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Asset Protection Basics
You are you and I am I. Sound silly? Well, let's see.
If someone "comes after me," be it an attorney or one of several alphabet agencies, can they also come after your stuff for my liabilities? "Of course not! That is silly," you might say. But there is an important point in asking. Did you ever stop and think why someone can't get your stuff for my liabilities? This addresses a very fundamental right recognized even by today's government. And that is the right to own property. i.e. private ownership. If it is mine it can't be yours (assuming there isn't joint ownership) because you and I are separate legal entities.
Now let's take things a step further. The law also recognizes trusts as separate legal entities or "persons." They can own things just like you and I. With very few exceptions, whatever you can own, a **Constitutional Pure Trust can also own. And if property belongs to the trust, it is the trusts, not mine. There is complete separation of ownership.
So the first and most fundamental principle of asset protection is separation. When property is held in a irrevocable **Constitutional Pure Trust, it is the property of that trust and no longer my property. A trust is it's own separate entity and owns it's own property just like you and I. No one owns a trust. To restate it simply, property that belongs to "someone" else, be it a natural or artificial person, isn't my property. And if it isn't mine, it can't be taken from me to cover my liabilities.
The second principle of asset protection addresses the extent of separation. If I own property in my name and my wife owns property in her name, someone coming after me may try to get her stuff (even though it is hers and not mine) simply because we are connected by marriage even though separate persons. However if we are talking about your property and my property, there is no chance of that happening. Simply because you and I have no connection whatsoever. The extent of the separation between you and I is greater than the separation between my wife and I.
In the asset protection arena a living trust is a good example of this same concept. Living trusts are great vehicles for avoiding probate. However most are revocable and therefore do not provide a great deal of separation of assets from me as long as I am living. Therefore they provide no protection of property. If I am sued, a living trust can be revoked as if it never existed and the underlying assets can be seized to satisfy a claim against me as if they are mine.
This however, is not the case with an irrevocable trust. Once property is exchanged into irrevocable trust, I can't change my mind and simply pull it back out. It is now the property of the trust and no future event can change that. That decision is irreversible or irrevocable. The only way for me to obtain those assets at this point would be to buy them back from the trust. But for that same reason the assets are legally separated from me to the greatest possible extent. And if asset protection is my goal, this is what I want. So, the greater the separation the greater the protection. (BUT unlike a living trust, an irrevocable Pure Trust protects property and eliminates estate taxes as well as avoiding probate. In short everything a living trust can do a Pure Trust does AND much more).
So property separated from me is protected from my liabilities. Again, the greater the separation the greater the protection. But property must not only be separated from me it must be separated from other property as well. Which brings us to our third principle of asset protection.
A trust is also a "person" by law and therefore can sue or be sued just like any other person. So we want to separate property from property for the very same reason we separate it from ourselves.
For example, let's say a trust owns a car, a house, a boat, several stocks and so on. What if the car is in an accident and the owner of the car, in this case a trust, is sued. What is at risk? Everything else owned by the owner of that car. Now what if a trust owned that same car, but another separate trust owned that same house and another the boat and so on, what is at risk if the car is in an accident now? Only the car! Simply because that is all that trust owns and the trusts owning the house and boat are separate entities from the one that owns the car. To state this another way we can say to separate property is to isolate and insulate it also.
Once you understand these 3 fundamental principles of asset protection,
1. Separation of property from oneself.
2. The greater the extent of separation the greater the protection.
3. Separation of property from other property.
Everything else makes more sense.
There is also one more principle regarding protection that is unique to **Constitutional Pure Trusts over all other forms of asset protection. Constitutional Pure Trusts are separate from statutory regulation. What this means is simply that they exist outside the realm of attorneys, the courts, the government and so on. (as long as they are not engaged in activities that are illegal, which could pull them into the statutory realm). This is hard to comprehend by many. We have been led to believe that statutory law has universal jurisdiction over any and all activities, but it does not. And because Pure Trusts do not fall into the statutory realm, they are often completely unheard of by the vast majority of attorneys and misunderstood at best or even despised by some attorneys as well as CPA's. They are simply outside the scope of statutory authority and therefore outside an attorney or CPA's expertise and government regulation.
It would be comparable to the Medical communities' attitude towards vitamins and a natural approach to health. These do not fall in the medical communities area of expertise therefore they know little about them at best or condemn them and seek to eliminate them at worst. In short what we don't know of, have control over or understand is often a threat. And just as Doctors are taught virtually nothing about nutrition in medical school, lawyers are taught virtually nothing about Constitutional law in law school.
But, you may ask, "if Constitutional Pure Trusts are not part of the statutory realm, by what authority do they exist?" None less than the Constitution of the United States, Article 1 section 10, under the right to contract. But, you may wonder, "isn't the Constitution a statutory document?" No, it is a common law document, just as Constitutional Pure Trusts are. In truth what makes CPT's so unique is they are not trusts at all by statutory definition ( which is why you will find virtually no information about them in "law" books or statutory regulations ) but are contracts in trust form. Trusts as defined by "the law" ( statutory ) operate in the statutory realm and therefore come under statutory regulation. CPT's do not, which makes them private and protected contracts, free from the "interference" of unwanted parties. This may be the most important form of separation which makes CPT's unique to all other forms of asset protection and therefore the best means of asset protection.
** Some of the names also used for Pure Trusts are "Constitutional Pure Trust", "Pure Trust Organization", "PTO", "Common Law Trust", "Contract Trust", or "Constitutional Trust".
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