entity) and not the FFL license.

Select Your Class of SOT and Tax-rate

the Class of SOT you must become depends on the activity you want to engage in. Once you’ve determined that Class of SOT you need to become, you must then figure out your tax rate. For some FFLs, the SOT tax rate changes depending on whether your total sales are over or under $500,000 annually.

Take an Online SOT Registration Course

The actual process of getting your FFL License and registering as an SOT can be difficult. However, thanks to online SOT certification courses, it’s never been easier. However, it’s incredibly important that you take the right one. When choosing an SOT Registration course, you should look to make sure that you are getting: legal advice from an actual firearms attorney that has the appropriate certifications:

• legal advice from an actual firearms attorney that has the appropriate certification guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the ATF

• guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the AT professional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees

• professional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees

Finally, Apply for and Register as an SOT

Upon ensuring you have the correct FFL and business type, have chosen the right Class of SOT, and taken your course, you’re finally ready to apply for your SOT registration to become a Class 3 dealer, a Class 2 Manufacturer, or a Class 1 Importer. Now, the steps to this can be very difficult and may require multiple forms and extra steps depending on your situation.

Title 2 Firearms Lawyer Free Consultation

When you need legal help with spcial occupations tax or firearms licensing in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

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West Jordan, Utah
84088 United States
Telephone: (801) 676-5506

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What Is A Private Placement Of Stocks?

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What Is A Private Placement Of Stocks?

There are many different ways to raise money for your small business.

What are Private Stock Offerings and How Can They Help You Finance Your Small Business?

You can get loans from your friends and family, liquidate your savings, ask for donations online, or even throw a local fundraiser. But one the most powerful way to finance your small business is a private stock offering. A private stock offering—sometimes called a private placement—is when you sell securities in your business without an initial public offering—usually called an IPO. In other words, a private placement is when you sell your company’s stocks or bonds to private investors. For example, if you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment. There are numerous ways to find investors that might want to purchase securities in a private stock offering. Bankers, small business attorneys, and your personal business contacts are a good place to start. But it’s important to remember that not everyone qualifies as a private investor. While private offerings are governed by less strict rules than IPOs, the Securities and Exchange Commission (SEC) still has guidelines your business will need to follow. (Do note that you will not need to file anything with the SEC, however. In other words, a private placement allows you to get funding for your business without dealing directly with the SEC.)

Who can invest in a private stock offering?

Private placements must come from what the SEC terms an “accredited investor.” Our article, “What are Accredited Investors and How Can They Help Finance Your Small Business?” lays out a fuller picture, but know for starters that accredited investors are generally wealthy individuals or organizations. For example, for a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

What documents you should have to hold a private stock offering?

• Operating Agreement: First and foremost, you need to make sure your company is incorporated and that you have an Operating Agreement. Legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

• Private Placement Memorandum: A Private Placement Memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they’ll need to know about your company. You can set the amount of stocks you’re offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

• Subscription Agreement: A Subscription Agreement is just that: an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased, in addition to information about the company itself.

• Accredited Investor Questionnaire Form: An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor, as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road, when your business is growing even faster. Rocket Lawyer provides this form as part of our Subscription Agreement.

While it might sound like a lot of paperwork, it’s not as bad as it seems. You’re simply showing potential investors how great your company is (via a Private Placement Memorandum) while they prove that they’re legally allowed to invest (via an accredited investor questionnaire form). When you agree, you both sign a contract (the Subscription Agreement) and you receive the funding you need to push your small business to the next level. Private Placement.

What Is a Private Placement?

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion. Investors invited to participate in private placement programs include wealthy individual investors, banks and other financial institutions, mutual funds, insurance companies, and pension funds. One advantage of a private placement is its relatively few regulatory requirements.

Understanding Private Placement

There are minimal regulatory requirements and standards for a private placement even though, like an IPO, it involves the sale of securities. The sale does not even have to be registered with the U.S. Securities and Exchange Commission (SEC). The company is not required to provide a prospectus to potential investors and detailed financial information may not be disclosed. The sale of stock on the public exchanges is regulated by the Securities Act of 1933, which was enacted after the market crash of 1929 to ensure that investors receive sufficient disclosure when they purchase securities. Regulation D of that act provides a registration exemption for private placement offerings. The same regulation allows an issuer to sell securities to a pre-selected group of investors that meet specified requirements. Instead of a prospectus, private placements are sold using a private placement memorandum (PPM) and cannot be broadly marketed to the general public. It specifies that only accredited investors may participate. These may include individuals or entities such as venture capital firms that qualify under the SEC’s terms.

Advantages and Disadvantages of Private Placement

Private placements have become a common way for startups to raise financing, particularly those in the internet and financial technology sectors. They allow these companies to grow and develop while avoiding the full glare of public scrutiny that accompanies an IPO. Buyers of private placements demand higher returns than they can get on the open markets.

A Speedier Process

Above all, a young company can remain a private entity, avoiding the many regulations and annual disclosure requirements that follow an IPO. The light regulation of private placements allows the company to avoid the time and expense of registering with the SEC. That means the process of underwriting is faster, and the company gets its funding sooner. If the issuer is selling a bond, it also avoids the time and expense of obtaining a credit rating from a bond agency. A private placement allows the issuer to sell a more complex security to accredited investors who understand the potential risks and rewards.

A More Demanding Buyer

The buyer of a private placement bond issue expects a higher rate of interest than can be earned on a publicly-traded security. Because of the additional risk of not obtaining a credit rating, a private placement buyer may not buy a bond unless it is secured by specific collateral. A private placement stock investor may also demand a higher percentage of ownership in the business or a fixed dividend payment per share of stock.

What is a Stock?

Stock (also capital stock) of a corporation, is all of the shares into which ownership of the corporation is divided. In American English, the shares are collectively known as “stock”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders. Stock can be bought and sold privately or on stock exchanges, and such transactions are typically heavily regulated by governments to prevent fraud, protect investors, and benefit the larger economy. The stocks are deposited with the depositories in the electronic format also known as Demat account. As new shares are issued by a company, the ownership and rights of existing shareholders are diluted in return for cash to sustain or grow the business. Companies can also buy back stock, which often lets investors recoup the initial investment plus capital gains from subsequent rises in stock price. Stock options, issued by many companies as part of employee compensation, do not represent ownership, but represent the right to buy ownership at a future time at a specified price. This would represent a windfall to the employees if the option is exercised when the market price is higher than the promised price, since if they immediately sold the stock they would keep the difference (minus taxes).

Shares vs. Stocks: What’s the Difference?

The distinction between stocks and shares is pretty blurred in the financial markets. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company (in the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Of the two, “stocks” is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, “shares” has a more specific meaning: It often refers to the ownership of a particular company.
What’s The Difference Between Shares and Stocks?

Stocks

Let’s confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don’t refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren’t types of stock but types of shares.

A share is the single smallest denomination of a company’s stock. So if you’re divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares pay dividends, but those in the preferred class are guaranteed. Common and preferred are the two main forms of stock shares; however, it’s also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as “A,” “B,” and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share.

Special Considerations

The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country’s Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.

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Utah Probate Code 75-7-811

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Thursday, June 25, 2020

Utah Probate Code 75-7-811

Duty to inform and report

• Except to the extent the terms of the trust provide otherwise, a trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, and unless otherwise provided by the terms of the trust a trustee shall promptly respond to a qualified beneficiary’s request for information related to the administration of the trust.

• Except to the extent the terms of the trust provide otherwise, a trustee:

• upon request of a qualified beneficiary, shall promptly furnish to the beneficiary a copy of the portions of the trust instrument which describe or affect the beneficiary’s interest;

• within 60 days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee’s name, address, and telephone number;

• within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settler or otherwise, shall notify the qualified beneficiaries of the trust’s existence, of the identity of the settler or settlers, of the right to request a copy of the trust instrument, and of the right to a trustee’s report as provided in Subsection (3); and

• shall notify the qualified beneficiaries in advance of any change in the method or rate of the trustee’s compensation.

• A trustee shall send to the qualified beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the amount of the trustee’s compensation or a fee schedule or other writing showing how the trustee’s compensation was determined, a listing of the trust assets and, if feasible, their respective market values. Upon a vacancy in a trusteeship, unless a co-trustee remains in office, a report must be sent to the qualified beneficiaries by the former trustee, unless the terms of the trust provide otherwise. A personal representative, conservator, or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.

• A qualified beneficiary may waive the right to a trustee’s report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.

What Is a Trustee?

A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, for a trust fund, or for certain types of retirement plans or pensions. Trustees are trusted to make decisions in the beneficiary’s best interests and often have a fiduciary responsibility to the trust beneficiaries. The trustee acts as the legal owner of trust assets, and is responsible for handling any of the assets held in trust, tax filings for the trust, and distributing the assets according to the terms of the trust. Both roles involve duties that are legally required.

The Trustee’s Duty to Inform and Report

Given the technical complexities of irrevocable trust administration, including the administration of irrevocable life insurance trusts (“ILITs”), trust litigation over breaches of fiduciary duty continues to rise. A trustee’s compliance with the duty to inform and report can be critical to avoiding liability. Most states impose a fiduciary duty on trustees of irrevocable trusts to inform and report to the beneficiaries regarding the trust accounts and administrative. Depending on the trust agreement and the applicable state law, this duty may range from mandating that the trustee notify beneficiaries of a trust’s existence and provide annual reports, to leaving all such disclosure and reporting activities in the trustee’s sole discretion.

These variations in state laws and increasingly complex trust agreements can present unique compliance challenges and potential liability exposure, particularly for non-professional trustees who lack the necessary experience and administrative infrastructure. A trustee’s duty to inform and report protects the interests of trust beneficiaries and can limit the trustee’s liability. This duty applies to trustees of all irrevocable trusts, including ILITs, even if the trust creator (grantor) is still living. As there is no uniform set of rules for compliance, however, each trustee must review the applicable state law, the trust agreement, and the trust’s circumstances to determine the specific reporting obligations. Due to legal nuances in understanding state statutes and trust agreements, non-professional trustees should consult with legal counsel to determine the scope of, and ensure compliance with, their disclosure obligations. Even when not required, trustees also may want to consider non-mandatory disclosures to beneficiaries to take advantage of available liability and other protections under state law.

Holding the Trustee Accountable

The law imposes certain informational requirements on trustees. Trustees have a duty generally to keep beneficiaries fully apprised regarding the trust’s activities. For example, a trustee must send a notice to all trust beneficiaries within 60 days after the settler of a revocable trust dies, informing the beneficiaries that they have a right to receive a copy of the trust instrument. In addition, the trustee must provide an annual accounting to the beneficiaries on request, showing the trust assets and liabilities, and the receipts and disbursements made during the accounting period. While there is no express requirement that a trustee provide an inventory of the trust assets to the beneficiaries within a specific period of time, the trustee should certainly do so in a timely manner. A trustee’s failure to keep the beneficiaries informed constitutes a breach of the trustee’s fiduciary duties for which the trustee can be removed, with court approval.

Reasons to Inform & Report For Compliance

State law may require a trustee to disclose the existence of a trust and other information to the beneficiaries, as well as provide written accounts of the trust’s assets, liabilities, receipts, and disbursements on a periodic basis and/or upon the occurrence of certain events (such as a change in trustee).

Protection

Generally, the duty to inform and report serves numerous practical considerations for both trustees and beneficiaries, which, depending on state law, include:

• Providing trust beneficiaries with sufficient information to enforce the trustee’s duties, preserve the trust, and protect their beneficial interests;

• Providing trustees with protection and closure with regard to specific transactions or for a certain time frame, particularly if no court approval is sought for the transaction or accounting;

• For changes in trustees, clearly delineating the actions and decisions of the prior trustee and providing full knowledge to the new trustee of the trust’s assets and activities;

• Evidencing good faith in trust administration and management (often, individual trustees will not be liable for breaches of fiduciary duty if they acted in good faith); and

• Starting the statute of limitations to run for actions again the trustee for breaches of fiduciary duty or other causes related to the matters disclosed or accounted for.

No Single Set of Rules

There is no single set of rules governing the duty to inform and report. The scope of the duty has developed over time, state-by-state, based on case law and the Uniform Trust Code (“UTC”),[i] a model code used by many states to develop their specific trust laws.[ii] Thus, state rules vary considerably and include both mandatory provisions and default rules, which a trust agreement can modify or delete. Also the specific requirements for disclosure and reporting, including the forms to use and the protections available, will depend on the trust’s terms, the interest, age, and capacity of a beneficiary, and the size, type, and complexity of trust assets or transactions.

Some Commonalities

Despite variations, the reporting and disclosure rules generally fall into several broad categories. Accordingly, using the UTC as a guide, many trustees could find themselves subject to one or more of the following obligations:

• Keep Beneficiaries Reasonably Informed: The trustee must actively report to “qualified” beneficiaries regarding the trust’s administration and material facts necessary for them to protect their interests. Generally, “qualified beneficiaries” are current beneficiaries, those next in line as beneficiaries after the current beneficiaries’ interests terminate, and anyone entitled to income or principal if the trust terminates.

• Provide Periodic Reports (Accounts): The trustee must send to current beneficiaries and permissible beneficiaries of trust income or principal, and to other beneficiaries who request it, a written report that includes the trust property, liabilities, receipts, and disbursements, the source and amount of the trustee’s compensation, and a list of the trust assets and, if feasible, their market values. The reports must be sent at least annually and at trust termination.

• Respond to Beneficiary Requests for Information: The trustee must promptly respond to any beneficiary’s request for information related to the trust’s administration, unless unreasonable under the circumstances and furnish a copy of the trust agreement to any beneficiary who requests a copy. For these purposes, a “beneficiary” is essentially anyone with any interest in the trust, whether present, future, contingent, or vested.

• Notify Beneficiaries of Trust’s Creation and Related Information: Within 60 days after a trustee learns of the creation of an irrevocable trust or a change in a revocable trust to an irrevocable trust, the trustee must notify the qualified beneficiaries of the trust’s existence, the identity of the grantor(s), and the beneficiaries’ right to request a copy of the trust instrument and to receive a trustee’s report.

• Notify Beneficiaries of Acceptance of Trusteeship: Within 60 days after accepting a trusteeship, the trustee must notify qualified beneficiaries of the acceptance and trustee’s name, address, and telephone number.

• Notify of Changes in Trustee’s Compensation: The trustee must notify qualified beneficiaries in advance of any change in the method or rate of the trustee’s compensation.

Trust Limits on Reporting Obligations

Despite the benefits offered by making trust disclosures, many grantors wish to keep trust information confidential, due to privacy concerns and the worry that the disclosure of information to a beneficiary may create disincentives for him or her to attain an education, obtain employment, or achieve other social and professional milestones. To address these concerns, the trust disclosure laws of most states consist primarily of default rules, which a grantor may waive or modify in the trust agreement. For example, under the UTC, the trust agreement can modify or waive the duty to (1) respond to a beneficiary’s request for a copy of the trust, (2) provide annual reports to qualified beneficiaries, and (3) advise a beneficiary under age 25 of the trust’s existence, the trustee’s identity, and the beneficiary’s right to request trustee reports. The UTC, however, makes mandatory the duty to respond to a qualified beneficiary’s request for trustee reports and other information reasonably related to the trust’s administration (with an option to make this mandatory only for beneficiaries who have attained age 25).

Other “optional” provisions the UTC would make mandatory include the duty to notify qualified beneficiaries of the trust’s existence, the trustee’s identity, and their right to request trustee reports (can be made mandatory only for beneficiaries age 25+), as well as the duty to notify beneficiaries of the acceptance of a trusteeship (again, can be mandatory only for beneficiaries age 25+). However, even among states that have adopted the UTC, there has been a significant lack of uniformity regarding enactment of the UTC’s mandatory disclosure requirements. Some states permit “quiet” or “silent” trusts, which allow the grantor to waive all or almost all disclosures to the beneficiaries, perpetually or for some period of time (such as until after the grantor passes, or a beneficiary attains a desired age). Other states allow the grantor to designate a “designated representative”, surrogate, or alternate person to receive certain or all mandatory or other disclosures on behalf of the trust beneficiaries, which attempts to balance the need for disclosure and the desire for privacy.