by Brent Johnson
At a time when it seems that the federal or State government has a hand in everybody's property, whether it be through taxation, licensing or other forms of regulation, I am thankful that a method still exists by which an ordinary Citizen can protect his or her property from the bureaucratic vultures inhabiting all levels of our government.
Pure Trust Organizations (PTOs) are common law entities that have been around for over a thousand years. Plato is believed to have had PTO to protect his property. These common law mechanisms are even acknowledged in the Internal Revenue Code as being exempt from the income tax! As a matter of fact, the IRS will not issue a Taxpayer Identification Number (TIN) or Employer Identification Number (EIN) to a PTO, because it has no reporting requirements whatsoever.
What is a Trust?
A trust - any trust - is a right of property held by one party for the benefit of another. If I entrust you with the keys to my car, I have placed my car in trust to you for my benefit. You must take care of my car for me.
There are two kinds of trusts: statutory and common law. Statutory trusts get their existence because some legislator wrote a statute. Whatever protections, tax breaks, or other relief that a statutory trust may provide you, the legislature can change the rules governing these trusts at any time, and you would have no recourse. This is because a statutory trust owes its existence to statute and is thereby regulated by statutory law.
A common law Pure Trust Organization, sometimes called a True Trust or Unincorporated Contractual Organization (UCO), gets its existence from fundamental law which pre-dates American legislative statute, and is thereby exempt from regulation by legislative statute. A PTO provides protection from taxation, liability, probate, and government regulation. It operates under God's law, the Magna Charta (1215 A.D.), and the laws embodied in the Holy Bible. Property held in a PTO is free from liens, levies, taxes and regulations imposed by federal or State government agencies.
History of the Pure Trust Organization
The oldest known PTO of record was set up by Patriot Patrick Henry for businessman Robert Morris, in the year 1764, twelve years before the signing of the Declaration of Independence! It is still operating today, under the name The North American Land Company. Most PTOs, however, protect their anonymity. Due to the extremely private nature of a PTO, you have no way of knowing who among your neighbors may operate from a common law PTO.
In 1968, while intoxicated, Ted Kennedy drove off Chappaquiddick Bridge, resulting in the death of 29 year old Mary Jo Kopeckni. At the time, there was no question that Kennedy was at fault. When the Kopecknis sued for the wrongful death of their daughter, they were offered (and accepted) a settlement of 30,000 dollars. From a Kennedy! For the death of their daughter!! Perhaps most surprising is the fact that they were lucky to get anything, because Ted Kennedy owns nothing! Everything he had is in PTOs and you cannot attach property belonging to a PTO, in order to collect on a debt incurred by an individual. Ted Kennedy has a public Oath of Poverty on file. Legally speaking, he is a pauper!
President John F. Kennedy had a cat. Somebody got badly scratched by the cat. He thought, "I've been scratched by a Kennedy cat. I'll sue!" Well, when you are John Kennedy, everything you have is protected by PTOs. This case was no different. It turned out that the cat was held in a PTO. Further, the cat was the only thing held in that particular PTO. The man sued, won his case, and was awarded the cat. This is how a PTO can protect you from liability claims.
A properly written PTO can erect an iron-clad wall around your assets and make you judgment-proof, because a PTO can not be held liable for your debts, nor can you be held liable for the debts of a PTO. Further, by diversifying your assets you can virtually eliminate liability claims against either you or the trust.
The key element in understanding why a PTO protects property and how to know whether a PTO will properly do for you what you want, lies in the test of control. This is what the IRS looks at when they attempt to pierce a trust's protective veil. The only important question that needs to be asked, with respect to setting up a PTO to protect your property, is "have I divested myself of legal control?" This is the only barometer that the IRS (or courts) will use when evaluating the validity of a trust entity.
You cannot maintain legal control and expect a trust to protect you. Legal control/ownership always carries with it liability. However, a properly crafted PTO will allow you to divest yourself of legal control while maintaining practical control of the assets in question. This requires that the principals of the PTO not be directly related to you.
I have reviewed several dozen so-called common law trusts or PTOs and found only one which I consider comparable to the Freedom Bound International PTO; it is sold in Hawaii for 5,000 dollars per trust (Freedom Bound's PTO costs only 2,200 dollars). Without exception, every other trust I have reviewed is fatally flawed, in that they either lack a clear Exchanger's divestiture of legal control or they contain other major flaws in their indenture and trust structure. If you are going to set up a PTO to protect your property you should first ensure that the trust you are creating will protect your property.
Principals of a Pure Trust Organization
A Pure Trust Organization is a three-party contract, between a Creator, an Exchanger and a Fiduciary Owner (trustee).
You - the Exchanger - start out with property you want protected. You exchange this property into the PTO, receiving back the assets of the PTO, consisting of 100 units of beneficial interest in the property held by the PTO. At this point you no longer own the property; the PTO owns the property. However, you are the only individual who can benefit from the PTO assets. Your role as Exchanger is over; you are now the Holder of Beneficial Interest. You may assign portions of your interest to other parties.
The Creator now hires a Fiduciary Owner (trustee) to manage the assets of the trust, for the benefit of the Holder(s).
A Protector is also appointed, whose sole job is to ensure that the Fiduciary Owner acts in the best interests of the Holder(s). The Protector is authorized to fire a Fiduciary Owner and hire a new one.
Neither the Fiduciary Owner, the Protector nor Creator may be direct relatives of the Exchanger or Holder, because this would give the Exchanger/Holder legal control.
You may also have several officers appointed to work for the PTO, including a General Manager, Assistant Manager or Secretary. These are non-required positions and I suggest not using them unless there is good reason to do so, because the main reason for establishing a PTO is to protect your privacy. However, there are circumstances which recommend filling at least the position of General Manager.
For example, let's say that you want to place your business into a PTO. You then have the PTO hire you as General Manager. In order to protect your interest, you have the bank account set up to require two signatures: the Fiduciary Owner (required on all PTO accounts) and the General Manager. You do not have legal control because you alone cannot access funds, but neither does the Fiduciary Owner have the ability to access funds directly. You maintain practical control. This is a common set-up for businesses placed into trust. Also, if an IRS agent ever visits you at your work place, you can honestly tell him, "I just work here, go talk to the owner."
If your PTO has been structured in the manner described above, you can then show that you have divested yourself of legal control and your trust will hold and protect its property from taxation, regulation, and attack by government or IRS agents.
Trust or Corporation?
There are four qualities which define a corporation. The IRS and courts have determined that if a trust shares three of these qualities it shall be treated as a corporation for purposes of taxation and regulation. Here are the four characteristics of a corporation.
- Centralized management
- Limited liability of the principles
- Continuity of life
- Easy transferability of beneficial interest
Items 1 and 2 are shared by a well-crafted Pure Trust Organization, items 3 and 4 are not. Thus, a properly written PTO will pass this test and be treated separately from a corporation.
You may wish to assign successorships at the time your PTO is created. Successors can be pre-qualified at any time, simply by including their names, mailing locations and telephone numbers in the PTO Minutes. When identifying successors to Holders of Beneficial Interest, the number of units going to the successor must also be specified. The most commonly identified positions for successorship include: Holders of Beneficial Interest, Fiduciary Owner and Protector.
A conduit is a chain of trusts that begins domestically and ends up off shore. Offshore trusts are being used with increasing frequency to protect American assets. However, most people do not realize that a direct transfer of assets from the uSA to an offshore location, sets up a dozen different red flags at the IRS, which is looking for and targeting these direct transfers.
The Internal Revenue Service Revenue Ruling 69-70 says, "a United States citizen may be the recipient of a distribution from a Foreign Grantor trust, and bring the money into this country tax free."
A properly erected trust conduit allows you to move funds offshore and then bring them back tax free. For example, you might have a house in trust. The trust sells the house and runs the proceeds through the conduit, ending up in a Foreign Grantor trust, which makes a tax free distribution to you. End result: no capital gains taxes!
The conduit structure I prefer contains five trusts: two domestic and three foreign. I use Belize as the domicile for my foreign trusts, but Isle of Man is very good, as are a variety of locations around the globe. Andorra looks particularly interesting. I have specific reservations regarding Cayman Islands, Bahamas and Switzerland.
In the conduit structure, trust two is the Holder of Beneficial Interest in trust one. Trust three is the Holder in trust two; trust four in trust three, trust five in trust four. You are the Holder in trust five. Each trust makes distributions to the next trust in the conduit, culminating with trust five (Foreign Grantor) which makes a distribution to you which the IRS admits is totally tax free.
- The Internal Revenue Service admits that they cannot tax property owned by a PTO.
- Most attorneys will not advise you to create a PTO, since it would represent a direct conflict of interest on their part.
- A PTO may be considered a "living" or "inter vivos" trust, since these terms apply to any trust established during the lifetime of the Exchanger.
- A Common Law PTO is irrevocable.
- A PTO is an "active" trust, because the trustees have actual duties to perform.
- A trust can be either "complex" (able to accumulate income with distribution at its discretion) or "simple" (income is distributed currently, which means at least annually).
- A Common Law PTO is considered to be a "foreign trust" as defined in 26 USC 7701(31) (Internal Revenue Code) and as such is exempt from the income tax.
We are rapidly approaching a time when individual property rights in the united States of America will be all but eliminated, in favor of a Communist Manifesto-style relationship between government and the people. If you take steps now to protect the fruit of your labor, to preserve your heritage for your family, friends, loved ones, for your country, you can still successfully and lawfully avoid the tightening regulatory grip of the United States federal government, its agencies, quasi-agencies and instrumentalities. For your own sake, please don't delay.
Remember, it's your life and your property. Protect it before it's too late.