Tax Treatment and Compliance of the Bridge Trust® System

Overview

The Lodmell & Lodmell asset-protection structure is designed to integrate maximum protection with complete tax transparency and simplicity. Each component—the Bridge Trust®, Asset Management Limited Partnership® (AMLP), and associated LLCs—is drafted to comply fully with IRS regulations while minimizing administrative burden.

Together, these entities form a cohesive estate- and asset-management system that is fully compliant, tax-neutral, and simple to maintain.

 

1. The Bridge Trust® – Tax Simplicity and Legal Strength

Purpose and Structure

The Bridge Trust® is a proprietary, irrevocable, self-settled spendthrift trust that provides the highest level of asset protection available under U.S. law while maintaining domestic tax treatment under the Internal Revenue Code.

It combines four unique features:

1. Spendthrift Provisions – Protect assets from creditors and limit beneficiary access.

2. Irrevocability – Prevents courts from ordering the settlor to revoke the trust.

3. Grantor Trust Status – Ensures tax simplicity by disregarding the trust as a separate tax entity.

4. Springing (“Bridge”) Feature – Allows the trust to remain fully domestic until an Event of Duress (such as litigation) triggers conversion into a foreign trust governed by the Cook Islands, preserving protection while retaining tax compliance.

Grantor Trust Tax Treatment

The Bridge Trust® is always treated as a grantor trust under IRC §§ 671–677. This classification ensures that the trust is tax neutral—it does not file its own tax return and has no separate taxable existence.

All income, deductions, and credits pass directly through to the grantor (the trust creator) and are reported on their individual Form 1040.

Regulatory authority:

• Treas. Reg. § 1.671-4(b)(2) permits the trustee to use the grantor’s SSN instead of a separate EIN.

• Treas. Reg. § 1.671-4(b)(8) allows a married couple filing jointly to be treated as a single grantor.

As long as the Bridge Trust remains domestic and uses the grantor’s SSN, no Form 1041 is required and there are no annual IRS filings.

(Optional) Obtaining an EIN and Filing Form 1041 with a Grantor Trust Letter

Although the Bridge Trust® does not require an Employer Identification Number (EIN) or its own tax return, certain situations may justify or necessitate obtaining one. Examples include CPA preference, institutional requirements, banking, or administrative convenience.

Obtaining an EIN does not change the trust’s tax classification—it remains a grantor trust—but it creates a minimal annual informational filing requirement.

When an EIN is obtained:

1. The trustee files IRS Form 1041 (U.S. Income Tax Return for Estates and Trusts) each year.

2. The filing includes a Grantor Trust Letter (also called a Grantor Trust Statement) explaining that:

   • The trust qualifies as a grantor trust under IRC §§ 671–677.

   • All income is reportable directly by the grantor on their personal return.

   • The trust is disregarded as a separate taxable entity.

3. No tax is paid at the trust level; the Form 1041 serves solely as an informational report.

This practice often satisfies custodians or investment firms that prefer or require an EIN for account opening or reporting purposes.

If the Bridge Trust “crosses the Bridge” to foreign status after an Event of Duress, it remains a foreign grantor trust for tax purposes. The only additional filings required are Form 3520 and Form 3520-A, both informational and not associated with additional tax liability, but required and critical to complete.

Summary of Bridge Trust® Tax Characteristics

Feature	Treatment / Effect
Tax Classification	Grantor Trust (IRC §§ 671–677)
EIN Requirement	Not required (optional for banking or CPA preference)
Tax Return	None if using SSN; Form 1041 + Grantor Trust Letter if EIN obtained
Income Reporting	Directly to Grantor on personal Form 1040
IRS Compliance if “Bridged”	Informational Forms 3520 and 3520-A
Result	100% Tax Neutral – No separate tax burden or filing requirement unless EIN elected

 

2. Asset Management Limited Partnership® (AMLP)

Function

The AMLP serves as the central management and holding entity for assets owned by the Bridge Trust®. It separates ownership (the Limited Partner interest held by the Trust) from control (the General Partner interest held through a separate LLC).

Tax Treatment

• Always files a Federal Form 1065 (Partnership Return).

• Always issues K-1s to all partners.

• Always obtains an EIN.

• When formed in Arizona, no separate Arizona state return is required.

This design maintains clear partnership-level accounting and compliance while flowing all income and deductions through to the ultimate grantor(s) via the Bridge Trust’s ownership.

 

3. Limited Liability Companies (LLCs)

Single-Member LLCs

• Treated as disregarded entities for tax purposes.

• No separate EIN or tax return required when wholly owned by the AMLP.

• An EIN may be obtained for banking or administrative purposes, but doing so does not change disregarded status.

Multi-Member LLCs

• Always require an EIN.

• Must file Form 1065 and issue K-1s to all members.

• The AMLP receives its K-1 and reports that income on its own Form 1065.

Wyoming LLC as General Partner

• Typically a single-member LLC owned by the Bridge Trust® or AMLP.

• No EIN or return required unless it elects multi-member status.

• Even if an EIN is obtained, it remains a disregarded entity for tax purposes.

 

4. EIN and Tax Filing Requirements Summary

Entity Type	EIN Required	Return Type	Tax Owner / Pass-Through To
Bridge Trust® (Grantor Trust)	Not required (uses SSN)	None / Optional Form 1041 + Grantor Letter	Grantor (individual 1040)
AMLP	Always required	Form 1065	Partners (K-1s)
Single-Member LLC (owned by AMLP)	Not required	None	AMLP
Multi-Member LLC	Required	Form 1065	Members (K-1s)
Wyoming LLC (GP)	Optional (single-member)	None	AMLP or Bridge Trust®

 

5. Why This Structure Works

The integrated AMLP + Bridge Trust® + LLC framework achieves three essential goals:

1. Asset Protection – Irrevocable and spendthrift features shield assets from creditors.

2. Tax Neutrality – No change in tax reporting or additional filings for the grantor.

3. Administrative Simplicity – Minimal entity maintenance and clear IRS compliance.

In short, it provides the protective power of an offshore trust with the simplicity of a revocable living trust—a balance no other structure achieves.

 

6. Compliance and Disclaimer

This material is provided for general educational purposes. Always consult your CPA or tax advisor for entity-specific guidance. IF you are a Lodmell & Lodmell client, please contact us directly at [e-mail] or 602-230-2014 for specific advice.

To comply with U.S. Treasury Department Circular 230, please note that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or matter addressed herein.