REPORT #PCT09: PURE CONTRACT TRUST QUESTIONS AND ANSWERS

CAVEAT
This publication is based on sources believed to be reliable. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or tax guidance service. If legal advice or other expert guidance is required, the services of a competent professional should be sought. This publication is for information only. The author and publisher assume no responsibility for the consequences of anyone acting in accordance with this information.

GENERAL QUESTIONS AND ANSWERS

Q. What is a trust?
A. Basically, a trust is a tool to protect yourself, your assets, your business, your income, or your privacy from unwanted intrusions. The whole tradition of trusts is that they are legal instruments to circumvent the laws of government thieves, and to protect against other thieves. Trusts can take as many forms as there are people to invent them.

Consider four types of parties: (a) Government thieves; (b) Lawyer thieves; (c) Other thieves; (d) Trust users. The basic purpose of the people who masquerade as "government" is to obtain their survival wherewithal through theft, because it's easier to steal than to work - see The Economic Rape of America: What You Can Do About It. Most lawyers operate on the same basis. Practically all "legal systems" are designed with deliberate "loopholes" so lawyers can exploit them, and also charge their clients substantial fees so they can also exploit the loopholes. There are also many other thieves constantly looking for wealthy people they can sue or legally steal from. Trust users seek to organize their lives and affairs so as to minimize the risk of being robbed, regulated, and spied upon by government, layers, and other thieves. (Despite the cynicism of the foregoing it needs to be emphasized that there are a few good, honest lawyers and people in government!)

So a trust is a protective tool or instrument. There's a wide range of trusts. They can cost anything from $1 to $20,000. You need to select the one(s) best for you and learn how to use it(them).

Technically, a trust is created when party A hands party B property to be held by party B on behalf of party A or party C. For example, if I give you my car to look after while I'm on vacation, that's a trust. Or if I give you $10,000 to hold on behalf of my son and to give to him on his 21st birthday, that's also a trust.

Q. What's so special about the Pure Contract Trust?
A. The special features that make the Pure Contract Trust so powerful are covered in Report #PCT02. One of the most important is that the trustees (who are sovereign individuals) are provided for you. The ideal is to use an entity that's completely separate from you, with trustees unknown to you so there's no link between you and the trustees. This enables you to not own assets, but to control them.

Q. What rights does the Pure Contract Trust have?
A. The Pure Contract Trust has the same constitutional rights as any sovereign individual. That is, the right to do business as expressed by Hale vs. Henkel, the right to privacy, to freedom from unwarranted search and seizure, to refrain from self-incrimination and all other common law and constitutional rights.

Q. Can a trust own and operate a business?
A. A trust can own and operate any lawful business. The business does not necessarily have to have the same name as the Trust. For example, "Acme Holdings dba Aggregate Gravel Company" (dba means "doing business as").

Q. Does the trust have to be recorded?
A. Trusts generally don't have to be recorded. The main advantage of recording the Pure Contract Trust is that it enables the Managing Director, if challenged by a bureaucrat, to say, "You need to speak to the principals; you can get their details from the Recorder in Maricopa County; it's public record." The second advantage to having it recorded is, if your original trust document is lost or destroyed, the County Recorder can give you a certified copy. A third factor is that recording the trust gives it an "official birth date" and, in general, adds to its credibility.

Q. What if there's a divorce?
A. There are three things a Managing Director can do in the event of divorce: (a) Keep the trust intact with both parties as Managing Directors; (b) Current Managing Director(s) resign and appoint someone else as Managing Director; 3) Decide how control of the property is to be divided, then exchange part of the property into another trust. Husband gets to be Managing Director of one trust; wife of the other. Do-it-yourself divorce made easy!

Q. What's the function of the Certificate Holder?
A. The Certificate Holder is comparable to a beneficiary. Though he or she isn't a beneficiary. The Pure Contract Trust has no beneficiaries. The only "claim" that the Certificate Holder has is a demand that the terms of the trust agreement be carried out. The Certificate Holder is appointed by the Managing Director and needs to be a trusted friend. He or she has a function similar to that of the executor of a will. Should the Managing Director become incapacitated, then the Certificate Holder appoints a new Managing Director in accordance with the trust Minutes and ensures that the wishes of the former Managing Director are carried out.

Q. Why doesn't the Pure Contract Trust have beneficiaries?
A. There is considerable case law that defines one of the requirements of a trust being that it has a beneficiary or beneficiaries. The Pure Contract Trust is a contract that creates a trust. The assets are owned by the trust itself, and are managed for the benefit of the trust - not the Certificate Holder or anyone else. In a sense, the trust is its own beneficiary. Statutes designed to curb the freedom of tusts are generally worded in such a way that they don't cover this unique structure - they define what they mean by "trust" and their definitions don't apply to the Pure Contract Trust.

Q. What kind of records do I need to keep?
A. The kind and the method of record keeping is up to the individual Managing Director. The records need to be sufficient to enable the Certificate Holder to organize the continuance of the trust, in the event of the incapacitation of the Managing Director. The Certificate Holder needs to be able to find all the assets owned by the trust and needs to find out what to do with each asset. The trust can also serve the same purpose as a will.

Q. Where do I keep the trust documents?
A. In a safe place, but accessible by the Certificate Holder.

Q. Can a trust be sued?
A. Yes; it's a legal person. Under some circumstances a trust can be sued, but only for its actions - such as foreclosure on trust property when a mortgage or lien is not paid, or, for example if a vehicle owned by the trust is involved in an accident. It cannot be sued for any actions of Managing Director unless that individual was acting in the name of the trust as its agent.

Q. Can the trustees abscond with the trust assets?
A. In general, the trustees don't know where the trust is being used and what assets it owns. The trustees delegate most of their powers to the Managing Director who manages the assets, without supervision or reporting to the trustees. The trustees cannot remove the Managing Director without proper cause. As long as the Managing Director adheres to the terms and conditions of the trust and the appointment contract, the trustees cannot remove him or her. The trustees don't know the address of the Managing Director.

Q. What are some of the disadvantages of the Pure Contract Trust?
A. It's sometimes harder to get credit in the name of the trust. There are sometimes difficulties in opening bank accounts. (How to open bank accounts is covered in detail in The Pure Contract Trust Manual.) The Managing Director does not have legal title to the property and can't pledge it as collatteral. It's sometimes difficult for the Managing Director to treat the trust assets as not belonging to him or her. The trust can't be listed on a stock exchange. It's also not suitable to serve as a company with many shareholders.

Q. Can a Pure Contract Trust be set up as an association with several "partners?"
A. No. The Pure Contract Trust is definitely not an association and cannot have partners. However, it can have multiple Managing Directors.

Q. Can a trust be a partner in a partnership?
A. Yes. Everything in setting up a partnership would be the same, except the name of a respective partner would be the name of the trust rather than the name of an individual.

Q. What is a Successor Managing Director?
A. Successor Managing Director is a person who has been designated to take over as Managing Director in the event that the original Managing Director dies. Before appointing a Successor Managing Director, it's normally a good practice to inform the individual to be appointed so that, in the event of the death of the original Managing Director, the Successor Managing Director would be ready to assume the duties of the Managing Director. The appointment of a Successor Managing Director should be done in the trust Minutes. The Certificate Holder should be informed.

Q. Can a Successor Managing Director be changed?
A. The Successor Managing Director can be changed at any time during the life of the original Managing Director. A Minute appointing a new Successor Managing Director and revocation of the previous Successor Managing Director is all that's needed. The Certificate Holder should be notified.

Q. What happens if no Successor Managing Director has been appointed and and the original Managing Director dies?
A. The Certificate Holder assumes the role of Managing Director or appoints a new Managing Director. This is recorded in the Minutes.

Q. Can the Trustees be changed?
A. Trustees can be changed at any time. The existing Trustee merely writes that he or she resigns and designates who the newly appointed Trustee shall be. A Trustee can also be removed for cause and and another Trustee appointed

Q. When does the trust go into effect?
A. The Pure Contract Trust goes into effect on the date it is created. On this date it is signed, notarized, and property conveyed to it. All this, as well as filing with the County Recorder, takes place before the trust documents are delivered to the Managing Director.

Q. When does the trust terminate?
A. Under the terms of the trust indenture it automatically terminates 25 years after its creation. The Managing Director may extend the duration of the trust for another 25 years (or shorter period) through the Minutes. In this way the life of the trust can be extended indefinitely.

Q. What kind of names (titles) should I use for my Pure Contract Trust?
A. Use names such as "The Acme Foundation," "Great Investments," "Elbow Enterprises," "Midas Holding Company," "Efficient Management Systems," "The Silver Group," "Family Fiduciary Fund," "Golden Resources," or "Silver Services." In general, it's not a good idea to have the word "Trust" in the name or title of your trust, because it may attract unwanted attention. In some states there are statutes requiring special licensing of "trust companies."

LEGALITY OF THE PURE CONTRACT TRUST

Q. People often ask if the Pure Contract Trust is legal. How should I respond ?
A. The educational material furnished covers the basic law and court cases on the legality of this system. But proving something is legal is more difficult than proving something "illegal." There are two basic factors you need to understand: (a) The obligation of contracts clause in the U.S. Constitution coupled with Hale vs. Henkel; and (b) Some government agencies (including judges) operate on the basis that they're above the law and whatever they say is "illegal" is "illegal." So the best way to operate is to organize your affairs in such a way that if you come to the attention of any government agency they'll discover that you have no assets and/or you're too tough a nut to crack, and you're not worth going after.

In addition to the above, the Pure Contract Trust is designed in such a way that if it's attacked, you deflect the attack onto the trustees. In other words, much of the risk is transferred from you to them. This is possible because your name doesn't appear anywhere in the trust document. This separation is crucial. In many other trust systems there are links between the user and the other parties, making it relatively easy for the enemy to claim that the trust is a sham.

You need to understand how the bureaucrats work. They need to "collect" extra money. They have quotas to fill. If they think you don't have money, or they'll have to spend too much time finding assets you control, or if they find them there will be liens that effectively stop them, they tend to leave you alone, in order to go after "easy pickings."

In any case, here are some citations:

• "No state shall pass any law impairing the obligation of contracts." U.S. Constitution, Article I, Section 10.
• "The judicial branch has only one duty, to lay the Article of the Constitution which is involved beside the statute (rule or practice) which is challenged and to decide whether the latter squares with the former." U.S. vs. Butler, 279 U.S. 1; 16th Am. Jur. 2nd., Sec. 177, 178, 210 and 547.
• "The right to labor and to its protection from unlawful interference is a constitutional as well as a common law right. Every man has a natural right to the fruits of his own industry." 48 Am. Jur. 2nd., Section 2 at Pg. 80.
• "A State may not impose a charge for the enjoyment of a right secured by the Federal Constitution." Murdock vs. Pennsy., 319 U.S. 105.
• "Where rights secured by the Constitution are involved, there can be no rule making or legislation which would abrogate them." Miranda vs. Ariz., 384 U.S. 436 at 491 (1966).

[If any government agent asserts that contrary rules apply to an individual, then the individual can demand that the government agent provide (a) Proof of the rule; (b) Proof that the rule applies to the specific individual, and (c) Proof that the government agent has the authority to enforce the rule. See Report #TL16B: Sample Correspondence to Beat the IRS.]

• "The proponent of the Rule has the burden of proof." Title 5 U.S.C., Sec. 556(d).
• "This Constitution is the supreme Law of the Land (Common Law). All judicial officers of the United States are bound by oath or affirmation, to support this Constitution." Hayburn's Case, 2 Dall. (2 U.S.S.) 409; U.S. Constitution, Article VI, Sections 2 and 3.
• "Disobedience or evasion of a constitutional mandate may not be tolerated, even though such disobedience may promote in some respects the best interests of the public." Slote vs. Board of Exchange, 274 N.Y. 367.
• "Law repugnant to the Constitution is void... " Marbury vs. Madison, 1 Cranch, 137 (1803).
• "Once jurisdiction is challenged, it must be proven." Hagens vs. Lavine, 415 U.S. 533 Note 3.
• "The law provides that once State and federal jurisdiction has been challenged, it must be proven." Main vs. Thiboutot, 100 S. Ct. 2502 (1980).
• "Jurisdiction can be challenged at any time, even on final determination." Basso vs. Utah Power & Light Co., 495 F 2nd 906 at 910.
• "Where there is absence of proof of jurisdiction, all administrative and judicial proceedings are a nullity, and confer no right, offer no protection, and afford no justification, and may be rejected upon direct collateral attach." Thompson vs. Tolmie, 2 Pet. 157, 7 L. Ed. 381; Griffith vs. Frazier; 8 Cr. 9. 3 L. Ed. 471.
• "No sanctions can be imposed absent proof of jurisdiction." Standard vs. Olsen, 74 S. Ct. 768; Title 5 U.S.C., Sec. 556 and 558(b).

PURE CONTRACT TRUST VS. LIVING TRUST

Q. What's the difference between a Living Trust and a Pure Contract Trust?
A. The Living Trust was created by staute. It's basically designed to reduce probate and estate taxes.

Q. Does a Living Trust protect my assets?
A. No, it does not protect your assets or your privacy while you are alive. If someone filed a frivolous law suit against you, he could serve you with a subpoena to produce your Living Trust at a deposition, thereby exposing all your assets. His next step would be to get a judgment attaching all assets in your Living Trust. Also, if one of your children were to file bankruptcy, the bankruptcy court could attach the child's interest in your Living Trust.

Q. What are some other differences between a Pure Contract Trust and a Living Trust?
A. The Pure Contract Trust is irrevocable. Generally, Living Trusts are revocable. Living Trusts provide no protection against lawsuits or government asset seizures; the Pure Contract Trust does. Living Trusts are governed by statute law; the Pure Contract Trust is governed by common law and protected under the U.S. Constitution.

Most Living Trusts do not qualify as contracts for the following reasons:
(a) Usually there aren't two different parties. One party is usually the Grantor and the Trustee. So, there is no "contract" between two different parties in the sense of the constitutional meaning. (The government generally regards husband and wife as one entity.)
(b) A Living Trust is a "trust agreement," but not a "contract." It's difficult for the state to intrude into the affairs of a contractual agreement if the state is not a party to the contract. That's why the Pure Contract Trust includes a dispute resolution procedure that is independent of the state.

CONTRACTUAL AGREEMENT

Q. How does the Pure Contract Trust qualify as a contract?
A. There is an offer and acceptance between two or more parties who are of legal age and competent, and there is consideration paid between the parties, including a legal object, and there is a termination date.

Q. Does the U.S. Constitution give citizens the right to contract?
A. No. The U.S. Constitution does not give citizens the right to contract. Every citizen already has that right, a common law right that antecedes the Constitution. The U.S. Constitution supposedly guarantees that right - see Report #PCT08.

WHAT ABOUT OTHER TRUSTS?

Q. My friend took some literature on the Pure Contract Trust to an attorney and was told that it was the same as a "Massachusetts Trust." Is this correct?
A. No. You may want to cite to your friend the following court case: "Designation of form of trust is not controlling; court will look to substance of circumstances and not labels placed on them by parties." Johnson vs. Hychyk, 517 P 2d 1079. The Pure Contract Trust is unique in that it has no beneficiaries. It is primarily a contract and secondarily a trust. It is very different from a "Massachusetts Trust" or an "Unincorporated Business Organization" (UBO). Some states have statutes that subject trusts and UBOs to the same licensing, reporting, and taxation as a corporation. If you research these statutes, you'll find that their definition of "trust" does not include the Pure Contract Trust. And even if such a statute were to specifically name the Pure Contract Trust, it would be unconstitutional because it's primarily a contract and "no state shall pass any law impairing the obligation of contracts" (Article I, Section 10, U.S. Constitution).

Q. What is a "Massachusetts Trust?"
A. This is a common law trust with beneficial interest certificates that are normally held by several unrelated individuals. Sometimes it's also called an "Unincorporated Business Organization" or "UBO." It's usually formed with some business purpose in mind. It may be classified in some states, and by the IRS, as a corporation if it has more than 50% corporate characteristics and features. Some states have statutes that subject Massachusetts trusts to the same regulation, reporting requirements, and taxation as a corporation. The Pure Contract Trust is greatly superior to an "Unincorporated Business Organization" or "UBO."

Q. According to some articles I read, aren't Pure Contract Trusts and other common law trusts disastrous for people who put faith in them?
A. A trust is a tool to help beat the enemy, who wants to steal your wealth. You need to put your faith in yourself and your ability to take correct actions. You may need to develop confidence. In order to do that, you may need to acquire more knowledge. You have to be very careful how you use your trust. A trust can be a double-edged sword, because it can attract the enemy's attention and alert him that you might be a "rebel of substance" whose wealth must be looted. The enemy is voracious and dangerous. Our Pure Contract Trust Manual contains a section on pitfalls to avoid. If you don't make the mistakes covered there, you'll be very safe.

PURE CONTRACT TRUST VS. CORPORATION

Q. Can a Pure Contract Trust be used to replace a corporation or limited partnership in doing business?
A. Yes. It can operate a business very easily, depending on the type of business. It's particularly suited for a business that can easily operate "out of sight," for example, a mailorder business. It's also very well suited for independent contractors. If it's a business requiring government interaction, such as a medical practice, then it may be necessary to continue to operate a corporation. The corporation handles only those functions it absolutely has to. It need not own any assets. It can have a contractual agreement with a Pure Contract Trust whereby the trust leases property to it, provides it with services, etc. - covered in more detail in our Pure Contract Trust Manual.

Q. My plans are to replace my business corporation with a Pure Contract Trust, thereby operating as a private business as suggested by Hale vs. Henkel. What should I tell my accountant?
A. Simply tell him that you no longer own the business and the new trustees have advised you that they no longer need his services.

Q. What is the main reason I should consider a Pure Trust over a corporation?
A. The popular business organization form, the corporation, appears to hold out "carrots" or advantages, but for most purposes there are both obvious and hidden penalties that far outweigh any advantages. The corporation is a creature of the state, subject to its jurisdiction and statutes that can be changed at any time. The corporation is like a slave owned by a deceitful, whimsical, random, haphazard, erratic, unpredictable, fickle, capricious master (the state). That's why major corporations (and aspirants) spend millions to "buy" politicians and bureaucrats.

The Pure Contract Trust is completely private, and a sovereign entity not subject to statutory jurisdiction or regulation.

Q. Why then do people use corporations?
A. Our current legal system got the idea of a "limited liability" company from old English history. It was called a "corporation." It's the usual method of doing business. It's almost always recommended by attorneys and accountants. Why? Because it's formed under statute law and is subject to all kinds of state and federal regulations - which only the attorneys and accountants can understand (they claim) - therefore you have to pay them thousands for their advice. People are brainwashed in schools to use corporations - and to listen to attorneys and accountants. The state needs slaves.

A corporation is a "privilege" issued by the state. It's an exchange of "rights" for "privileges." The state operates on the basis that it has the unilateral right to change the rules governing corporations at will. In practice, the contract clause in the U.S. Constitution provides no protection for a corporation or against a unilateral change by the government in the corporate contract. You must always have an attorney represent the corporate entity. Make no mistake. When you form a corporation, you surrender many of your constitutional rights. Your books and records are open to the public through the State Corporation Commission. Each year you must report to the state, file your annual financial status, and submit the names and addresses of the directors, thus giving up all your privacy.

Q. Why should I as an entrepreneur consider a Pure Contract Trust?
A. The economy of the free world depends on the entrepreneur and the entrepreneur's survival may well depend on his ability to protect his assets, reduce his taxes, and increase the privacy of his activities. Imagine if your business didn't have to keep records for the bureaucrats, if you didn't have to send them all kinds of paperwork and money, if you didn't have to submit to their regulation - just imagine how much more productive and profitable your business could be!

Q. But what if my employees wanted to stay in the system; how do I handle them?
A. For those of your employees who want to stay in the system, you use a personnel leasing company such as Manpower. The personnel leasing company becomes the employer of record. They handle all the paperwork and interaction with the bureaucrats. You pay them a lump sum every week or month. For practical purposes, the employees are still yours, but all the red tape is handled by the personnel leasing company. If any of your employees want out of the system, they could set up trusts. The trust you manage could contract for services with the trusts they manage.

DUTIES OF THE MANAGING DIRECTOR

Q. I understand that if I were to purchase a Pure Contract Trust, I would be appointed the Managing Director. To whom is the Managing Director of a Pure Contract Trust accountable?
A. The only persons to whom the Managing Director is responsible and accountable are the Trustees. No other individual or agency can question the duties, management, decisions, distributions, or expenditures made by the Managing Director. The Trustees delegate practically all their powers to the Managing Director. Provided the terms of contract (trust agreement) are carried out, the Managing Director is authorized to conduct the affairs of the trust without supervision by or interference from the Trustees, or even having to report to the Trustees. Under certain circumstances the Trustees may resign, and the Managing Director may appoint new Trustees.

Q. Can I designate my spouse as Co-Managing Director?
A. Yes. A wife, husband, relative, or anyone else can be Co-Managing Director and have equal say in managing the trust. There can be up to four Managing Directors.

Q. What happens if one or more of the trustees dies?
A. If there is a remaining trustee, he or she appoints additional trustees. If all the trustees die, the Managing Director has the power to appoint new trustees.

Q. Who .should I designate to take over after my death?
A. You can designate anyone you choose as Successor Managing Director. There can be several people. These individuals should be people you can trust to maintain or distribute the trust assets as you see fit. You make these arrangements in the Minutes of the trust and clear them with the Certificate Holder, to be sure they will be carried out.

TRANSFERRING VS. EXCHANGING

Q. Explain the procedure for transferring or exchanging assets into the Pure Contract Trust.
A. It's more appropriate to use the term "exchanging," because that more accurately reflects the nature of the transaction. Once the Pure Contract Trust has been created, the Managing Director may exchange assets (equipment, cash, property, etc.) with the Pure Contract Trust and receive in return a "Certificate of Capital Units." When those assets are placed into the Pure Contract Trust, it's not a sale, nor a gift. It's an "exchange" for valuable consideration, but with only indeterminable value. Thus, there is no taxable event. The U.S. Supreme Court has ruled that "if property received in exchange has no fair market value, it does not represent taxable gain to the recipient." Burnett vs. Logan; 283 U.S. 404.

Q. I think I understand how to exchange my personal assets into the trust with the exception of assets which are already registered with the government. For example, my automobiles are registered in my name with the State of Texas. As another example, my home is registered in my name. How do I exchange such assets so that the government registration accurately reflects ownership by the trust rather than by me?
A. There are two crucial principles involved here: (a) Exchanging assets into a trust with or without leaving a paper trail; (b) Having many different assets in the same trust. The ideal is to have all assets in trust, without any paper trail connecting you with the trust. If you exchange your home into a trust - which is done via quit claim or warranty deed - then you leave a paper trail. An option to consider is to sell your home and have a trust you control buy another home. Another option is to have a trust file a lien against your home.

Automobiles can be sold to a trust. You can also find out from your local DMV the procedure to follow to exchange a vehicle into a trust. There is a tricky way that works in some states. Suppose the vehicle is registered in the name of "John Doe." Ask your DMV to change the title to "John Doe or (name of trust)." A month or so later, ask your DMV to change the title to "(name of trust)."

Suppose both vehicles and real estate are owned by the same trust. A vehicle is involved in an accident, and the owner (the trust) is sued. Then all the assets owned by the trust are at risk. That's why it may be necessary to use several trusts in order to create "watertight compartments." Asset protection can be further strengthened by certain trusts file liens against the trusts holding assets.

Q. In the case of assets that are actually equity in mortgaged assets, how is the equity exchanged into the trust? For example, I own a home worth approximately $200,000 with a 30-year mortgage of $100,000. How do I exchange the $100,000 in equity into the trust? Note that in Texas it is not possible to simply get a home equity loan and transfer the cash as this is a so-called "homestead state."
A. A trust that you manage files a lien of $120,000 against the home. That protects your equity, because if anyone tries to foreclose, they have to pay off the lien first.

Q. The mortgage note reflecting the $100,000 mortgage mentioned above has a pointer to me. It would be a simple matter to correlate the pointer with the asset in question. Is there a way to hide this correlation? I.e., is there a way to get the name on the mortgage note changed?
A. Generally, mortgage companies won't allow this. Simply filing a lien against the property solves the problem.

Q. Are there any other ways to handle these situations?
A. I've heard that in some states, real estate that has a mortgage can be exchanged into a trust by recording a grant deed, without the permission of the mortgage holder. For vehicles where there is a lienholder, that lienholder must give his approval of the exchange before the title can be changed. This permission is in the form of a letter stating that: a) they acknowledge and approve the exchange and; b) they are still the lienholder. If the lienholder will not approve the exchange, the vehicle can be exchanged by filling out a "Bill of Sale." A Bill of Sale form can be obtained from any stationery store. When the lien is fully paid off, the title can be transferred to the trust.

Q. I have exchanged everything I own into several Pure Contract Trusts. What next?
A. If you've exchanged everything you own into Pure Contract Trusts, then it's best if you cease to "exist" as an entity. That is, everything you buy, sell or contract is done in the name of the Trust for the Trust.

Q. What if I should become bankrupt?
A. Your personal bankruptcy has no effect on the trust assets. John King placed roughly $240 million into a trust for his family, and later declared bankruptcy to over $40 million in creditors' claims. The court ruled that his trust did not have to pay any of the claims, and it kept the entire $240 million intact for his family. John King maintained his standard of living throughout the bankruptcy. Note here, however, that exchanging assets into the trust cannot leave you insolvent, or without the means to pay your present bills or expected future bills, or contribute to your personal bankruptcy. If so, then again, the exchange of assets into the trust can be set aside as a fraudulent conveyance.

Q. What is fraudulent conveyance?
A. Suppose the IRS or a creditor sent you a demand for payment of $20,000. You then exchange all your assets into a trust to evade the creditor. This would be fraudulent conveyance. The safest way to protect yourself against a possible charge of fraudulent conveyance is to arrange your affairs so it's never your assets being exchanged into a trust. If it's legally possible, you should seriously consider changing your status to "non-taxpayer" - someone with no tax liabilities. Also, whatever arrangements you make, should be done well in advance of any "troubles." If you wait till there's "trouble," and then try to "hide assets," you may set yourself up for a charge of fraudulent conveyance.

PROPERTY

Q. Do individuals have common law rights to the fruits of their labor?
A. Yes. Individuals have an inalienable right at common law to labor and to the fruits of that labor. This is a natural property right and a constitutional right to be protected from unlawful interference from government encroachment.

Q. Can property be added to the trust?
A. Any property can be added at any time by the Managing Director(s) to the trust.

Q. Can the trust sell property?
A. The Managing Director can sell trust property at any time as long as it's done in the name of the trust.

Q. Do I have to notify the County Recorder each time I add property to the trust?
A. No. Once a Trust is recorded, the County Recorder does not have to be notified that property has either been sold or added, other than the normal recording of real estate deeds.

Q. Is there a limit on property I must own in order to create a trust?
A. There is no minimum or maximum amount of property that can be held in a trust.

Q. Does all the property I own have to be exchanged into the trust?
A. No. For ideal privacy and protection, all major assets should either be in trust or liens should be filed against them. High liability vehicles such as automobiles, motorcycles, boats, and aircraft should be placed in separate trusts.

Q. Can the IRS seize property or bank accounts which are in a trust?
A. In practice, IRS agents can do anything they want. Some of them operate as if they are above the law. Legally they can't seize anything without a court order. Legally they also can't seize anything for any liability of the Managing Director. In practice, though it's illegal, if there is a paper trail from the manager of a trust to the trust itself, IRS agents sometimes operate as if the trust doesn't exist - for example, if you exchange your house into a trust by quit claim or warranty deed (creating a paper trail), they may simply sell the house. A very powerful way to protect against this is for another trust to file a lien against the house.

Q. Can I exchange real estate into the trust and then immediately sell the property?
A. Yes. You can, in fact, sell either the property or the trust itself (which includes the property). Of course, to sell the trust itself you would have to find a buyer willing to learn how to use the trust. Two of the criteria you apply to decide how to structure such transactions are: (a) Who might see the transaction?; (b) What will they see?

Q. Do real estate deeds have to be recorded?
A. Yes. Most state statutes provide that although it is legal to not have a deed recorded showing a transfer of property, such a transfer is held invalid unless and until the deed is recorded.

Q. If I move to another state, do I have to record the trust there?
A. Once the trust is recorded in one state it does not have to be re-recorded in any other state. However, if real estate is to be exchanged into the trust, and the property is located in a state other than where the trust was originally recorded, then the trust may have to be recorded in the second state. An "extra front page" of the trust document is provided for this purpose.

Q. How do I show in the trust that property has been added, sold, or purchased?
A. As property is purchased, the title, deed, or bill of sale should be made out in the name of the trust. On 'Schedule A' add this newly acquired property (real estate, vehicles, and other major items) to the list. You can add an additional pages as necessary. When property is sold, a line should be drawn through the item on 'Schedule A' and the notation made: 'sold on (date).' For minor items, use 'Schedule B.' (The trust documents you receive will include Schedules A and B.)

Q. How are household goods and personal effects listed?
A. Items in a household don't have to be itemized. They can be listed simply as household goods and personal effects on Schedule B. However, if there are things of great value such as antiques, coin collections, valuable jewelry, etc., these should be listed individually on Schedule A.

Q. How are items which are used in business listed?
A. Inventory, tools, equipment, furniture, etc., used in a business should be listed separately and itemized whenever possible. Inventory items can be listed as the inventory of such and such business. Hand tools and other small tools can be listed as small tools. Realize that all this information is private. Records are kept for the benefit of the Managing Director(s). The records also need to be such that, in case of the demise of the current Managing Director, the Certificate Holder and/or new Managing Director will know what is owned by the trust and what they have to do with these assets.

TAXES AND REPORTING REQUIREMENTS

Q. Do I have to tell the IRS that I manage a trust?
A. No. The less you tell the IRS the better. You don't own the trust and you're not a trustee, therefore you have no responsibility to even admit or deny the existence of the trust.

Q. Will the trust make me exempt from taxes?
A. The Trust will not make you exempt from taxes. If you are liable for taxes, you, individually, are still responsible for any taxes on any "taxable income" you receive. The trust itself is not liable for taxes such as inheritance taxes and capital gains taxes. It also avoids probate.

Q. Do I have to file a trust tax return?
A. No. The Pure Contract Trust is not a taxable entity and has no reporting requirements. The only exception is if the trust is involved in business related to tobacco, alcohol, firearms, or anything subject to excise tax.

Q. What are the technical legal reasons why, unlike a corporation, the Pure Contract Trust has no reporting requirement to the state?
A. "The Pure Trust is a common law entity formed by contract, and thus is not subject to the same types of state regulations as a corporation." Elliot vs. Freeman, 220 U.S. 128.

Q. If a government agent walks into my place of private business (operated as a Pure Contract Trust) seeking information, how should I respond?
A. State that it's a private business. Ask him to put his questions in writing. Request that he not phone you. This issue is covered in considerable detail in Reports PCT05 and PCT06.

"The cooperative taxpayer fares much worse than the individual who relies upon his constitutional rights. Only the rare citizen would be likely to know that he could refuse to produce his records to Internal Revenue Service agents. "U.S. vs. Dickerson, 413F 20 1116. Hill vs. Philpott, 445 F2d 144, 146 held: "In numerous cases where the IRS has sought enforcement of its summons pursuant to statute (26 USC 7402), courts have held that a taxpayer may refuse production of personal books, and records by assertion of his privileges against self incrimination." The court quoted Stuart vs. U.S., 416 F2d 459 and U.S. vs. Kleckner, 273 F Supp 251.

Q. Does the trust exempt me from property and sales tax?
A. No. The trust does not exempt anyone from property or sales tax.

Q. What if the IRS says that an individual is personally responsible for taxes due on trust income?
A. Refer the IRS to the principals (trustees) - see Report #PCT06. For additional details on how to deal with the IRS, see the Build Freedom tax reports.

MONEY AND BANKING

Q. Should I use the banks?
A. A trust can have a bank account in its name. How to open bank accounts while maintaining privacy is covered in detail in The Pure Contract Trust Manual.

Q. Can the trust borrow money?
A. The Trust is authorized to borrow money. It's a separate entity (person). It can pledge its assets collateral.

Q. Do I have to get a trust identification number (EIN) form the IRS?
A. No. You may need a number to open a bank account. This is covered in detail in The Pure Contract Trust Manual.

Q. How can I withdraw money from a trust?
A. The Pure Contract Trust can pay the Managing Director in the form of both salary and expenses. The trust can also loan money to the Managing Director.

Q. Can I assign salary or commissions to a trust?
A. A trust can contract with any individual, organization (or even a corporation) to provide goods or services to that that entity in return for valuable consideration which will be received and owned by the trust.

Q. If my employer makes out my paycheck directly to the trust, will that exempt me from taxes?
A. Your paycheck needs to be made out to you. However, instead of employing you, the company could contract with the trust to provide services. Unfortunately, some companies will be reluctant to do this, but there's usually no harm in asking them.

Q. What about credit cards?
A. Never use any credit cards in the name of the trust. If you wish to eliminate or reduce "paper trails" or keep your and the trust affairs private, you should eliminate credit cards alltogether. However, credit cards may be obtained from a foreign bank with near-perfect privacy.

Q. Can a trust own stock in a corporation?
A. Yes. The corporate stock would be issued in the name of the trust rather than in the name of the individual. All dividends would be paid directly to the trust.

Q. What is co-mingling?
A. Co-mingling is when trust property and assets are mixed in with personal property and assets. It's also where title to trust property is bounced back and forth between the trust and a personal name. Depositing a check made out to the Managing Director in a trust account would be co-mingling. Writing checks from a trust account to pay for personal expenses of the Managing Director is another example. Apart from leaving "paper trails," co-mingling is strong grounds for claiming that a trust is a sham.

Q. What about insurance?
A. A trust can have its property insured in the same manner as an individual. A vehicle owned by a trust is simply insured in the name of the trust. Regarding life insurance, notify your insurance company to change the beneficiary to the name of the trust. (Insurance bureaucrats in some states may require that the trust be "registered with the government" before they make it a beneficiary. You may have to use resourceful means to overcome this problem. For example, persuade a sales person from the insurance company to help you cut the red tape; set up a Wyoming Trust, register it as required, and make that the beneficiary; etc.) Medical insurance stays the same as before the trust was implemented because it is the individual who will become ill, not the trust.

Reports in this series:
#PCT01 - #PCT01A - #PCT02 - #PCT03 - #PCT04 - #PCT05 - #PCT06 - #PCT07 - #PCT07A - #PCT08 - #PCT09 - PCT-User Manual

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