A business trust, which is a commercial organization managed by appointed trustees (who hold the title to the business’ property) for the benefit of one or more beneficiaries. The trust is treated as a legal entity by the tax authorities and must have a business purpose and must function as a business.  A settlor (the person creating the trust, which would be Michael) designates a trustee or trustees to manage the settlor’s assets on behalf of a beneficiary.  (ex. Michael’s mother would manage the money for the children) 

Upon the settlor’s death, for example, trust-fund assets pass directly to the beneficiaries, without the intervention of probate, and such trust funds are also exempt from estate taxes.  But, the beneficiary must pay ordinary taxes on assets received through a trust. 

Now, this seems just fine, and just might be the perfect fit for you.  But, there is always something to be cautious about.  Some think a business trust is a way to avoid taxes.  The IRS will make sure that your business trust is set up correctly without the intention of avoiding taxes.  Some business trusts have avoided audits, but the IRS is on the lookout for phony business trusts. 

So beware!