COMMON LAW BUSINESS TRUST

ORGANIZATION
or, the

PURE TRUST

Prepared by:

Blue Ridge Group

David L. Miner, General Manager
DMiner@FreedomSite.net
www.FreedomSite.net

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COMMON LAW BUSINESS TRUST

ORGANIZATION
or, the

PURE TRUST
INTRODUCTION
If you act on what this booklet tells you, you can save more money than you ever
imagined. If you do not act, then there is no other way for you to escape the fate of so many
millions of others. Has the following happened to you or someone you know? A friend or
relative passed away and his estate was thrown into time-consuming probate -- enormous
inheritance taxes, high estate taxes, and large legal fees drastically reducing the estate. Did the
Internal Revenue Service rule adversely on stocks, paintings, antiques, or other personal
property? Did the family business have to be destroyed in order to pay these hefty costs? Did
the heirs have little to inherit after it was all over?
When you pass on, your family may have to go through the same needless waste of
money and time. If your total estate can be valued above $600,000, at least 30 and sometimes 50
percent or more of your estate will be taken by taxes, and many thousands of dollars in legal fees
and probate costs will usually be taken out on top of the taxes. The financial security you
promised your family might be destroyed when you die.
Now there is no need for your family to do without. You can legally avoid every dollar
that your family would have paid due to the probate process. You can use a tool that could save
you the cost of legal fees, executor and administrative fees, probate costs, inheritance taxes,
estate taxes and gift taxes.
Since you have accumulated assets throughout your life, it is only right that when you
pass on, your family should receive the full benefit -- the full use of those assets. Now they can
control those assets intact without a cent of probate or tax costs -- and without a moment's
hesitation.
WHAT IS THIS METHOD? A little known and rarely used instrument based on common law
called the COMMON LAW CONTRACT, also know as the UNINCORPORATED BUSINESS
TRUST ORGANIZATION or the PURE TRUST ORGANIZATION.
HOW DOES IT WORK? You and your family form your own trust organization through
properly prepared contracts, trust organization minutes, and a trust organization indenture.
Oversimplified, you exchange (not give) your assets with the Pure Trust Organization. The trust
organization then owns the assets outright, and manages those assets through its trustees. No gift
taxes are paid because no gift was made. You and family members may, under certain limited
circumstances, be appointed trustees who manage, control, and direct the desired benefits of the
trust organization assets. As you and succeeding trustees pass on, no death taxes or probate costs

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are incurred on the trust organization assets. The trust organization does not end when you pass
away. It ceases only when the trustees decide it should.
CAN ANYONE USE IT? Anyone with large or moderate assets who wants to save money can
use it to reduce or avoid probate costs and other legal problems involved in the distribution of an
estate after his/her death.
OTHER ADVANTAGES OF THE PURE TRUST ORGANIZATION
The Pure Trust Organization acts in many ways like an individual -- buying, owning,
selling, spending, and earning.
It is private. You do not have to register the Pure Trust Organization, its assets, or its
functions with any city, state or federal body.
The Pure Trust Organization can be used in place of both business and personal
transactions.
The assets of the Pure Trust Organization may not be touched by probate or divorce
proceedings or by personal creditors.
Why have you not heard of this estate planning tool before now? That question has too
many different answers to get a good response in these pages. But there are a number of reasons
that might play a role in this information not getting out to those who could use it.
First, you must understand the difference between common law and statutory law.
Common law is that set of commonly acknowledged rules that everyone should know and
obey out of common sense and common decency. It has often been said that common law makes
common sense to the common man. Common law has been slowly and informally collected into
a set of beliefs that are accepted as the way things should be by most western European people.
It is sometimes called English Common Law because the British legal system was built on it.
Statutory law is the legal structure created by those who want or need to govern people.
Common law is simple; the common man can and will understand it. Statutory law is complex;
sometimes only attorneys and legislators can understand it. Common law is based on the belief
that there is a God and he has given man certain rights which should not be abrogated by any
government. Statutory law is based on a belief that man must be limited if he is to live in
association with others. Common law has as its goal maximum individual freedom. Statutory
law has as its goal the common good, or that which is expedient, in order to ruffle the fewest
feathers and hurt the fewest feelings. Another way of saying it is, Common Law is based on
what is right and wrong, and statutory law is based on what is legal and illegal. While common
law and statutory law can and should coexist peacefully, they do have at their roots different
presuppositions, goals and purposes.
Most trusts are statutory trusts, created by legal edict to restrict or to grant limited license
to activities that otherwise would be illegal. The tax breaks and limited liability granted to
statutory trusts would be illegal if it were not for the laws that create that kind of trust. A
common law trust, or pure trust, is based on the common law principles of property ownership.

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As a result, liability is limited by common sense in common law (You cant sue me, the car
doesnt belong to me!). Liability is limited by legal technicalities in statutory law (You cant
sue me, I have been given the license to incorporate! You can only sue the corporation.).
Because statutes are constantly changing, and judges tend to change their interpretations of laws
over time, most lawyers are totally consumed with statutory law. And their understanding of
common law and Constitutional Law is almost totally lacking today.
One reason for this deficiency is that most common law courses taught in the law schools
were dropped from the curriculum in the 1920's and 1930s. This fact is very distressing, because
our whole law system is based on the English "common law" except for one state (Louisiana).
The United States Supreme Court has ruled that common law is just as much a part of the State
law as are statutes passed by the state legislatures, and that statutes are often nothing more than
declarations of common law. Yet, a considerable number of persons in the legal profession
would lead you to believe that the United States Constitution is outdated, and that common law
principles are of no importance in this day and age. Since you cannot learn common law
principles in most law schools, the only alternative is to study on your own and become selfeducated on the subject.
Surprisingly, not many attorneys know that the Pure Trust Organization actually exists,
even though there are United States Supreme Court cases, district court cases and others where
the "pure trust" form of business organization is specifically mentioned. Several years ago, I was
involved in a discussion on the Legal Forum of CompuServe where an attorney told me that he
had never heard of an unincorporated business trust organization, or a Pure Trust Organization.
Based on the fact that he had never heard of it, he proclaimed to all on the forum that it must be
illegal and invalid. How wrong can one be? I have seldom had someone proclaim his ignorance
so boldly and aggressively.
"A Trust, for probate avoidance, is a lawful, irrevocable, separate legal entity." Harwood
vs. Tracy, 118 MA 631.
"It is established by legal precedent that pure trusts are Lawful, valid business
organizations.'' Baker vs. Stern, 58 A.I.R. 462
"Trust or trust estates is a legal entity for most all purposes, as are common law trusts."
Burnett vs. Smith, S.W. 1007 (1920)

It is also surprising how little most lawyers know about other types of trusts or
organizations that they are drafting for clients. I have yet to meet one (beyond the handful of
lawyers who specialize in pure trusts) who could adequately explain the difference between a
common-law contract organization and an inter vivos (living) trust, although I know there must
be some that would research the subject (for a fee and enough time).
Of course, volumes of information are printed today on the vast subject of estate planning
devices, such as establishing and maintaining trusts and organizations. These books deal largely
with testamentary and/or living trusts, which have many limitations. Yet these same estate
planning experts seldom if ever discuss the Pure Trust Organization, which avoids many of the

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pitfalls of the more common types of trusts. Pure Trust Organizations are not widely used for
they are not widely known, but this tool is seldom challenged in the courts and has rarely been
broken by courts of equity. Hence, very little information is in print on how they are established
and maintained, and on their official status before the law. Pure Trust Organizations do definitely
exist and, in fact, are widely used by those of sufficient knowledge and financial acumen to
know how they can be put to far-reaching advantage. It is very difficult to determine who these
people are, because one of the main functions of the Pure Trust Organization is to maintain the
complete privacy of the financial and legal information of the organization and its activities. The
documentation of the Pure Trust Organization is not a matter of public record as are charters of
trusts and articles of incorporation.
There is another reason why so few of the American people know anything at all about
these trust instruments radical revenue reduction!. Plain and simple, these trusts get in the
way of attorneys making money. First, they totally avoid probate, which is one of the most
profitable and most sacred of revenue generators for judges and lawyers. Second, they totally
avoid federal reporting requirements (no federal forms to file!), which reduce the income made
by attorneys and CPAs in their services to businesses. And third, any person with knowledge of
these issues can create a business trust it does not require an attorney like statutory trusts. So,
it is possible that some attorneys are hesitant to discuss these options with their clients since that
discussion would result in a radical decrease in the revenues they will ultimately receive from
those clients. Attorneys and CPAs often make half or more of their fees from providing the
services that are not needed by business trusts.
We are not suggesting, as many have, that the legal profession is consumed with making
money to the exclusion of an honest presentation of options. But, of the legal professionals we
have discussed these issues with, most have been aware of business trusts but have never
discussed these trusts with clients. Of course, there is always the comment that they are not
totally familiar with all the issues concerning business trusts, and therefore they would not feel
comfortable discussing these instruments without first knowing more about them. However, not
one of the attorneys who have made these comments ever took it upon themselves to learn more
about what they already knew would cost them money should it become common knowledge,
not even when we offered large amounts of legal research to those attorneys for free.
This publication attempts to present some of the issues involved with a business trust, or
pure trust. It is simple, general and incomplete. Yet it presents more solid information on this
issue than most attorneys or CPAs have seen. In reading this publication, you have become the
expert, not your attorney. On the other hand, you would be best served if your attorney or CPA
would read this and then do a little research on his/her own. Some will; many will not. You will
need to decide what you should do if your tax and estate professional will not take the time to
learn this information and become proficient in the legal technicalities of the business trust. The
professional who listens, reads and then studies these issues will ultimately have a powerful new
estate planning tool to use in providing an essential service to his/her clients. But the good news
is, the common man can use the common law to accomplish uncommon estate planning and
leave an uncommon estate for his/her heirs. And he/she can do this totally without the use of an
attorney. Read on, to your financial health.

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A SHORT HISTORICAL ANALYSIS OF THE PURE TRUST ORGANIZATION

The Pure Trust Organization is, in legal terms, an entity not new to the world or the
United States. Springing from equity procedures, the first Pure Trust Organizations were known
in the Roman Empire -- going back as far as 800 AD or earlier. It became the preferred method
of establishing equity of ownership and management in the Middle Ages on the European
Continent. The States of the Union (United States) adopted the common law of England as an
entire system, including the principles of equity then enforced by the courts of chancery in
England.
"The Unites States adopted the Common Laws of England with the Constitution."
Caldwell v. Hill, 176 S.E. 383 (1934)

These early English trust organizations were modeled after the ancient German legal
receiver called the "salman." The "salman" was a person to whom land was transferred in order
that he might make the conveyance according to the former owner's wishes. Although this might
seem a devious and inefficient way of transferring property, a review of the conditions in
medieval times should show the reasons for this procedure.
In England, many burdens and conditions fell upon the holder of legal title to real estate.
For example, the lord of the land was entitled to relief or money payments when the land was
passed to an heir of full age. The lord was entitled to wardship fees when the son of the former
owner was a minor. The lord was also entitled to aid or additional taxes to pay for the marriage
of the lord's daughter or the knighting of the lord's eldest son. In addition, the owner of the land
was usually prohibited from selling the land or dividing the land among his children or
grandchildren. Also, if the owner of the land was convicted of a crime he forfeited all he owned
to the lord or king, thereby leaving his family impoverished. In addition, landowners could never
will or give the land to their daughters.
These were the major restrictions. There were nearly 100 other taxes and limitations on
the owners of lands.
To avoid these restrictions under the law, the trust organization was developed. It works
as follows: The owner contracted with two trustees to convey the property to a trust for the
beneficial use of another person (the beneficiary). This fourth person was generally the owner's
son or the person to whom the owner wished to sell the land. The trustees were literally trusted
with the proper use of the property.
In the twelfth and thirteenth centuries there were no legal methods to enforce the trust
contract. If the trustees during these years decided to use the property for themselves, there was
nothing the former owner could do. Eventually, however, the courts began to enforce these
contracts.
Because the contracts were not sales, they were not illegal transfers of land. Because the
contracts were not wills, they were not improper transfers to children or grandchildren. Further,

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they could be kept secret. The king did not have to know of the transfer, and the laws, the taxes
and other limitations could be ignored.
The trust organizations had other advantages. For example, if the transferor of property
placed in a trust organization was convicted of a crime, he would not forfeit the property since he
no longer owned it. His family as beneficiaries of the trust would continue to enjoy the property.
Also, since beneficiaries of a trust organization were not limited in number, a man might
distribute the benefit of the property to all of his children. (Under the law at the time, he could
pass it by will only to his eldest son.)
The trustees and beneficiaries in each of these trusts controlled the land, planted it, reaped
the harvest, sold or used the results for profit and by law, could ignore almost all other
restrictions on the use of the land. The trustees usually did not participate in this use but allowed
the beneficiaries to do as they wished, since the property would ultimately go to them anyway.
The beneficial or equitable interests in these trusts could be sold at will with no change in the
trustees and usually without taxation. Normal sales of property had to be made public and were
usually accomplished by elaborate procedures. Beneficial interests in trust organizations could be
created and transferred secretly.
Early in the fifteenth century the king's chancellor began to enforce such trusted contracts
and agreements in the king's own court. The relief offered by the chancery court was usually in
the form of an order to keep the trustees from committing some act, such as evicting the
beneficiary or laying waste to the land. By the sixteenth century the concept of the trust
organization was well developed.
The king, having lost many of his former rights to the lands held in trust organizations,
publicly criticized them. There were probably many abuses of the trust organization which led to
this criticism; for example, religious orders which had pledged themselves to poverty often held
hundreds of thousands of acres of land in trust organizations and enjoyed their use, even though
the priests themselves did not "own" a thing. However, since the nobility was being severely
pinched with respect to their traditional rights and powers, one can identify with them more
easily. So kings generally resisted or refused to discuss pure trusts.
In 1535 the Statute of Uses was passed to prohibit the use of certain trust instruments, but
this statute did not address trust organizations. The law required that the beneficiary of certain
trusts would be considered the legal owner whenever such a trust was made and that the trustees
would be considered mere conduits or passive parties. The preamble of this law set out the
"evils" that had been possible through the use of the trust.
Among these "evils" were privacy of transfer, legal avoidance of taxes and other
regulations, preservation of the estate of convicted criminals, and (most significantly), the loss of
revenue to the lords.
The common law judges of England who had sole jurisdiction over legal estates were
faced with the task of interpreting the Statute of Uses. They had to determine which trusts were
legal and which should be dissolved. The judges decided to restrict the application of the Statute

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of Uses to limited circumstances. Only one trust out of five was found to be illegal and the rest
were enforced. Within five years, the Statute of Uses was all but out of use.
Suffice it to say that the Statute at the hands of the common law judges did not achieve
what the king and his nobles had hoped. A large number of trust organizations were left
unaffected by the Statute and were recognized and enforced by the Court of Chancery. It is these
interests and trust organizations, which were preserved in spite of the Statute of Uses, which
traveled to America with the English Colonies and which formed the very basis of the trust
organizations of today.
The advantages of the ancient trust organizations are obvious: The trust organization
enabled a person to enjoy privacy under a system that usually demanded disclosure. The trust
organization enabled a person to avoid some of the burdens of special taxes. The trust also
enabled individuals to "sell" land and to pass it to those they wished. Obviously, the same goals
are desirable today. Our present tax system, however, has imposed certain burdens and many
restrictions on the citizens of our country that are comparable to the burdens and restrictions that
limited the citizens of ancient England.
In general, the definition of a "trust" is a right of property, real or personal, held by one
party for the benefit or another. From this broad definition numerous types of trusts are derived,
because a trust can be created for any purpose which is not illegal or against public policy.
One of these various types is an "express trust" created or declared in express terms,
usually in writing, as distinguished from one inferred by law. Another necessary qualification
that is placed on the express trust is that it must be "active," where the trustee has authority to
manage the property of the estate and to pay the net income to legatees or beneficiaries. Such
express trusts were quite prevalent in England from the fifteenth century to date, for the purpose
of estate management and preservation. They were so widely used that they became part of the
common-law, and Courts of Equity were set up to handle them.
Exactly at what time in history the term "common-law trust organization" was applied to
these express trusts is unknown, but the term was used in some of the earlier trust organizations
set up in the United States of America. Since we adopted the English common law as the basis of
our legal system, the term "common-law trust organization" was most descriptive of the
instrument.
During the eighteenth century, the term "pure trust organization" was used on occasion in
place of "common-law trust organization" to denote that it was simple and free from defects or
fault. Late in the eighteenth century, common-law trust organizations were used to vest a
business, real, or personal property in a group of trustees who managed it for the owners of
beneficial shares. This practice, although used occasionally in other states all the way back to
about the seventeenth century, became predominantly accepted in the state of Massachusetts.
(This was true not so much because Massachusetts was the only state to recognize these trusts as
valid, but because of the large number of very wealthy Massachusetts families that used these
trusts to avoid taxes and maintain privacy.) Thus, the term "Massachusetts trust" was used in
place of common-law trust organization. Still later (in the earlier part of the nineteenth century),

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when a greater number of businesses were vested in a common-law or Massachusetts trust, the
term, "business trust" was applied.
In the 1920's "pure trust organizations" were legally defined by the Supreme Court of the
United States of America. One of the reasons for the legal definition was that some of the
common-law (or Massachusetts or business) trusts were being operated more like a partnership
than they were a trust-like relationship. The "Pure Trust Organization" then became the more
modern form connected with the old common-law trust organizations. The partnership-like form
of trust organization was not invalidated, but recognized as another form of common-law or
business trust along with the Pure Trust Organization. The partnership-like business trust is a
special form of trust arrangement used when investors are involved. Both forms have been used
extensively throughout the United States up to the present time for estate management and
preservation of a business, real estate, or personal property.
A business trust is a hybrid type of business organization. As Judge Magruder has
pointed out, "It is the offspring of a union between the unincorporated joint stock company and
the trust." The shield of a trust is used to protect the shareholders from personal liabilities,
similar to a corporation. The trustees of a business trust really correspond to the board of
directors of a corporation. These trustees are acting for the shareholders and are designated by
some common name (the name of the trust), which is recognized as a separate business and also
as a legal entity. On the other hand, the trustees also hold some of the features of a shareholder
of a corporation, in that the trustees are absolute owners of the trust assets. Although the
shareholders of a corporation are not absolute owners of the assets of the corporation, they are
the legal owners of the entity, as are the trustees of a trust.

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The Case for Privacy of Family Affairs

One of the advantages of the Pure Trust organization is privacy. In what way can privacy
be helpful and why is it important to you and your family? Let us look at it this way: A man may
keep secret the contents of a will he has made as long as he lives, but when he dies and the
documents governing the disposal of his estate are filed in court as the law requires, they are for
all the world to see. Granted, members of the general public are not in the habit of meandering
through the recording offices and browsing through the wills on file, but there are always
reporters as well as certain specialists who make a job of combing files containing wills. People
compile mailing lists, for instance, of widows and other heirs and legatees, for one sort of
solicitation or another.
We must keep in mind that wills of people of reputed means, and of social, business or
professional prominence in their communities, are rated as news -- not as scandalous news, but
as news that satisfies the curiosity of many -- friends, neighbors, and strangers. Tidbits as to the
wealth of people they know or have heard about, as to who is going to get what, or who is being
cut off, are choice pieces of news. Consequently, the court where wills are filed in "probate" is
on the court reporter's route. Some newspapers, generally in the smaller communities, faithfully
report wills filed for probate, naming the beneficiaries and citing such estimates of worth as may
be gleaned from the documents. It may be only the high spots that are covered. Should anything
out of the ordinary be revealed, some headlines might certainly be expected.

How the Pure Trust Organization Helps

In most of us, there is a deeply felt, though rarely voiced, urge to map out areas in terms
of space and thought in human relations that we can call our own -- we have our private
individual worlds and instinctively defend them.
"For a man's house is his castle," wrote Sir Edward Coke, in the pedantic fashion of three
centuries ago. This is popularly misremembered as "The Englishman's home is his castle."
Because Coke was writing of the English common law, there is a certain appropriateness here
that he helped to formulate. It is particularly relevant due to the fact that out of the English
system of common law the Pure Trust Organization was developed, which can truly be a castle
of refuge in time of need to a man, his family and all that he holds dear. A Pure Trust
Organization can be created during a lifetime, thus readily distinguishable from the testamentary
trust, the terms of which are stated in a "Last Will and Testament." The Pure Trust Organization
is a now and forever trust organization. It comes into existence when the trust organization
indenture, which states its terms, is signed. At that point, the ownership of property to be owned
by the trust organization is conveyed to the trust. The creator of the trust may be someone
outside of the family, not related by birth or marriage. Since he may appoint the first trustee and
this trustee may appoint the second and those two may appoint others, on the death of any trustee
the trust may be continued and usually is. Since the members of the family can be trustees, they
may draw salaries. Family members may also be beneficiaries, and often are. Since the trust need
never die, the property it holds may continue to grow and pay benefits to the beneficiaries. By

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renewing the life of the trust, the trustees may extend its life indefinitely, as has been the case in
several trusts in the United States.

The Important Part

Here is where the element of privacy comes in: There is no process of probate that is to
be gone through, no routine spreading of trust agreements in public records for every Tom, Dick
and Harry to peruse. There is no required process of notification to people who may consider
themselves neglected or unfairly dealt with -- no exposed invitation to come into court and
challenge the agreement. The Pure Trust Organization is a private contract between the creator of
the trust and the one(s) with assets or an estate to protect (known as the grantor). After the death
of the grantor, the only persons to whom the trustee owes duties are the beneficiaries of the trust
-- the holders of Beneficial Certificate Units. To these the trustee owes the duty of absolute
undiluted loyalty and confidentiality.
In truth, we should point out some exceptions to the sweeping claims we have just made.
The Trust Certificate holders conceivably may have some dissatisfaction with the terms of the
trust organization. While litigation can expose the trust organization to public gaze, it is difficult
and extremely unusual for this to happen. Thus, it becomes clear that the Pure Trust Organization
is an instrument that contributes greatly to those who desire privacy for themselves and their
loved ones.
And remember, the trust is owned and managed by the trustees. They are accountable
only to requirements and limitations of the trust indenture, similar to the articles of incorporation
of a corporation. As long as the trustees are operating within those limitations, then the only
ones they need to satisfy are themselves. The trust indenture requires all actions and activities to
be carried out for the long-term purpose of benefiting the beneficiaries. But that same trust
indenture normally leaves the judgement calls up to the trustees.
"If it is free of control by Certificate Holders, then it is a Pure Trust." SchumAn-Heink v.
Folsomn, 159 N.E. 250

It is not unusual for the board of trustees to decide that they can best serve the trust (and
its beneficiaries) if the trust purchases a nice house for use by each trustee. And often a nice car.
And usually a nice retirement plan. And so on and so on. And all these purchases are generally
not reportable to any government agency, beyond the legal requirements involved in purchasing
the property itself. This form of "compensating" the trustees is the norm when the trustees are
also the grantors. All the trustees need do is document their belief that these actions will make it
easier for the trustees to manage the trust assets, and any trust activity they choose can and will
be justified with respect to the trust indenture. Remember that the trustees of a pure trust are
accountable for their intent to benefit the trust, and therefore the trust beneficiaries. They are not
accountable for the ultimate results in the event that those activities cannot be proven to actually
result in benefits to the trusts beneficiaries. While trustees of a statutory trust can be sued and
directors can be fired if their activities do not clearly and directly benefit their respective bosses,

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(the beneficiaries or shareholders), the trustees of a pure trust are only held accountable for their
intent to bring about those tangible benefits.
Of note here is the issue of federal reporting requirements. I have personally spoken with the IRS
District office for Tele-TIN in Dallas, one of the offices that assigns Employer ID Numbers
(EINs) to employers and other business entities. A new business can obtain an EIN from the IRS
by calling the Tele-TIN phone number and submitting the information contained in the Form
SS-4, Application for Employer Identification Number. While it may not be required by law for a
business trust to obtain an EIN from the IRS, it is sometimes an advisable step, especially when
the business trust wishes to utilize bank accounts, investment accounts, etc. When I personally
called the Dallas office for Tele-TIN, I was told that the IRS was no longer issuing EIN's to
business trusts over the phone. When I asked why, I was told to complete the Form SS-4 as
normal, and the IRS would issue the number as they always have, but that the EIN would not be
issued over the Tele-TIN phone number. I requested to speak with a supervisor, and finally was
able to get someone who identified himself as the "district manager." When I asked specific
questions, I was given more information. It seems that the ability to obtain an EIN over the TeleTIN phone number was a "taxpayer service," and since so many business trusts were choosing to
not file returns with the IRS, they could not be called taxpayers as defined in the Internal
Revenue Code. "Since taxpayer benefits are reserved for taxpayers, business trusts will no longer
be able to obtain an EIN over the Tele-TIN phone number," the district manager told me. He
then gave me a phone number in the national office of the IRS if I wanted to pursue the matter.
Here was the "district manager" of the IRS admitting that a business trust didn't have to file tax
returns because they were not taxpayers as defined by the Internal Revenue Code! The relevant
section of the Code of Federal Regulations follows:
Internal Revenue Regulation, 26 CFR, Section 301.7701-4(b):
"(b) Business Trusts -- There are other arrangements which are known as trusts because the legal
title to property is conveyed to trustees for the benefit of Beneficiaries, but which are not classified
as trusts for purposes of the Internal Revenue Code, because they are not simply arrangements to
protect or conserve the property for the Beneficiaries."

Another important fact to bear in mind is the continuity provision of the trust. If and
when one or more of the trustees die, the trust continues. The assets, actions and business
activities remain uninterrupted by the death. The reason for this is simple: the trust is totally
separate from the trustees. The trust is an entity in and of itself. Of course, the more trustees in a
UBTO, the less the impact on the trust when one of them dies. If the trust has only one trustee,
and if there are no contingent trustees pre-appointed, and if the one trustee also manages the
business activities, then the impact of that trustees death will be maximized. But there are steps
which can be taken to minimize the business setback even in those circumstances.
Not only does the trust, and the business, continue, but there is no probate process or
probate costs incurred. Often the family business must be sold to pay the estate taxes of the
primary bread winner upon his/her death. Anywhere from 25% to 75% of the estate can be
confiscated in taxes, fees and other probate costs. And the probate judge is almost totally
unaccountable in the costs he/she can charge to an estate before dispersing the leftovers. This
cannot happen with a business trust. Absolutely no estate taxes or probate costs are incurred by

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the pure trust organization. Both trust assets and life insurance benefits have the enviable status
of totally bypassing the probate process.

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Examples of actual Pure Trust Organizations

Under the Pure Trust Organization indenture, the Church of England (one institution that
the King perpetually hesitated to bother), took over the assets, managed them and paid out
income to the creator and his heirs after death without disturbing the trust organization estate.
Over the years many versions of the Pure Trust Organizations were developed, but their basic
goals were preserving family estates -- keeping them out of the King's hands then and out of
probate and tax collectors' hands today.
According to a California attorney, Pure Trust Organizations arrived in America with the
colonists, and the first Pure Trust Organization on record here was drafted by the attorney Patrick
Henry in 1765 -- 24 years before the adoption of the Constitution -- for Governor Robert Morris
of the colony of Virginia, who was later a prominent financier of the American Revolution. In
the Morris trust, known as the North American Land Company, lands belonging to Governor
Morris were transferred to the Pure Trust Organization.
William Bingham, a man reputed to be the richest American when the thirteen colonies
won independence, started a Pure Trust Organization for his vast estate in 1804. At one time the
pure trust indenture owned two million acres in Maine, much of which were sold about the time
of the Civil War. Besides being a very large landowner, Bingham was a Senator of the Second
United States Congress from Pennsylvania. This pure trust indenture was terminated by the
trustees in 1964 after more than 160 years of operation. It ceased because of the multiplication of
beneficiaries (then 315) and the sale of the last properties involved. Throughout the years, the
income from property or proceeds from the sale of the land was distributed to the beneficiaries.
At the time of liquidation, it had no termination date. The rule against perpetuity did not apply in
this case. The trust organization estate was not affected by death of the creator or of succeeding
trustees, by probate procedures, or by death transfer taxes.
One of the outstanding examples of the Pure Trust Organization is the Mesabi Trust,
which owns the reserves of the famous Mesabi iron deposits in Minnesota. This trust
organization receives the royalty payments from the iron deposits and then distributes the
royalties to Mesabi's certificate holders. Mr. Arnold Hoffman was then president of the Mesabi
Iron Company which transferred the assets of the company to the Pure Trust Organization -- and
then announced in the Wall Street Journal on March 14, 1961, that the Commissioner of the
Internal Revenue had ruled the trust organization would not constitute an association of persons
taxable as a corporation. The Certificate Units are traded daily on the New York Stock
Exchange.
Edward H. Hines, a multimillionaire building supplier, established a $12 million family
trust organization 1914-- he headed his business until his death in 1931. His two sons, Ralph J.
and Charles, succeeded the elder Hines as trustees of the family Pure Trust Organization, and
retained trusteeship of their father's trust organization after a court fight instituted by two nieces,
a sister, and a nephew -- all seeking to break the trust organization by claiming that the
administration of the family estate had been erroneous. The court ruled that the family Pure Trust
Organization was not an erroneous method of managing the assets -- and in fact was a valid and
legal arrangement for the estate. Please understand this. The Hine pure trust organization

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owned assets once owned by the Hine family. The trust used the Hine family as trustees. The
judge ruled that having family members act as trustees did not violate any laws and fell within
the legal limitations of pure trusts. Ralph J. Hines, the eldest son and head trustee, died in 1950-and again the family assets in the Pure Trust Organization were not disturbed by estate and
inheritance taxes. The younger brother, Charles, subsequently became head trustee handling the
trust organization for many years.
In the normal operation of probate if there were a norm -- how much of this family
estate would have been left after two deaths in the family without a Pure Trust Organization? Yet
the Edward H. Hines Lumber Company (A Trust) is still operating today, preserved for future
generations intact.
Another example of the Pure Trust Organization used as a family trust is that of the
Joseph Kennedy family. Kennedy, father of John F. Kennedy, originally established a Pure Trust
Organization to own the famous Chicago Merchandise Mart, wherein the elder Kennedy engaged
in all sorts of activities he wanted to keep out of the scrutiny of the authorities. The Kennedy
family is known to maintain several other Pure Trust Organizations for tax shelter purposes as
well. One such trust organization was reported with the caption, "KENNEDY DIVIDES
MERCHANDISE MART" (Chicago Tribune, March 22, 1947). A trust organization agreement
in which Kennedy's wife, Rose P. Kennedy, and a long time friend and associate, John J. Ford,
joined as trustees of this trust organization formed several years before, helped materially in
distributing ownership in this Thirty Million Dollar ($30,000,000) Merchandise Mart, among
members of his family. It is said that this and many trust organizations are domiciled in the Fiji
Islands of the South Pacific.
William Waldorf Astor, owner of the Waldorf Astoria, created a Fifty Million Dollar
($50,000,000) trust organization estate, by a conveyance to trustees, recorded in New York
(August 15, 1919), and saved the heirs several million dollars which would have gone for
inheritance taxes had the estate been distributed by the court instead of trustees.
The Rockefeller family has used various kinds of trusts as a means of minimizing
inheritance taxes and maximizing privacy. Before his death in 1937, John D. Rockefeller tucked
much of his fortune into about 70 trust organizations for his descendants. The vast web of
individual and group funds represents assets of considerably more than $1 billion. Nelson A.
Rockefeller and his generation are believed to be reducing their personal holdings by the creation
of still more trust organizations for their own grandchildren and great-grandchildren. It has been
reported that two of the Rockefeller brothers spent a considerable sum for information on Pure
Trust Organizations. According to one source, there are "well over 100 and perhaps 250
individual Rockefeller trust organizations by now. Many of these trusts are known to be Pure
Trust Organizations, which place the funds beyond the reach of the probate and inheritance tax
laws.
H.L. Hunt, the Texas oil billionaire, is reported to have paid $75,000 for the setting up of
the first Hunt family Pure Trust Organization. Hunt's attorneys then copied this first trust
organization indenture and formed at least 25 additional trust organizations. The trust
organizations seem to follow the names of the Hunt family members such as:

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1. Ruth Ray Hunt Trust Estate; this trust organization owns a large percentage of the Hunt Oil
Company and is worth an estimated $1 billion plus.
2. Caroline Hunt Sands Trust Estate; this trust organization is estimated to be worth at least
$100 million.
3. Ray Lee Hunt Trust Estate; this trust organization bought the Jefferson-Dallas Hotel in
downtown Dallas, Texas. This transaction was reported on the Dallas Morning News with
the purchaser being a "Mystery Buyer," thought to be a Hunt Family Trust controlled by Ray
Hunt. Ray Hunt called the purchase by his family's trust an excellent investment, according
to the Dallas Morning News. The entire transaction was kept secret because the City of
Dallas wrote off $21,491 on real estate taxes owed on the Jefferson-Dallas Hotel, a few
weeks before it was revealed that H.L. Hunt family interests were involved.
4. Nelson Bunker Hunt Trust Estate
5. Ruth Jane Hunt Trust Estate
6. Helen Hunt Kreiling Trust Estate
7. Swanee Hunt Trust Estate
8. Hassie Hunt Trust (Estate); this trust is involved in the new exploratory oil drilling efforts in
the Permian Basin of West Texas and Southwestern New Mexico.
Some persons who claim to have been close to the Hunt family estimate that there may be
as many as 200 Hunt family trust organizations now in existence. H.L. Hunt recently passed on,
leaving an accumulated fortune of several billion dollars. Much of this fortune is invested in
offshore oil wells. It will be interesting to see whether the Hunt family has to liquidate many of
these assets to pay enormous estate and inheritance taxes. (This, of course, will never happen -because the rich arrange their affairs so that their estates increase generation after generation
instead of drastically diminishing.)
The above are but a few of the many family estates that are preserved generation after
generation through the use of the Pure Trust Organization.

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The following chart is a brief summary of some of the differences between a business or
pure trust and a corporation. Remember, a statutory trust and a corporation are both artificial
persons, created by the State and under its total and absolute control, and having no rights. On
the other hand, a business or pure trust is seen by the laws as a natural person, with all the rights
of an individual.
a business trust is a citizen of every State in which its shareholders reside
Navarro Savings Assn. v. Lee, 446 U.S. 458 (1980)

Corporations

Business Trusts

Artificial person
Subject to statutory law
Board of Directors (managers)
Shareholders (beneficiaries and owners)
Subject to lawsuits from many directions

Sovereign person
Subject to a higher law (Common Law)
Board Of Trustees (owners)
Certificate Holders (only beneficiaries)
Not subject to lawsuits unless laws are
broken by the trustees
Not accountable to the certificate holders
Trustees can lose their job only for illegal
activities
Not a taxpayer by IRS definition
No federal filing requirements
No transactions are reviewed by govt
Trustees operate within wide limits
Trustees are accountable for intent
Trustees never need to distribute funds,
but can for many reasons
Trustees may distribute whatever funds for
whatever reason the Indenture allows
Trusts exist for 99 years, subject to
renewal
Trustee compensation (both the manner
and the amount) not subject to review
Owner (trustee) liability is limited

Accountable to the shareholders

Management can lose their jobs for many
reasons
Taxpayer by IRS definition
Many federal filing requirements
All transactions are reviewed by govt
Directors operate within narrow limits
Directors are accountable for results
Corporations must distribute dividends
regularly
Corporations may ONLY distribute
dividends
Corporations continue indefinitely unless
disbanded or bankrupt
Management compensation subject to
review
Owner (shareholder) liability is limited

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+ + +
No State shall . . . pass any bill . . . or law impairing the
Obligation of Contracts."
U. S. Constitution, Article I, Section 10

+ + +
Restatement of the Law of Trusts, 2d, American Law Institute, Washington, D.C.:
"The Restatement of this subject does not deal with business trusts . . . (page 2).
"Matters excluded: A statement of the rules of law relating to the employment of a trust as
a device for carrying on business is not within the scope of the Restatement of this subject.
Although many of the rules applicable to trusts are applied to business trusts, yet many of
the rules are not applied, and there are other rules which are applicable only to business
trusts. The business trust is a special kind of business association and can best be dealt
with in connection with other business associations." (page 4).

+ + +
Internal Revenue Regulation, 26 CFR, Section 301.7701-4(b):
"(b) Business Trusts -- There are other arrangements which are known as trusts because
the legal title to property is conveyed to trustees for the benefit of Beneficiaries, but which
are not classified as trusts for purposes of the Internal Revenue Code, because they are not
simply arrangements to protect or conserve the property for the Beneficiaries."

+ + +
United States Supreme Court Justice Brown, Hale v. Hankel, 201 U.S. 43 at 74 (1905):
The individual may stand upon his constitutional rights as a citizen. He is entitled to
carry on his private business in his own way. His power to contract is unlimited. He owes
no duty to the State or to his neighbors to divulge his business, or to open his door to an
investigation. He owes nothing to the State since he receives nothing therefrom beyond
mere protection of life and property. His rights are such as existed by the law of the land
long antecedent to the organization of the State. . . . He owes nothing to the public so long
as he does not trespass upon their rights." (Emphasis added)

+ + +

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A Summary of Some Court Decisions Relating

to Pure Trust Organization Concepts
The following court cases are the results of many months of intensive study and research.
This outline list is but a few of the hundreds of court cases dealing with the Pure Business Trust
Organization. Most of the case law on the Pure Trust Organization was decided approximately
50 or more years ago, as they became more known and were becoming more widespread in their
use by the wealthy. These cases have withstood the test of time concerning the important legal
aspects. As the reader probably knows, the truly valuable court cases are older. The longer a
case remains without being overturned, the more solid is its legal basis and reasoning. While the
following cases are quoted more for the use of attorneys and CPAs to review some of the legal
issues involved in statutory trusts versus business trusts, we believe the variety of cases below
will offer those unfamiliar with tax laws at least some confidence in both the legality as well as
the viability of unincorporated business trust organizations, known as the Pure Trusts. To the
non-professional, we again affirm that the business trust is viewed as being a different legal
entity than the statutory trust. The many laws and statutes which offer so much restriction of and
requirements for statutory trusts generally do not apply to the business trust. The reason, in a
nutshell, is simple: the business trust or pure trust is really not a trust as much as it is a
common-law contract functioning in the form of a trust. As the government agencies, especially
the IRS, became familiar with the business trust, they attempted to treat them as if they were
statutory trusts subject to the many tax laws and legal restrictions to which statutory trusts were
subject. The early business trusts had to wage legal war against the IRS so we wouldnt have to
today. For that we thank those business trust pioneers.

Valid and Legal Instrument

1. Crocker v. Malley, 249 U.S. 223 (1924): The United States Supreme Court upheld the
Massachusetts Trust as a valid legal entity. In this case the court held that the trust
organization was not an association, but was in fact a Pure Trust Organization.
2. Hecht v. Malley, 265 U.S. 144 (1924): It is distinguishable from other express trusts, and
these trust organization instruments are held to create "pure trusts" if trustees are the
principals and are free from the control of the certificate holders. The Hecht R. E. Trust was
established by the members of the Hecht family and was primarily a family affair, according
to the United States Supreme Court.
3. Schumann-Heink v. Folsom, 159 N.E. 250 (1927): This type of trust organization is also
sometimes referred to as a "common-law trust" because it finds its basis in the law of
contract and does not depend upon any statute for its existence.
4. Hill et al. v. Reynolds, 75 F.Supp. 408 (1948): The character of the trust for income tax
purposes is dependent upon the phraseology of the trust organization instrument (i.e.,
whether or not the instrument creates a "pure trust").

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5. Bouchard v. First Peoples Trust, 148 N.E. 895 (1925): The Supreme Judicial Court of
Massachusetts stated that "the declaration of trust in the case at bar is different from any
hitherto considered by this court" (not a statutory trust) and was a valid legal entity.
6. Goldwater v. Qitmun, 292 P. 624 (1930): The California Supreme Court stated that a
business trust is lawful in a state the statutes of which permit trusts to be created for any
purpose for which a contract may lawfully be made." (NOTE: This includes all states, as the
U.S. Constitution forbids any State to enacts laws inhibiting the formation and execution of
contracts for any and all legal purposes.)
7. Smith vs. Morse, 2 CA 524: A pure Trust is established by contract, and any law or
procedure in its operation denying or obstructing contract rights, impairs contract obligation
and is, therefore, violative of the United States Constitution.
8. Navarro Savings Assn. v. Lee, 446 U.S. 458 (1980): a business trust is a citizen of every
State in which its shareholders reside
Non-Statutory in Nature
1. Crocker vs. MacCloy, 649 US SUP. 39 at 270: A Trust organization, consisting of a U.S.
Constitutional right of contract, cannot be abridged. The agreement when executed becomes
a Constitutionally protected organization and not under the laws passed by any of the several
legislatures.
2. Elliot vs. Freeman, 220 US 178: A Pure Trust is not subject to legislative control. The
United States Supreme Court holds that the Pure Trust Relationship comes under the realm of
equity, based upon the common law, and is not subject to legislative restrictions as are
corporations and other organizations by legislative authority.
3. U.S. vs. Carruthers, 219 F2d 21: "Concerning privacy, a Trust organization, created under
the United States Constitutional right to contract, can not be abridged...The agreement, when
executed, creates a Federal organization not under the laws passed by any of the several
legislatures."
4. Crocker v. Malley, 264 U.S. 144: "The Pure Trust derives no power, benefit, or privilege
from any statute".
5. Smith vs. Morse, 2 CA 524: A pure Trust is established by contract, and any law or
procedure in its operation denying or obstructing contract rights, impairs contract obligation
and is, therefore, violative of the United States Constitution.
6. 13 Am Jur 2d, pg 379, Paragraph 51: "One of the objectives of Business Trusts is to obtain
for the Trust associates most of the advantages of corporations, without the authority of any
legislative act and with the freedom from the restrictions and regulations generally imposed
by law upon corporations."
Exchange of Property
1. Burnet v. Logan, 283 U.S. 404: The United States Supreme Court ruled that if property
received in exchange has no fair market value, it does not represent taxable gain to the
recipient. Hence, trusts can exchange trust certificates for property received without the
exchange being taxable to either the exchanger or the trust.
2. American National Bank of St. Joseph v. U.S., 92 F.Supp. 403 (1950): "Market value" for
the purpose of internal revenue law, is the price at which a seller willing to sell at a fair price
and a buyer willing to buy at a fair price (both having reasonable knowledge of the facts),
will trade.

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3. C.I.R. v. Marshman, 279 F.2d 27: The gain is measured by the fair market value of the
property received, not by the fair market value of the property transferred. The trust
certificate had no established value and therefore specific gain could not be established.
Gift Tax Considered
1. Palmer et al. v. Taylor et al., 2699 S.W. 996 (1925): The organization of the common law
(business) trust was held not unlawful. Subscription to stock in common-law trust was held
to be not a gift but an investment.
2. Tyson v. Commissioner, 146 F.2d 50 (1944): Gift tax applies only to transfers by gift with
less than full and adequate consideration. Exchanges with a business trust that involved a
trust certificate could not be viewed as a gift.
3. Est. of Anderson, 8 T.C. 706(A) (1947): Even bad bargains in a genuine business transaction
are held not to result in taxable gifts. Where the value of the stock was in excess of the
consideration, the transfers were made in the ordinary course of business and are not subject
to gift tax. (Leon Jaworski argued this case against the IRS.)
4. Scanlon v. Commissioner, 42 U.S. Board of Tax Appeals 997 (1970): No gift tax applied
when the property was transferred to a disconnected and isolated entity, where consideration
was not lacking.
Estate Tax Considered
1. Old Ken Bank & Trust Company v. U.S., 430 F.2d 392 (1970): Federal estate tax is an
excise on transfer of interests in property which occurs as a result of death. (Note: Interest in
property is transferred to the Pure Trust Organization before death. Therefore, estate taxes
cannot be involved.)
2. Second National Bank of New Haven v. U.S., 422 F.2d 49 (1970): The rationale of federal
estate tax is not a levy on property of the estate, but on transfer at death.
3. Babb v. U.S., 349 F.Supp. 792 (1972): Property interest terminating on or before death is not
a property subject of federal estate tax.
4. Igleheart v. Commissioner, 77 F.2d 704 (1935): The measure of estate tax is the value of all
the property owned by the deceased at the time of his death. (Note: Property that is owned by
the Pure Trust Organization cannot be included in a deceased estate.)
5. MaCaughn v. Fidelity Trust Company, 34 F.2d 443 (1929): The transfer tax is determined
by the value of property or interest transferred at the decedent's death. (Note: Property is
transferred to a Pure Trust before death.)
6. Shaw vs. Paine, 12 Allen (Mass) 293: "A Trust, for probate avoidance, is a lawful,
irrevocable, separate legal entity."

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Taxation in General
1. Hellmich v. Hellman, 18 F.2d 239 (1927): Treasury Department regulations, construing laws
relating to taxation, are not conclusive. Doubts in taxation statutes are resolved in favor of
the taxpayer. Courts also, if possible, avoid interpreting tax statutes to result in injustice.
2. Raymond Pearson Motor Company v. Commissioner, 246 F.2d 509: Taxpayers are not
required to continue that form of organization which results in the maximum tax.
Rule Against Perpetuities
1. Liberty National Bank & Trust Company in New York v. New England Investors, Inc., 25
F.2d 493: Such trust organizations do not come within the rule against perpetuities, having no
application to such a trust organization.
2. Baker v. Stern, 216 N.W. 147: Such a trust organization in personality does not fall within
the condemnation of the rules where it is terminable at any time by the trust indenture
articles. Legal and beneficial interest is vested immediately, and the rule against perpetuities
does not apply to business trusts.

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This document was prepared by Blue Ridge Group, an unincorporated non-associated common
law pure business trust organization. This document was prepared for the purpose of offering
some brief education to those wishing to explore the pure trust as an option in their estate
planning. It is not intended to offer legal advice in any way. This document was prepared from
a number of publications available on the topic, as well as from extensive original research. It is
distributed free of charge. For more information on pure trusts, please contact:

Blue Ridge Group

David L. Miner, General Manager
478 East Altamonte Drive
Suite 108, Box 530
Altamonte Springs, Florida 32701
(615) 301-1811
DMiner@FreedomSite.net
www.FreedomSite.net