Key Information

  • A Settlor has no rights or beneficial interest in the trust.

 

  • (Let’s explain who the Settlor is, their function and an example of whom it might be; ie… an attorney, your neighbor, etc.)
  • The Compliance Overseer can be the Trustee (as long as he/she is not the Settlor of the trust). The Compliance Overseer can appoint another party to be the trustee; however, the Compliance Overseer can still replace the trustee that he/she has appointed.
  • (Let’s explain who the Compliance Overseer, their function and an example of whom it might be; ie… an attorney, your neighbor, etc.)
  • The Compliance Overseer can appoint or remove any beneficiary at will. A Compliance Overseer may never be a beneficiary.
  • Beneficiaries in a Spendthrift Trust may be anyone or any organization named in the trust documents.
  • The Compliance Overseer can appoint his/her successor at any time during his lifetime.
  • The trustee may disburse funds to the beneficiaries in equal amounts, unequal amounts or not at all at his/her absolute discretion.
  • If a Compliance Overseer does not appoint a successor, then upon his/her death, the office disappears. Yet, the existing appointed trustee and the beneficiaries remain the same.
  • When the Settlor or anyone else gives money or assets to the trust for it to be capitalized or endowed, no taxable event has occurred. The trust pays taxes only on what the assets earn unless deemed to be paid to corpus according to the terms and conditions of the trust, which is discretionary.
  • Any monies that the trustee distributes from the original endowment of the trust to the beneficiaries are a nontaxable event for the trust. The monies that the trust earns are taxable unless deemed to be paid to the corpus according to the terms and conditions of the trust.
  • Once the assets are placed into the trust, no court or entity can remove them. Spendthrift Trusts have proven to withstand court judgments, divorces, bankruptcies, and lawsuits. These trusts can prevent creditors from attaching trust assets.
  • Trusts can own and trade government securities, stocks, bonds, gold precious metals or any other form of asset. The trust can hold, buy, or sell real estate.
  • The monies that are paid to the beneficiaries are a taxable event to the beneficiary from the endowment funds of the trust according to their income level if earned income is the distribution; only the monies that a trust earns from the endowment and are undistributed to the beneficiaries are taxable to the trust if retained by the trust unless deemed to be paid to the corpus according to the terms and conditions of the trust. Our Trust Format is a discretionary trust and complies with this IRS regulation.
  • Trusts are required to file federal income tax returns via Form 1041. However, a Spendthrift Trust is a complex trust and the capitalizations or endowments of the trust are not taxable events and deemed to be paid to the corpus according to the terms and conditions of the trust. Capitalizations or Endowments are retained indefinitely and only distributed by the trustees of the trust to the beneficiaries at the sole and absolute discretion of the trustees only. All capitalizations or endowments of a trust that are retained in the corpus are not a taxable event.

 

  • Acontract 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 cannotregulate or impose a tax upon a right. Our “right to contract” according to the Constitution of the United States, Article. §10 is  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. 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.

 

  • A Spendthrift Trust Organizationis not an “association” or an “unincorporated association,” because it does not possess the sameattributes 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 Organizationis also not an alter ego or a nomineefor any trustee or beneficiary because no one individual holds both legal and equitable title and beneficial interest.

 

  • Another major advantage to operating a business within a Spendthrift Trust 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 178ruled 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 restrictionsas are corporations and other organizations created by legislative authority.

 

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