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Layered vs. Tiered Trust Strategies: Understanding the Critical Difference
Welcome to this important discussion on trust strategies. RED Worldwide and Precision Advisor Group utilize coordinated trust strategies that maintain full compliance while achieving clients' financial goals. We'll explore the key differences, warning signs of problematic structures, and how to confidently implement proper tiered trust solutions.

by RED WORLDWIDE INC.

Understanding the Difference: Layered vs. Tiered Trust Strategies
Not all trust strategies are created equal. In estate planning and asset protection, terms like "layered," "tiered," or "stacked" can create confusion among clients and even some advisors. However, the intent, transparency, and function behind each approach make all the difference in how they're viewed by the IRS and the law.
The distinction is critical because while some structures may appear similar on the surface, their underlying purposes and implementation determine whether they represent legitimate planning or potentially problematic schemes that could trigger audits and penalties.

Purpose-Driven Planning
Legitimate goals beyond tax reduction
Proper Documentation
Clear roles, responsibilities and reporting
Transparency
Open dealings with tax authorities
What Is a Layered Trust Strategy?
Layered trust strategies, also referred to by the IRS as "abusive trust schemes," involve stacking multiple trusts—domestic or offshore—in ways that intentionally obscure ownership and artificially lower tax obligations without economic substance.
These arrangements typically give the appearance of surrendering control while the creator still manages everything behind the scenes. They often misuse trust entities to deduct personal expenses or depreciate personal assets, directly violating tax law principles.
Obscures true ownership
Assets and income sources are deliberately hidden from tax authorities
Artificially splits income
Distributes money between entities solely to reduce tax liability
Lacks economic substance
Transfers between entities have no legitimate business purpose
Misuses deductions
Improperly claims personal expenses as business deductions
What Is a Tiered (or Coordinated) Trust Strategy?
By contrast, a tiered or coordinated trust strategy—like the one used by RED Worldwide, Inc. and Precision Advisor Group—is a lawful, transparent, and purpose-driven approach to legacy planning, business continuity, and charitable giving.
It is "tiered" not to dodge taxes, but to create distinct trust types, each serving a unique, legally valid role within an overall estate plan. Each component maintains proper fiduciary relationships and complies with all relevant tax regulations and reporting requirements.

Business Protection
Shields business assets from personal liabilities

Family Security
Ensures proper wealth transfer to heirs

Charitable Impact
Creates structured giving with proper tax benefits

Legacy Building
Establishes long-term family governance
Key Characteristics: Comparing Trust Strategies
Understanding the fundamental differences between abusive layered trusts and legitimate tiered strategies is crucial for advisors guiding clients through complex wealth management decisions. The distinction lies not just in structure, but in purpose, transparency, and regulatory compliance.
While layered trusts attempt to disguise control and ownership to reduce taxes improperly, tiered strategies organize assets with clear documentation and proper reporting to achieve legitimate planning objectives while maintaining full tax compliance.
Layered Trust (Abusive)
  • Created to hide assets or reduce taxes without substance
  • No real separation between grantor and trustee
  • Used to disguise control and ownership
  • Often includes offshore entities or shell companies
  • May underreport income or misuse deductions
Tiered Trust (Coordinated & Legal)
  • Created for asset management, protection, and giving
  • Proper fiduciary roles with clear responsibilities
  • Organizes control and ownership transparently
  • Domestic structures with proper documentation
  • Income properly attributed and reported to IRS
Real-Life Application of a Tiered Strategy
At RED Worldwide, the Tiered Trust Strategy includes clearly defined trusts, each serving a specific purpose within a comprehensive wealth management approach. Each component works in coordination with the others while maintaining its own legal integrity and compliance requirements.
This structured approach allows clients to achieve their estate planning, business continuity, and philanthropic goals while maintaining full transparency with tax authorities. Every entity is formed for a lawful purpose, with proper documentation and reporting.
Revocable Living Trust
Avoids probate and transfers assets smoothly
Business Trust
Formalizes business operations and ownership structure
Family Trust
Manages and preserves wealth across generations
Charitable Trust
Supports causes while providing tax deductibility
Private Family Foundation
Establishes governance-driven philanthropy
The Bottom Line: Deception vs. Discipline
The distinction between layered and tiered trust strategies ultimately comes down to intent and implementation. Layered trust strategies focus on deception and tax avoidance, while tiered trust strategies emphasize discipline, legacy planning, and lawful compliance with tax obligations.
RED Worldwide's approach is not about hiding wealth—it's about honoring it, managing it responsibly, and transferring it with integrity. By understanding these critical differences, advisors can confidently guide clients toward legitimate solutions that achieve their goals while maintaining full compliance.
100%
Transparency
Full disclosure to tax authorities
5+
Trust Types
Coordinated for comprehensive planning
0
Hidden Assets
Complete reporting of all holdings