OPTIMAL WEALTH STRATEGY GROUP
Interesting Facts
A contract in the form of a Spendthrift Trust Organization, does not owe its existence to any act of the legislature. The authority for its creation is the common law right of the parties to enter into a contract which the Constitution recognizes. According to American law, the government cannot regulate or impose a tax upon a right. Our “right to contract” according to the Constitution of the United States, Article. §10 is unimpariable.
That means that it is not within the power of the government or even a judge to change one word of a Contract of Trust. Once the property is transferred into a Spendthrift Trust Organization, it is subject to its own indenture, which governs and, protects the property held by it. The government can ONLY regulate and tax entities it creates.
A Spendthrift Trust Organization has the income tax requirement to pay only the tax on the income money that the corpus or endowments of the trust earns unless deemed to be paid to the corpus according to the terms and conditions of the trust. If set up properly, all capitalizations or endowments of the trust are nontaxable. Like corporations, Revocable Living Trusts are statutory and are subject to legislative control and taxation. A Revocable Living Trust is required to file a 1041 Form each year. While the income in a corporation is taxable and the endowments to a Revocable Living Trust are taxable, capitalizations or endowments to a Spendthrift Trust are not.
In Weeks v. Sibley DC 269£, 155, Edwards V. Commissioner. 41512£!, 532 10th Cir. (1969) and Philips v. Blanchard 37 Mass 510, the courts ruled thata Spendthrift Trust Organization is not illegal even if formed for the express purpose of reducing or deferring taxes Edison California Stores, Inc. v McColgan. 30 Cal 26472.183 P2d 16. ruled that persons may adopt anylawful means for the lessening of the burden of income taxes;The Department of the Treasury, IRS Handbook for Special Agents § 412, Tax Avoidance Distinguished from Evasion states; “Avoidance of Taxes isnot a criminal offence. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible”.
Pursuant to Narragansett Mut. F. Ins. Co. v. Burnhamun 51 r1371, 154 a 909, It is not an evasion of legal responsibility to take what advantage may accrue from the choice of any particular form of organization permitted by law.
A Spendthrift Trust is not considered a taxable “Association” pursuant to tax law. Black’s Law Dictionary defines Association as follows: “What is designated as a trust or a partnership may be classified as an association [only] if it clearly possesses [all] corporate attributes. Corporate attributes include: [1] centralized management, [2] continuity of existence, [3] free transferability of interest, [4] limited liability.
A Spendthrift Trust Organization is not an “association” or an “unincorporated association,” because it does not possess the same attributes of a corporation, such as continuity of existence and free transferability of [beneficial] interest. Further, unlike a corporation, a Spendthrift Trust Organization is not an “artificial entity” nor does it owe its existence to the charter power of the State.
A Spendthrift Trust Organization is also not an alter ego or a nominee for any trustee or beneficiary because no one individual holds both legal and equitable title and beneficial interest.
Another major advantage to operating a Spendthrift Trust Organization as a business is that, because it is not a creature of the legislature, it is not subject to the myriad of strangling legislative controls, rules and regulations that are applicable to corporations and other legislative entities. The Supreme Court case Eliot v. Freeman 220 US 178 ruled that a Spendthrift Trust Organization is not subject to legislative control. The Supreme Court holds that the trust relationship comes under the realm of equity based on common law and is not subject to legislative restrictions as are corporations and other organizations created by legislative authority.
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