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0 Asset Protection Basics[1]

0 Asset Protection Basics[1]

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Published by Devon Clark

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Published by: Devon Clark on Sep 20, 2012
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from http://www.f-f-a.com/basics.html
 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 get
your 
stuff because they are coming after
me 
? "Of course not! That is silly," you might say. Butthere 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'sgovernment. And that is the right to own property. i.e. private ownership. If it is mine it can't beyours. (assuming there isn't joint ownership). You and I are separate legal entities.Now let's take things a step further. The law also recognizes trusts as separate legal entities.They can own things just like you and I. Whatever you can own, a **Constitutional Pure Trustcan also own. And what belongs to the trust is the trusts, what is mine is mine and the twainshall never meet.So the first and most fundamental element of asset protection is
separation 
. When property isheld in a **Constitutional Pure Trust, which is irrevocable it is the property of that trust and notmy property. A trust is it's own separate entity and owns it's own property just like you and I. Noone owns a trust. To restate it simply, property that belongs to "someone" else isn't mine. And if it isn't mine, it can't be taken from me.The second principle of asset protection addresses the
extent of separation 
. If I own property inmy name and my wife owns property in her name, someone coming after me may try to get herstuff (even though it is hers and not mine) simply because we are connected by marriage eventhough separate persons. However if we are talking about
your 
property and
mine 
, there is nochance 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 of the
extent 
of separation. Living trusts are great vehicles for avoiding probate. However most are revocableand therefore do not have a great deal of separation from me as long as I am living. Thereforethey provide
no 
protection of property. If I am sued, a living trust can be revoked as if it neverexisted and the underlying assets seized as if they are mine.This is
not 
the case with an
irrevocable 
trust however. Once property is gifted into irrevocableTrust, (or
exchanged 
in the case of a Pure Trust) I can't change my mind and pull it back out. Itis
now 
the property of the trusts and no future event can change that. That decision isirreversible or
irrevocable 
. But for that
same 
reason it is as separate from me legally as it can be.So, the greater the separation the greater the protection. (BUT unlike a living trust, anirrevocable 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. The greater the separation thegreater the protection. But property must not only be separated from me it must be separatedfrom
other 
property. Which brings us to our third principle of asset protection. A trust is also a "person" by law and therefore can be sued just like any other person. So wewant 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 thecar 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 thetrusts owning the house and boat are separate entities from the one that owns the car. To statethis another way we can say to separate is to isolate and insulate.
 
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 PureTrusts 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, thecourts, 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 havebeen led to believe that statutory law has universal jurisdiction over any and all activities, but itdoes not. And because Pure Trusts do not fall into the statutory realm, they are often completelyunheard of by the vast majority of attorneys and misunderstood at best or even despised bysome attorneys as well as CPA's. They are simply outside the scope of statutory authority andtherefore outside an attorney or CPA's expertise and government regulation.It would be comparable to the Medical communities' attitude towards vitamins and a naturalapproach to health. These do not fall in the medical communities area of expertise therefore theyknow little about them at best or condemn them and seek to eliminate them at worst. In shortwhat we don't know of, have control over or understand is often a threat. And just as Doctorsare taught virtually nothing about nutrition in medical school, lawyers are taught virtually nothingabout Constitutional law in law school.But, you may ask, "if Constitutional Pure Trusts are not part of the statutory realm, by whatauthority do they exist?" None less than theConstitution of the United States, Article 1 section10, under the right to contract. But, you may wonder, "isn't the Constitution a statutorydocument?" No, it is acommon lawdocument, just as Constitutional Pure Trusts are. In truthwhat makes CPT's so unique is they are
not trusts 
at all by statutory definition ( which is why youwill 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 realmand therefore come under statutory regulation. CPT's do not, which makes them private andprotected
contracts 
, free from the "interference" of unwanted parties. This may be the mostimportant form of separation which makes CPT's unique to all other forms of asset protection andtherefore the best means of asset protection.
Trust Frequently Asked Questions
from http://www.f-f-a.com/faq.htmlQ. WHERE DO TRUSTS COME FROM?
A
. Trusts have a long history of usage. Plato used a non-profit Trust to finance his university inGreece around 400 B.C. Trusts were known in Roman law as well. In England Trusts were in useas early as the 11th century and by the 15th century were being enforced by the Courts of Chancery. Many burdens and conditions fell upon the holder of legal title to real estate. Forexample, the lord of the land was entitled to relief or money payments when the land waspassed on to an heir of full age. The lord was also entitled to aid or tax money to pay for themarriage of the lord's daughter or the knighting of the lord's eldest son. The owner of the landwas usually prohibited from selling the land or dividing it among his children or grandchildren. If the owner of the land was convicted of a crime, he forfeited all he owned to the lord or the king,thereby leaving his family impoverished. These are some of the major restrictions. There were
 
nearly 100 other taxes and limitations on the ownership of land. It was to avoid these restrictionsthat Trusts were first created in England. They were designed to avoid the application of theserigid laws by allowing the Creator to vest legal title in a Trustee on behalf of a wife, son,daughter or other person as beneficiary. They had many advantages, not the least of which wassecrecy. Trusts were also used in English history to allow religious organizations to use propertycharitably bestowed which would otherwise not be possible due to certain restrictions againstland ownership by churches and religious organizations. The English also used (and still use)Trusts to avoid probate of an estate.Pure Trust organizations arrived in America with the colonists. The first **"Pure Trust" of recordwas drafted for Governor Robert Morris of the Virginia Colony, a prominent financier of the American Revolution, by the famous attorney and patriot, Patrick Henry, in 1765, 24 years beforethe adoption of the Constitution. Known as the North American Land Company, this Pure Trust isstill in operation today, over 200 years later.William Bingham, reputed to be the richest American when the thirteen colonies won theirindependence, started a Pure Trust for his vast estate in 1804. The Trust owned two millionacres in Maine which sold about the time of the Civil War. Bingham, a Senator from Pennsylvaniain the Second United States Congress, owned vast land holdings. The Trust was terminated bythe Trustees in 1964 after some 160 years of operation. It was terminated because of themultiplication of beneficiaries (total 315) and the liquidation of assets. Throughout the years, theincomes from property and proceeds from land sales were distributed to the beneficiaries. At thetime of liquidation, it had no termination date. During its period of existence it was not affectedby the death of its Creator, succeeding Trustees, probate procedures, or death transfer taxes.One of the outstanding examples of the Pure Trust is the Mesabi Trust which owns the reservesof the famous Mesabi iron deposits in Minnesota. This Trust receives the royalty payments fromthe iron deposits and distributes the royalties to the holders of Mesabi's certificates of beneficialinterest. Following the transfer of assets from the company to a Pure Trust, Mr. ArnoldHoffmann, then president of the Mesabi Iron Company, announced in the Wall Street Journal onMarch 14, 1961, that a ruling by the Commissioner of the Internal Revenue declared the Trustwould not constitute an association of persons taxable as a corporation. The shares of beneficialinterest are traded daily on the New York Stock Exchange.Edward H. Hines, a multimillionaire building supplier, established a $12 million Trust in 1914, andheaded his business until his death in 1931. His two sons, Ralph J. and Charles, succeeded theelder Hines as Trustees of the Trust and retained Trusteeship of their father's Trust after a courtfight instituted by two nieces, a sister, and a nephew sought to break the Trust by claiming theadministration of the family estate had been erroneous. The court ruled that the Pure Trust wasnot an erroneous method of managing the assets, and was in fact, a valid and legal arrangementfor the estate. Ralph J. Hines, the eldest son and head Trustee, died in 1950, and again thefamily assets held in the Pure Trust were not disturbed by estate and inheritance taxes. Theyounger brother, Charles, subsequently became the head Trustee, handling the Trust for manyyears. Preserved, intact, for future generations, the Edward H. Hines Lumber Company is still inoperation today. Another example of the Pure Trust used for a family estate is that of the Joseph Kennedy family.Joseph Kennedy, father of John F. Kennedy, originally established a Pure Trust to own thefamous Chicago Merchandise Mart. The Kennedy family is known to maintain several other PureTrusts for tax shelter purposes as well. One such Trust was reported in the Chicago Tribune.March 22, 1947 with the caption: "Kennedy Divides Merchandise Mart." "A Trust agreementformed several years before, in which Kennedy's wife, Rose F. Kennedy, and a long time friendand associate, John L. Ford, joined as Trustees, helped to materially distribute ownership in the30 Million Dollar Merchandise Mart, among members of the family. It is said that many of theseTrusts are domiciled in the Fiji Islands of the South Pacific."

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