© 1997 ALR
The Contract and Declaration of Pure Contractual Trust
An Introduction to
PURE CONTRACTUAL TRUSTS
WHAT IS A TRUST?
According to Black’s Law Dictionary, a trust is defined as: "A right of property, real or personal, held by one party for the benefit of another. Any arrangement whereby property is transferred with intention that it be administered by trustee for another’s benefit."
Bouvier’s Law Dictionary’s definition includes the following language: "A trust is an obligation imposed either expressly (contractually) or by implication of law whereby the obligor is bound to deal with property over which he has control for the benefit of certain persons of whom himself be one, and any one of whom may enforce the obligation."
The term used herein of "Pure Contractual Trust" is used in the context of an express trust instituted by a private contract setting out the rights and obligations of all parties. That is, a pure contractual arrangement.
A Pure Contractual Trust is set up under an irrevocable contractual agreement (Declaration of Trust) in the form of a trust arrangement. A Trust Creator enters into a private contractual arrangement with a Trustee to hold real and personal property for the benefit of another. After the contractual arrangement (Pure Contractual Trust) is established, an exchangor (Exchangor) transfers property (Assets) to the Trust or to the Trustee(s) in exchange for Trust Certificates. Trust Certificates, which indicate the distribution rights under the terms of the Trust are issued to the Exchangor or to their designee(s).
A Trust is created by the Creator, setting out the complete terms of operating the Trust. The Trust becomes a firm contract when the First Trustee accepts the terms of the Declaration of Trust and accepts the position as First Trustee. The Declaration has provisions to be governed by a Board of Trustees. The Board may constitute one to three Trustees. All of the power is vested in the Board. The Board has a fiduciary duty to administer and conserve the Assets of the Trust, to defend the structure of the Trust and its Assets and make distributions to the Trust Certificate Holders according to the terms of the Declaration. The Board may appoint or hire a Manager or Mangers to manage the Trust Assets. The Manager or Managers report to the Board and present to the Board evidence that the Trust is continuing to function according to the terms of the Declaration. The Trust Certificate Holders may appoint a "Trust Protector". The Trust Protector may intervene in the affairs of the Trust and can terminate, any or all of the Trustees if he believes the Trust or its Assets are being endangered by their mismanagement.
The Trust is private and its affairs remain confidential. A Trust need not be registered with any city, county, state, or federal agency, however, certain activities of a Trust, customary to ownership, may require recording, such as, the deed to property owned by the Trust. Under certain circumstances a Trust may have a federal identification number from the Internal Revenue Service.
The Pure Contractual Trust has the same constitutionally assured rights as an natural person. It may own, buy or sell personal or real property, develop, build, manufacture or conduct any lawful activity enterprise. The Trust has the right to privacy, freedom from unwarranted search and seizure, and refrainment from self-incrimination.
A Trust while operating its private activities can divide its assets, placing them in various trusts thus significantly reducing exposure to lawsuits, divorce, probate and estate taxes.
Put simply, the Pure Contractual Trust is:
One of the most valued principles of common law is the right to contract. It is a right so fundamental to a free people that our Founding Fathers inserted an absolute prohibition against government interference with contractual obligations in the Constitution of the united States of America, Article 1, Section 10.
American Legacy Resources has extensively researched a declaration format to accomplish an effective trust private contract that protects assets from claims, judgements and taxing authority attacks and is an effective tool for estate, tax planning and asset protection. This document is designed to comply with the Common Law right of private contract and avoid statutory infringement on its actions.
Mechanically, a Creator creates the Declaration of Trust, and appoints a First Trustee. When Assets are exchanged by an Exchangor into the trust for Trust Certificates, the Trust becomes active. Major activities of the Trust are recorded in the Official Minutes, including, but not limited to receipt of Assets, appointment to the Board of Trustees and appointment of a manager or managers.
All legal rights to operate the Trust lies with the Board. The Board has the fiduciary responsibility to operate the Trust in a manner that insures the distribution rights of the Trust Certificate Holders.
The Trust Certificates which entitles its holders to distribution rights as set out in the Declaration. The Trust Certificates do not give the holders any management authority. The Trust Certificates may be transferred under certain circumstances.
The Trust Protector acts as an arbitrator whose function involves protecting the trust from trustees who might exceed their authority, or become negligent in actions affecting the trust. The protector may immediately terminate a trustee and appoint a new trustee.
A Pure Contractual Trust is irrevocable by the terms of the Declaration. The irrevocability is essential to providing asset protection and avoiding probate.
Trusts preserve estates for future generations. For the maximum utilization of a trust, its term should be set for a sufficient time to cause the trust renewal to be a matter of review at the passing of the Exchangor rather than taking a chance on missing a time-table for renewal. We recommend a term of 25 years. The Trust term may be extended or shortened by the Board.
A Trust may lawfully own anything that an natural person may own lawfully. The trust can hold legal and/or equitable title to all property, real or personal. There is no limit to what a trust may own: real estate, mortgages, contracts, stocks, bonds, art, jewelry, etc. It may conduct any activity a natural person may, such as to buy, sell, develop, manufacture or otherwise operate businesses.
The death of a Trustee, Manager, Exchangor, or Trust Certificate Holder does not affect the Assets or lawful operation of the trust.
The Declaration of Trust states that the Trustee(s) are not personally liable for Trust debts. Wisdom dictates that the Trustee(s) advise creditors that they do not have legal recourse against the Trustees. Trust Certificate Holders are not subject to liability for Trust debts.
The personal bankruptcy of a Creator, Trustee, Manager, or Trust Certificate Holder does not affect the trust. A divorce of a Creator, Trustee or Manager has no legal effect upon a trust. A Trust Certificate acquired during a marriage may be the property of the marital estate, dependent upon local laws. An exchange of Assets into a Trust prior to marriage, prevents a spouse from any marital rights to the Assets, and is not a part of a divorce settlement.
A Pure Contractual Trust is not subject to legislative control. The Constitution of the United States of America holds that the trust relationship comes 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.
If you would like to make more inquiries into asset protection and tax planning, the various techniques used and the philosophies behind such planning you may be interested in the following:
Davidson, James Dale; Rees-Mogg, Lord William; The Sovereign Individual; 1997; Simon & Schuster; NY, NY.
Modeleski, Mitch; The Federal Zone; 1993; Account for Better Citizenship; San Rafael, CA.
Save-A-Patriot Fellowship; Believe It or Not; 1982; Self Published; HYPERLINK http://www.taxtruth4u.com/10k.html
Deal, Jim; Tax Basics 101; 1995; Self Published; http://www.taxtruth4u.com/taxbasics101.html
Schalabach, John J.; IRS Research : 1997; Newman; HYPERLINK http://www.halcyon.com/jasont/schlbch1.htm
American Legacy Resources
P.O. Box 2299
Gilbert, Arizona 85299
Tel:  926-8665 Fax:  926-3599
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