Franchisees are generally familiar with the use of trusts in their estate planning process. Some of the benefits generally sought by use of trusts include the efficient passage of assets upon death, potential tax savings, avoidance of a lengthy and sometimes costly probate proceedings, privacy, and the maintenance and control of the grantor of decision making during his or her lifetime.
To further complete the process, assets – ordinarily subject to probate such as homes; insurance proceeds; investment real estate; financial investment accounts; and business interests – would be transferred to one or more estate planning trusts.
Often times a franchisee’s most valuable assets are business holdings, including the Dunkin’ Franchise Agreements, which heretofore could not be retitled into estate planning trusts. Additionally, the franchise agreement requires that a qualified franchisee be in control of the operation. Generally, franchisees would like this matter settled during their lifetime.
The Dunkin’ Franchise Agreement, however, restricts the holding of Dunkin’ interests to individual names, and certain business entities, such as corporations and limited liability companies. Until recently, Dunkin’ recognized the franchised ownership interest to be held in certain business trusts, but generally not estate planning trusts. That has now changed as a result of the creation of the Dunkin’ Franchisee Qualified Trust (“the Trust”).
The Trust is an agreement between the franchisee, referred to as the Grantor, and Dunkin’ Donuts’ Franchising LLC, and its affiliates and is created for the purpose of allowing the transfer or retitling of the franchisee’s interests into the Trust. It allows the franchisee to control who he or she wants as the successor by choosing the designated qualified franchisee during his or her lifetime, rather than having a court make such an appointment.
Additionally, the Trust can be structured to allow multiple entities to be retitled in a single Trust and allow additional units purchased by the franchisee after the time the Trust is created to be added to the existing trust.
The franchisee is generally the initial trustee of the Trust and his or her revocable trust is the beneficiary of the Trust. Under the terms of the Trust, the franchisee has power to appoint and remove successor trustees during his or her lifetime. This provision allows flexibility for the franchisee to change the successor trustee as business and family situations occur. For example, the franchisee might desire his non-qualified spouse to be a major beneficiary of his or her estate planning trust, but designate a qualified child, other relative or business owner be the Dunkin’ Qualified Trustee.
The beneficiary of the Trust is the franchisee’s revocable trust. The Trust works in conjunction with the franchisee’s estate planning trust and incorporates the powers and privileges provided therein. Dunkin’ must approve the transfer and charges a documentation fee for processing the Trust and incorporating certain franchise provisions into the trust.
Franchisees should consider the Qualified Dunkin’ Donuts Trust as an integral part of their estate planning and retitling process. •
This publication is not intended to constitute legal advice. If legal advice is required the services of a competent legal professional should be obtained.