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WHAT IS A TRUST?
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| WHAT IS A TRUST? | | |||||||||||||
By: | | IFC | | ||||||||||||
Date: | | 05/09/2000 | | ||||||||||||
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WHAT IS A TRUST? A Trust is a contractual agreement between three parties. The three parties consist of the Creator/Grantor, Trustees and Certificate Holders. A Trust is a set of documents which allows for the restructuring of a business or an estate, providing the Certificate Holder many tangible benefits. When properly created and constructed, Trusts empower us to regain control of our lives, provide increased asset protection and enable us to reclaim our personal and business privacy. POWER OF TRUSTS Henry Ford II left the bulk of his fortune, estimated at $250 million, to a private trust whose beneficiaries are unnamed according to his will... The New York Times, Wednesday, October 7, 1987 Upon the death of Mayor Richard Daley of Chicago, Illinois, it was learned that much of his assets were put into family trusts after a 1974 stroke. That would put most of his holdings in the hands of his wife or seven children with no public disclosure!! Combined Wire Services, Chicago Tribune Mesabi Iron Company received a ruling from the Commissioner of the IRS allowing them to transfer all of their assets into trusts so that they would not be axed as corporations. The effect of the ruling is that the trusts themselves were non-taxable. Wall Street Journal, March 13, 1961 Rupert Murdoch transferred Boston TV Station WFXT into an independent trust to avoid cross-ownership laws that would have put the TV station at risk. Wall Street Journal PROBATE EXAMPLES WITHOUT THE USE OF TRUSTS Mr. A. Deeds, Chairman NCR of Dayton, Ohio, gross estate of $13,312,905.00. Total cost and taxes at time of death, $7,902,005 reducing his estate by 58%!! Albert H. Wiggin, retired Chairman, Chase National Bank of New York City, New York, gross estate of $20,493,990.00. Total cost and taxes at time of death, $14,865,310.00 reducing his estate by 72%!! ADDITIONAL EXAMPLES OF THE POWER OF TRUSTS Ronald Reagan established the "Ronald Reagan Trust" in 1966 enabling him to receive sizable tax advantages. In some years Mr. Reagan paid no taxes at all while at the same time maintaining a magnificent lifestyle. H. L. Hunt, the Texas Oil Billionaire, is reported to have paid $75,000 for the setting up of the first Hunt Family Pure Trust. Today it is estimated the family uses 200 or more Trusts. Joseph Kennedy, father of John F. Kennedy, used many Pure Trusts for his family and various businesses. LIVING TRUSTS v. PURE TRUSTS The following comparison details the advantages of a Pure Trust versus a Living Trust. Living Trusts do nothing to protect assets while the individual is still alive. Pure Trusts have the distinct advantage of not only protecting assets but also allowing for privacy, tax advantages, and establishing a judgment-proof persona. LIVING TRUST 1.No limit on liability against lawsuits. 2.Offers no privacy. All assets in a Revocable Living Trust are still under your control. 3.Offers tax protection up to $600,000 per person. A pending change of this law will lower the amount to $200,000 per person. 4.Offers total probate protection--the only good thing about a Living Trust! 5.Has no protection against any catastrophic illness or loss. 6.Offers no protection against bankruptcy. 7.Offers no protection or reduction of personal income tax. PURE TRUST 1.Offers total protection against lawsuits structured as an irrevocable Trust. 2.Provides total privacy under the laws of the United States of America. A Pure Trust is its own lawful entity and you are not the owner. 3.No tax requirements according to the IRS. A Pure Trust is a lawful entity and lives on after your death. 4.Offers total probate protection. 5.Has total protection against loss or illness. 6.Offers total protection against bankruptcy and assets can not be touched. 7.Offers large personal tax advantages. CORPORATIONS v. PURE TRUSTS CORPORATIONS 1.Taxed on Net Income before distribution. 2.Individuals taxed on distributions. 3.Employees requiring "withholding" and other payroll taxes. 4.Stock Certificates are taxable assets at very high rates if passed through Probate. 5.Stock holders have voting rights and 51% stock ownership gives Corporate control. 6.Annual filing required as a "Creature of the State". 7.Rules are subject to the capricious avarice and control of lawmakers. 8.Quarterly tax estimates must be filed. PURE TRUSTS 1.Pays no taxes. 2.Individuals may or may not pay tax after distribution. 3."Leased or Independent" contractors replace employees and require no withholding. 4.Trust Certificates are of beneficial interest and are owned by family or another trust. Not taxable or subject to probate. 5.Beneficial Certificate Holders have no power the Trust operation. Management is through Trustees. 6.No filing requirements. "The Trust Contract is executed by private parties for personal purposes, and is not registered with the Corporation Commission." Hodgkiss v. Northland Petroleum Consolidated 104 Mont 328, 67 p 2nd 811. 7.Based on Common Law and entitled to all rights and protection under the Constitution of the United States of America. 8.No filing requirments in a Complex Pure Trust Organization. Why Pure Trusts Are Important in Our Personal Life Asset Protection The old saying goes " If someone knows we have it, someone will try to get it!" Someone in this case can be our neighbor, our relatives, lawyers and not to be forgotten.... the various tax collection agencies of State and Federal Government. Through proper use of Pure Trusts we can lawfully and legally limit or even eliminate individual taxation from our hard earned compensation. We are not speaking of tax evasion. We are instead speaking to proper estate planning through the use of Pure Trusts which will eliminate the desire on the part of those who would like to pick our pocket just because we earned something of value. Essentially we will no longer own anything in the eyes of the law. What we don't own we are not responsible for. However, this does not mean we will not control many assets for our own use. Privacy Through the use of Pure Trusts we can legally and lawfully disappear from public ownership records. Without a great deal of specialized knowledge, many will find it very difficult to know what we control. If it is important to us that someone cannot go into a public record or a computer database and find out what we own or control, just so they can sue us or perhaps defraud us, a Pure Trust can effectively set up an invisibility wall between assets and ourselves. Taxation This is usually the first and most visible reason anyone thinks about using Pure Trusts. If we are an: Individual We can establish a contractual relationship with a Pure Trust organization in a format that can limit or effectively eliminate all individual tax liability. If we have no taxable earnings we have no taxes to pay nor personal reporting requirements. Capital Gains If someone buys something at a low price and then sells it at a high price they have created what is known as a capital gain. Government loves to share in our good fortune. Through the use of Pure Trusts we can eliminate such government intrusion into our private business success. Inheritance We have all heard the stories of how someone's relative passed on and the horror stories of how the lawyers and the taxman took the lions share of the estate before the inheritors get a dime. The use of Pure Trusts allows anyone to place their valuable lifelong earned assets into the hands of a trusted third party that lives on after our death or incapacity. When we die the Pure Trust lives on. Therefore we get to cheat the lawyers and tax collectors out of their share. How? Because, if we owned nothing upon our demise we have nothing to tax or give to lawyers. Those inheritors we want to benefit will simply become involved in the management of the Pure Trust and reap the benefits of the Pure Trust assets. Limited Liability What if someone decided to sue us? If we have no assets what can they get from us? Through the use of a Pure Trust we can establish ourselves in an enviable position of becoming virtually judgement proof. Excluding of course any criminal activity someone may contemplate. Asset Transfer Suppose we want to sell property to someone. Normally we exchange cash for our goods right? Everyone knows this took place, especially if this was a real estate or automobile transfer. Through the use of Pure Trusts we can make the transfer without any public record of the transaction. More Privacy Every time we subscribe to a new magazine, open a bank account, buy a major item or even rent a home we are filed and cataloged in some computer database. We cannot do anything without disclosing what we are doing. Through the use of Pure Trusts we can severely limit or eliminate our exposure to this invasion of personal privacy. We do not do the business or subscribe to those magazines.... a trust does. Our name remains private. Why Pure Trusts Are Important In Our Business Life Self Employed If we are self employed we usually have a "silent partner". That partner is government. Unfortunately, this silent partner does no work. Instead, this partner creates more work for us and then takes a large percentage of our hard earned cash flow as its share. Wouldn't it be great if we could eliminate this silent partner? Through the use of a Pure Trust we can do just that. A Pure Trust organization according to the Internal Revenue Service "...has no tax requirements, and therefore a EIN number is not required." If there is no tax requirement or EIN number there is probably no filing requirement. The silent partner is no longer with us. Learning how to properly utilize a Pure Trust is easy. IFC has great support in video seminars, handbooks, tutorials and live interactive conferencing as well as e-mail Q&A for your business development requirements. Professionally Self Employed If we happen to be a licensed professional such as a doctor, lawyer, engineer or contractor we have to be very astute in designing our business or that silent partner will soon be the majority partner. Through the use of Pure Trusts, we can arrange to have our license held in one form of organization while we are independently contracted to another form of organization. This simple technique gives us control of our financial life while limiting our professional exposure to such occurrences as lawsuits, expensive audits and annoying government interference. Employee(s): / Employer(s) If we are currently operating as a corporate structure we are taxed twice for doing business. Once as a corporation and again as individuals when proceeds are distributed. A Pure Trust does not have this problem. If we are a corporate structure and have employees we have a host of government required fees to pay and expensive accounting to maintain. We have to calculate each employees withholding, unemployment and workmans compensation and a host of other expensive overhead items. A pure Trust organization has no employees. Workers become independent contractors and as such are responsible for their own lives. Compensation simply becomes what it used to be. Fair compensation for fair labor or service. Without "employees" our reporting and accounting headaches go away. The workers are happier because they now have more cash in their pockets and if their lives are also structured around Pure Trusts they also reap the benefits as enumerated previously. IFC can assist in developing an effective formatted business. Source: http://www.i-f-c.com/trusts.html#power ARE THE "USE OF PURE TRUSTS" CONSTITUTIONAL? Sample Rulings include: The Constitution specifically provides that "No state shall...pass any...law impairing the obligation of contracts." and includes our sacred right to contract. Article 1, section 10, Constitution (1776) "A Pure Trust is established by contract, and any law or procedure in its operation, denying or obstructing contract rights impairs contract obligation and is, therefore, in violation of the United States Constitution." Burnett v. Smith, 240 SW 1007 (1922) "A Trust can be a separate, legal, profit making business entity. When the income is distributed to the Certificate Holders, it is taxable to them. Income earned by the Trust in any given year not distributed in the same year to the Certificate Holder(s) cannot be taxed a second time when it is distributed, as is the case with incorporated businesses." Weeks v. Shibley (D.C.) 269 F.155: A Pure Trust is a contractual relationship in Trust form. There are other arrangements known as trusts because the legal title to property is conveyed to trustees for the benefit of beneficiaries, but which are not classified as trusts for purposes of the Internal Revenue Code, "because they are not simply arrangements to protect and conserve the property for the beneficiaries." Berry v. McCourt, 204 NE 2d 235 (1965) A Pure Trust is not subject to legislative control. The United States Supreme Court holds that trust relationships come under the realm of equity, based upon the common law, and is not subject to legislative restrictions as are corporations and other organizations created by legislative authority. Crocker v. Malley, 249 US 223, 39 Sup.Ct. at 270-2. The trust contract is executed by private parties, for personal purposes, and is not registered with the Corporation Commissioner. This failure to file with the state does not invalidate the trust organization. Hodgkiss v. Northland Petroleum Consolidated, 104 Mont 328, 67 P 2d 811 The United States Circuit Court of Appeals for the First Circuit has long held that full and adequate consideration is achieved by issuance of trust certificate units in exchange for real and personal property invested in a "pure" trust organization. Carpenter v. White, C.I.R. 80 F2d 145 If it is free of control by Certificate Holders, then it is a Pure Trust. Schumann-Henink v. Folsom, 159 NE 250 (1927) Property interests terminating on or before death aren't subject to Estate Tax. Accordingly, an "exchange" of assets for UBI's (Units of Beneficial Interest) terminating before death do not result in a gift or estate tax. Furthermore, death of the trust creator does not result in estate tax.. Babb v. U.S. 349 F Supp 792 (1972) | | | ||||||||||||
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