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Why is it important that your advisor understand the workings of a Pure Trust Organization?
* ALL trusts are NOT alike.
* ALL trusts do NOT have the same tax advantages.
* ALL providers who publish trusts do NOT know everything there is to know about all trusts.
* ALL trust providers and your immediate advisors should be pre-qualified as to their comprehension of certain kinds of trusts, especially those that benefit you.
There is a type of trust that has gone unnoticed by the vast majority of CPA's and attorneys engaged in offering estate planning advice. This trust is the Pure Trust. Many knowledgeable authorities compare it to the blind trust which is employed almost exclusively by highly visible politicians.
The Pure Trust seems to have been the exclusive choice of the Super Rich and Elite in this country as the centerpiece of their estate planning. In recent years it has been appearing in a variety of estate applications for all kinds of people. The Pure Trust is often being recommended as a viable business entity alternative to the traditional sole proprietorship, partnership, or corporation. Recent trends favoring limited liability companies (LLC) over corporations still do not measure up to the Pure Trust.
Simple research by anyone looking into the Pure Trust as an estate planning instrument, quickly finds it is the most extraordinary asset protection tool available. Sadly, many advisors, content with traditional methods, prefer to remain with old remedies that just do not work as they once did. Today's hostile environment, composed of predatory litigation waiting to pounce upon you and your assets; frivolous lawsuits, liens, judgments, and disqualification from your entitlement to long-term nursing care, are just a few of the many evils the Pure Trust can isolate and insulate from one's life.
The information in this report should leave the reader with food for thought, and the advisor with a challenge to find out more about a method that will preserve the client's personal and business assets, - a strategy for life. The report offers both the client and advisor a framework to inject positive energy in a proactive direction instead of the usual expectant reactive knee-jerk mode exhibited by people who aren't willing to admit that they don't know the facts about everything there is in this world.
Let's say if you approach your advisor about Pure Trusts and they say,"It won't work, there is no such thing, and if it was a viable solution, I would have told you about it."
What is your reaction? Don't feel bad. You have relied on your advisor up to this point, and for the most part, you probably have done okay. However, the issue of the Pure Trust and your reliance on the advisor to offer sound advice about it may be something you should reconsider. At least insist the negative reactive advisor investigate thoroughly. Challenge him to go to Am. Jur. and A.L.R. and at least see what these legal encyclopedea have to say about Pure Trusts. There are hundreds of pages describing Pure Trust entities in these volumes.
The advantages to you, your business, and total estate is a considerably more serious matter than you may have experienced up to now. If the advisor has not ever introduced you to the Pure Trust and its enormous advantages for you and your family, perhaps you should inquire as to the reason it has not been presented to you, then have him present some qualifying remarks to ensure any advice on the subject is viable, and not based on offhand remarks from little or no knowledge of a Pure Trust.
We wish to encourage you to insist on facts from your advisor if the Pure Trust is rejected without further study. Opinion is trivial and can be costly to you. Raising an eyebrow and smirking, does not get you the information that could benefit you! References furnished with this report, when researched by the advisor, will be found to be legally proven and undeniably valid. Will there be a next step?
How to Qualify an Advisor to Evaluate the Pure Trust
For the CPA's & tax preparers or accountants
When property is exchanged into the Pure Trust, particularly real property, and I no longer own it, will there be a gift tax consequence generated as a result of that exchange?
If all of my assets have been declared into and are now owned by the Pure Trust, and I should die, is the fair market value of those assets at the time of my death included in the total value of my estate?
For the legal advisor
Does the designated "beneficiary" in a Pure Trust have any rights under Internal Revenue Code Section 2036?
The answer to ALL three questions is NO! No additional explanation or discussion is necessary. The Law is the Law. The Internal Revenue Code says what it says.
The Pure Trust or Contract Trust predates corporations by hundreds of years. The IRS fully recognizes the Pure Trust in its Regulations. The courts have ruled on its validity as a legal entity. Due diligence demands court citations and the IRC references from the advisor who rejects the Pure Trust as a serious instrument of choice in preserving your assets now and in the future. If there is a better alternative to estate planning than the Pure Trust, it has yet to make itself known! The knowledgeable advisor is aware of this FACT. If your advisor is not, encourage him to learn about the Pure Trust. It is in your best interest that he does. It will NOT be in anyone's best interest if he does not!
Interest which terminate "on" or "before" death are not a proper subject of the Federal Estate Tax.
Knowlton v. Moore. 178 U.S. 41. 20 S Ct 747, 44L Ed 969 (1900)
YWCA v. Davis. 264 US 47 (1924). 44 S Ct 291, 68L Ed 564
Goodman v. Granger. 243 F 2D 264 (1957)
Babb v. US. 349 F Supp 792 (1972)NEGATIVE STATEMENT: "I can write an A-B trust or similar instrument for you"; "You don't need one of those things"; "Your estate isn't large enough for one of those things"; or, "We know what's best for you"; and so on...
Response: Anyone providing trusts can deliver the "ordinary" or statutory trust. Financial Fortress Associates has such capabilities as well. However, where trusts allow the client to continue ownership of property transferred into the trust, the only tax benefit (other than the avoidance of probate) occurs when the principal dies, and the value of the estate is more than $1,000,000 or less than $1.3 million if married, the question to ask is "What happens to my estate if I have the unfortunate circumstance of living?" and "With all of my assets transferred into a properly structured trust, can I loose any assets through litigation for something I have done personally?" -- The answer to both questions is that the assets held in Pure Trust are totally insulated from both sets of circumstances; they are totally protected. And estates exceeding $1.3 million which are held in a Pure Trust are completely immune from federal estate taxes.
If the value of your estate today is worth less than $1,000,000 the revocable trust has no value for tax liability purposes since there is no federal estate tax under that amount anyway, and no asset protection benefits (other than for "Estate Recovery" in some states). Because there is a lot more to life than death, doesn't it make sense to protect an estate while alive rather than prepare it for death only? When there is a chance an entire estate could be devastated by myriad circumstances long before death, doesn't it make sense to plan for living and maintaining the assets safely under one's control while removing the assets from the inevitable taxable event occasioned by one's death?
The Pure Trust owns the property and is a distinct legal entity. Beneficial Certificate Holders are not treated as co-owners of trust property.
National City Finance v. Lewis (Cal AM) 3P 2d 316 (Rehearing denied) 4 P2d 163
Belin v. Dren & Dato 350 M 2840 183 NE 330
Hemphill v. Orloff 238 Mch 508, 213 NW 867, 58 ALR 507, affd 277 US 537, 72 L Ed 978. 48 S Ct 577, Annotation 156 ALR 32
Goldwater v. Oltman 210 Cal 408, 292 P 624NEGATIVE COMMENT FROM ADVISOR: "I have never heard about this kind of trust, therefore it cannot exist"; "There must be something wrong here"; or "I've heard about these kinds of things, but they never do work."
The United States Supreme Court has acknowledged the Pure Trust as a true trust, citing the Hecht case in Navarro v. Lee.
Hecht v. Malley 265 US 144 (1924)
Navarro v. Lee 446 US 458 (1980)Business trusts are found in Corpus Juris Secundum and American Jurisprudence, 2d.
Business trusts are recognized under the term "common law trust".
88 American Law Reports 3d 704, Citing Schumann-Heink v. Folsom 328 M 321; 159 NE 250, 50 ALR 458 (1927)
NEGATIVE STATEMENT: All property placed in trust must pay a gift tax."
This is true for irrevocable statutory trusts. The Pure Trust is not a statutory or ordinary trust, however. The Pure Trust is a contract. The initial transfer of assets to the Pure Trust is done in exchange for Certificates of Beneficial Interest. These Certificates (1) represent valuable and adequate consideration, (2) are of indeterminable value, and (3) confer no interest or ownership rights to their holders. "Valuable consideration", and fair market value for fair market value exchange, is the reason that there is no gift tax generated. Go to Internal Revenue Code Section 7701(a)(45) Non Recognition Transaction.
To the advisor:
The statutory or ordinary trust, with which you may be most familiar, does not have such an exchange. Property transferred to an irrevocable statutory trust is subject to a gift tax. Property transferred to the ordinary revocable trust does not have a gift tax because title and the beneficial interest to property does not change and will not change until the death of the grantor/trustee occurs. The operation of the Pure Trust is not affected by death, nor does death cause a taxable event. When death of the exchangor occurs, the former estate is not subject to any estate taxes no matter what the value of the assets.
Certificates are personal property and convey no interest (ownership) in trust property. Parker v. Mona-Marie. 278 SW 321 (1925).
Certificates in exchange are not taxable until a realized gain has occurred. Burnet v. Logan. 283 US 404 (1931).
The United States Circuit Court of Appeals for the First Circuit has long held that full and adequate consideration is met by issuance of trust certificate units in exchange for real and personal property invested in a "Pure" trust organization.
Carpenter v. White, CIR, 80 F 2d 145
NEGATIVE STATEMENT: "I've been doing tax preparation for twenty years. There are no tax shelters anymore, and this sounds like a tax shelter," or "Business trusts are audited more often than other forms of business. This trust will raise a 'red flag'".
Response: The advisor making such remarks may not be familiar with tax strategy. Pure Trusts have no tax requirements (click here for IRS Letter), and are not subject to audit. The advisor who protest there are "no tax shelters anymore" is right. There are none. The Pure Trust doesn't pretend to be one, either.
Summary
When your advisor says "No"...
and is unable to provide a satisfactory documented response, he has disqualified himself to counsel on all matters concerning the Pure Trust. Should an advisor offer opinion only (or a raised eyebrow and a sneer), omitting supportive written documentation in case law, IR Code or Regulations to back it up, he is probably unfamiliar with the subject, and may be too embarrassed to respond, or understandably concerned that he may lose you as a client. In either event, require a response of fact, in writing, and if denied, request a qualified list of those advisors competent in case law or IR Code and Regulations who confidently use the Pure Trust as part of an estate planning format. Preservation of your assets depends on it.
Financial Fortress Associates contracts qualified attorneys and CPA's who can answer your questions about the use of the Pure Trusts with FACT.
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