Resource Center

An equipment lease can allow your business clients to pay reasonable business expenses into another entity that owns equipment used in the ongoing operations of the business. This is often seen in dental or medical practices, or in manufacturing and farming where highly valued, depreciating assets are used on an ongoing basis. Clients who own those assets used by their small businesses may wish to transfer the equipment into a trust for the benefit of other beneficiaries, and then pay reasonable rents into the trust to fund future trust benefits and receive the use of the equipment owned by the trust. These are fairly advanced strategies, so proper documentation is essential.

Your business clients most likely already have a lease agreement in place if they are leasing office space from an unrelated third party. But when your client owns a business that leases space in a building owned by your client’s trust, a trust created for the benefit of the client’s descendants, or some other entity that your client has an interest in, it is important to establish an arm’s-length lease agreement establishing the terms of the leasehold. This is a useful strategy to allow the business to pay reasonable rents into an estate sheltered or asset protected vehicle, and can work well with your client’s overall planning objectives.