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I had heard from an individual a Trust could get commercial financing but I've never known anyone who has, do anyone know if what I was told is factual?
I realize a trust is an entity of it's own but can it borrow? A regular business could borrow funds but if the business lacked commercial credit one of the principles would have to secure it with their personal credit.
If you have a trust wouldn't a trustee have to secure it with their personal credit if it lacked commercial credit?
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I have held real estate for many years in various irrevocable trusts. I have repeatedly obtained mortgage loans secured by this real property in the name of the trust, only. Sometimes, I have been required to personally sign the loan agreement and sometimes I have not, depending upon the lending institution and my credit score. It is indeed possible for a business to operate as a trust, instead of as a corporation, partnership, or limited liability company. The most famous of these arrangements was the Broadmoor Hotel in Colorado Springs, Colorado. It was owned by a man named Spencer Penrose who transferred it to a trust in 1938 known as the El Pomar Foundation. It (The Foundation) later became a foundation when the 1954 internal revenue code was enacted. Trusts are of various types and may be charitable and tax exempt which was the case with this trust. the earnings from the Broadmoor Hotel accumulated as nontaxable for many years until the IRS challenged the status under what are known as the Unrelated Trade or Business Income Rules (UBIT). The Service Argued that the trust should have been filing an UBIT tax return in addition to its trust act return, or in conjunction with its trust return and paying tax on the earnings of the business. The service prevailed in the Broadmoor was spun out from the charitable foundation into an operating Corp., changing the way charitable trusts have operated ever since. The point being that this trust certainly obtained commercial credit, borrowed money, conducted business, and did all the things you associate with corporations operating an operating business. When you add this to the fact that the IRS rarely audits trust tax returns, the trust can be a very favorable method to use to conduct your affairs.
In addition, creditors have a very difficult time attaching any assets you possess that are held in trust. For this to occur, the trust should be irrevocable and not revocable. The trustee should be someone other than yourself. Anything held an revocable trust is the same as if you held it in your own name. This is why, so-called, "Pure Trusts", are basically useless, because the law surrounding irrevocable trusts is basically superseded it.