REPORT #PCT04: THE PURE CONTRACT TRUST IN A NUTSHELL
© Copyright 1994 Sovereign Services ALL RIGHTS RESERVED
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
WHAT IS A PURE CONTRACT TRUST?
In this publication the term "Pure Contract Trust" refers
to a particular form of Common-Law Contract that creates a Trust, also
called a "Pure Trust."
Definition of Trust: Property held by one person for the benefit of another.
The Pure Contract Trust is a particular kind of trust. It is based on
the U.S. Constitution, Common Law, and extensive case law, including many
Supreme Court decisions.
The Pure Contract Trust provides these basic benefits:
- Asset Protection
- The ability to engage in any lawful business anywhere
- Diversification of assets and activities into separate "watertight
- Rendering yourself virtually judgment-proof
- Elimination of probate and estate taxes
- Reduction or elimination of attorney's and accountant's fees.
- Reduction of other taxes
- Reduction of time-wasting, bureaucratic reporting.
THE MOST BASIC ASPECTS OF THE PURE CONTRACT TRUST
/ Exchange \
[PROPERTY] ---------------------------- [CERTIFICATE(S) OF
\ / CAPITAL UNITS]
A Pure Contract Trust can have special characteristics:
- The Pure Contract Trust is a contractual agreement. It contains an
offer and an acceptance between competent parties of legal age - the Creator
and Exchangor, who enter into the basic contract that creates the trust.
They also appoint the Trustees.
- Consideration is paid between the Creator and Exchangor.
- The first part of the Pure Contract Trust consists of eight Stipulations.
These Stipulations provide the basic legal foundation of the Contract,
based on the U.S. Constitution, Common Law, and certain Court Decisions.
- Property can be exchanged into the Trust in return for certificate(s)
of capital units. (Though capital units are not shares, they are similar
- The Pure Contract-Trust is irrevocable.
- The Pure Contract-Trust has a legal object or purpose.
- The Pure Contract-Trust has a termination date, but is renewable.
- The Pure Contract-Trust involves no grantors and no gifts.
- There are no beneficiaries and no certificates of beneficial interest.
- The capital units are non-voting.
- The certificates of capital units confer neither legal nor equitable
title to the trust property, nor any voice in the management and control
- The certificates of capital units have no determinable value.
- The Pure Contract Trust has a profit motive.
- The Pure Contract Trust can be used for a variety of purposes, including,
but not limited to, owning property and other assets, owning one or more
businesses, managing or running one or more businesses, and providing consultation
or other services.
BENEFITS OF THE PURE CONTRACT TRUST STRUCTURE
- The trust contract is filed with the county recorder and becomes a
public record. This part of the trust documentation contains a record of
initially exchanged property, such as "a desk and four chairs."
- Personal assets can subsequently be exchanged into the trust. Such
exchanges are recorded in the trust minutes, a private set of documents
completely under the managing director's control.
- The public record contains no references to you as managing director.
Yet, as managing director you have complete practical control over the
assets and affairs of the trust. Your appointment as managing director
is included in the trust minutes, a set of private documents over which
you have complete control.
- In the same way you can manage one or more businesses owned by such
- The county recorder filing number can sometimes be used to open bank
accounts and investment accounts. These accounts can be set up so they
don't have any "number" that can be easily linked to you. Whatever
the bank reports is about the trust not about you.
- You can close all bank accounts bearing your personal name and social
- This structure maximizes your privacy.
- It enables you to organize your affairs so you pay as little or as
much tax as you choose.
- Through the trust minutes you appoint successor managing director(s)
who take over control of the trust, its assets, and affairs, according
to conditions you specify, under the direction of the certificate holder
(s). The trust need never "die" - so there is no probate and
never any estate taxes.
- Professionals such as doctors and dentists can reduce or eliminate
their need for liability insurance. By exchanging their assets and practices
into Pure Contract Trusts, they reduce their own ownership to little or
nothing. Different assets can be exchanged into separate trusts - individual
- No attorney is necessary to set up the Pure Contract Trust structure.
In fact, practically all U.S. attorneys are statutory attorneys. They swear
an oath to uphold a State Constitution, not the U.S. Constitution. Most
attorneys know little Constitutional/Common Law. They are unfamiliar with
Pure Contract Trusts.
- Every aspect of the Pure Contract Trust is lawful. As you will see
in the following pages, the Pure Contract Trust is guaranteed by the U.S.
Constitution, many Supreme Court decisions and other court decisions.
- It is unlikely that the "ruling elite" will change the rules
in the near future to disallow such trusts. It is precisely through similar
trusts that many of the richest families of the "ruling elite"
- the Rockefellers, Kennedys, Hunts, etc. - have conducted their affairs
in privacy, while reducing or eliminating taxes. The "ruling elite"
do not shoot themselves in the foot!
- A doctor recently commented, "The protection of liability alone
is beyond my dreams, not to speak of the other benefits that the Pure Contract
Trust system offers, such as tax control and no need for a will, nor any
worry about probate and inheritance taxes, as they are neatly avoided by
the trust arrangement. It was also great to see that property could be
exchanged into the trust without a hitch and no sales or excise tax being
charged by the County, which surprised me. I strongly recommend the Pure
Trust to anyone in a professional or business position. No corporation
can protect the principals like a Pure Contract Trust does. The rewards
and benefits are enormous... "
THE PURE CONTRACT-TRUST IN MORE DETAIL
(A) CREATOR/EXCHANGOR _______\ (B) PURE CONTRACT
& TWO TRUSTEES / TRUST DOCUMENT
(C) SEPERATE, PRIVATE FILED WITH
CONTRACT APPOINTS COUNTY RECORDER
(D) MANAGING _____\ (E) TRUST _____\ (F) CERTIFICATE
DIRECTORS(S) / MINUTES / HOLDER(S)
- Creator and Exchangor (A) create basic Contract (Trust).
- Creator and Exchangor appoint two Trustees.
- Creator, Exchangor, and two Trustees (A) sign Pure Contract Trust Document
- Pure Contract Trust Document (B) filed with County Recorder.
- Trustees (A), by means of separate private Contract, appoint Managing
- Above appointment also recorded in first (private) Trust Minutes (E).
- Pure Contract Trust Document (B) contains no references or links to
Managing Directors (D).
- Pure Contract Trust Organization (created by B) has legal and equitable
title to Trust assets.
- Managing Director(s) (D) has/have complete, practical control of Trust
assets and affairs, and maintain(s) Trust Minutes (E).
- Trust Minutes (E) used to exchange assets into trust, and to appoint
Certificate Holder(s) (F).
- The function of Certificate Holder(s) (F) is to ensure that the provisions
of Trust Minutes (E) are executed upon the demise of Managing Director(s)
(D). Certificate Holder(s) is/are not beneficiaries. His/their only claim
is a demand that the terms and stipulations of the Contract (B) be carried
out. The Role of Certificate Holder(s) (F) is similar to that of the Executor
of a will.
- Someone who purchases the right to use the Pure Contract Trust - the
Managing Director(s) - receives the following:
(a) Creator, Exchangor, and Trustees are provided. They are Sovereign Individuals
- meaning they have taken the necessary steps to eliminate "hidden"
or "adhesion" contracts associated with birth certificates, social
security numbers, driver's licenses, etc. In general, they are not subject
to statutory control.
(b) The Pure Contract Trust Document, signed by the above parties, notarized,
and recorded by the County Recorder in Maricopa, Arizona.
(c) The Minutes of the first Trustee meeting, where the Trustees pass a
resolution to appoint the Managing Director(s).
(d) The signed and notarized Contract appointing the Managing Director(s).
As soon as the purchaser - the Managing Director(s) - receives the above
documents, the Managing Director(s) only have to sign the Contract and
get his/their signature(s) notarized, and the Pure Contract Trust is ready
COMMON-LAW JURISDICTION V. STATUTORY JURISDICTION
Very few U.S. citizens know that they have a fundamental choice: To
live their lives and conduct their businesses under common-law jurisdiction
or statutory jurisdiction. Common Law is the law of the land, the law of
the Constitution. Statutory law is the laws of the several States and the
The U.S. Constitution is a Common-Law Statement. In the U.S.,
Common Law is the law of the land
- "It [The U.S. Constitution] must be interpreted in the light of
Common Law, the principles and history of which were familiarly known to
the framers of the Constitution. The language of the Constitution could
not be understood without reference to the Common Law." U.S. v.
Wong Kim Ark, 169 U.S. 649, 18 S. Ct. 456.
- "Law of the Land" means "The Common Law." Taylor
v. Porter, 4 Hill. 140, 146 (1843) - Justice Bronson; and State
v. Simon, 2 Spears 761, 767 (1884) - Justice O'Neal.
- The U.S. adopted the Common Laws of England with the Constitution.
Coldwell v. Hill, 176 S.E. 383 (1934).
- "The United States is entirely a creature of the Federal Constitution,
its power and authority has no other source and it can only act in accordance
with all the limitations imposed by the Constitution." Reid v.
Covert, 354 U.S. 1, 1 L. Ed. 2nd. 1148 (1957).
- "The rights and liberties of the citizens of the United States
are not protected by custom and tradition alone, they are preserved from
the encroachments of government by express/enumerated provisions of the
Federal Constitution." Reid v. Covert, 354 U.S. 1, 1 L. Ed.
2nd. 1148 (1957).
- "The prohibitions of the Federal Constitution are designed to
apply to all branches of the national government and cannot be nullified
by the executive or by the executive and the senate combined." Reid
v. Covert, 354 U.S. 1, 1 L. Ed. 2nd. 1148 (1957).
- "Where rights as secured by the Constitution are involved, there
can be no rule making or legislation which will abrogate them." Miranda
v. Ariz., 384 U.S. 436 at 491 (1966).
- "Congress may not, by any definition it may adopt, conclude the
matter, since it cannot by legislation alter the Constitution." Eisner
v. McComber, 252 U.S. 189 at 207.
The IRS makes this distinction between the two kinds of law:
"1. Common law comprises the body of principles and rules of action
relating to government and security of persons and property which derive
their authority solely from usages and customs or from judgments and decrees
of courts recognizing, affirming, and enforcing such usages and customs.
2. Statutory law refers to laws enacted and established by a legislative
body." IRS Manual, page 5041.1 Section 222.1.
Much of the original U.S. common law has been codified in a single Federal
statute, the Uniform Commercial Code. The UCC provides the mechanism for
making the choice between common law jurisdiction and statutory jurisdiction.
It also states that the failure to make the choice results in the loss
of common law rights.
"When a waivable right or claim is involved, the failure to make
a reservation thereof, causes a loss of the right, and bars its assertion
at a later date." UCC 1-207.9.
"The Sufficiency of the Reservation - Any expression indicating
an intention to reserve rights, is sufficient, such as "without prejudice.""
The specific method for reserving your common-law rights - for choosing
to operate under common law jurisdiction - is to write below your signature
"Without Prejudice UCC 1-207." You could use this phrase
on your driver's license, on bank signature cards, on checks, and on contracts.
Case Law on Jurisdiction
- "The law provides that once State and Federal Jurisdiction has
been challenged, it must be proven." Main v. Thiboutot, 100
S. Ct. 2502 (1980).
- "Jurisdiction can be challenged at any time." Basso v.
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
attack." Thompson v Tolmie, 2 Pet. 157, 7 L. Ed. 381; and Griffith
v. Frazier, 8 Cr. 9, 3 L. Ed. 471.
WHAT MAKES THE PURE CONTRACT TRUST SUCH A POWERFUL INSTRUMENT
The Pure Contract-Trust is a Common-Law "Identity" ("legal
person"), based on the unlimited right to contract, and not subject
to statutory jurisdiction
- "No State shall... pass any bill... or law impairing the obligation
of contracts... " U.S. Constitution, Article I, Section 10
- A trust is a legal entity. Burnett v. Smith, 240 S.E. 1007 (1922).
- A Trust has a legal right to own property, to sue in its own name and
be sued. Goldwater v. Oltman, 292 P 624.
- A Pure Trust is a contractual relationship in Trust form. Berry
v. McCourt, 204 N.E. 2d 235 (1965).
- A Trust organization created under the U.S. constitutional right of
contract cannot be abridged. The agreement, when executed, creates a Federal
organization not under the laws passed by any of the several (State) legislatures.
Crocker v. MacCloy, 649 U.S. Sup. 39 at 270 .
- A Pure Contract Trust is not subject to legislative control. The U.S.
Supreme Court holds that 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 created by legislative authority.
Elliot v. Freeman, 220 U.S. 178 (1911).
The Pure Contract-Trust is a Contractual Agreement guaranteed
by the US Constitution.
- 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 U.S. Constitution. Burnett
v. Smith, 240 S.W. 1007 (1922).
- The creator of a Pure Trust may mold and give it any shape he chooses,
and he or the trustees may provide for the appointment of a successor or
successors to the trustee or trustees, upon such terms as he may choose
to impose. "It is established by legal precedent that pure trusts
are lawful, valid business organizations." Shaw v. Paine, 12
Allen (Mass) 293; and Harwood v. Tracy. 118 MO. 631, 24 SW 214.
The Pure Contract Trust can engage in any lawful business in any
State (and anywhere in the world)
- "It is established by legal precedent that pure trusts are lawful,
valid business organizations." Baker v. Stern, 216 NW 147,
58 A.L.R. 462.
- A trust created and recorded in one state is valid in all states. Newhall
v. McGill, 212 P 2d 764.
- The trust is not limited to any given state in conducting business.
Shirk v. Lafayette, 52 F 957.
- The Pure Trust can engage in any kind of lawful business that individuals,
partnerships, or corporations might engage in, as evident from the wide
variety of business pursuits for which Pure Trusts have been organized:
Operating and management of apartment houses - Helvering v. Coleman-Gilbert
Assn., 296 U.S. 369; Oil well development - Helvering v. Cones,
296 U.S. 375; Real estate business - Crocker v. Malley, 249 U.S.
23; Purchasing, improving, holding and selling land and buildings and operating
an office building - Elliot v. Freeman, 220 U.S. 178 (1911); Production
of motion pictures - Goldwater v. Oltman, 210 Cal. 408; Building
and equipping racing speedway - Chas. Nelson Co. v. Morton, 106
Cal. App. 144; Real estate business - Schumann-Heink v. Folsom,
328 Ill., 321.
The Pure Contract Trust may reduce its tax liability
- "A pure trust is not illegal if formed for the express purpose
of avoiding taxation." Weeks v. Sibley, (D.C.) 269 F 155.
- "Dignity of contract cannot be set aside because a tax benefit
results either by design or accident." Edwards v. Commissioner,
415 F 2d 578, 582, 10th Cir. (1969).
- "Anyone may arrange his affairs so that his taxes shall be as
low as possible. He is not bound to choose that pattern which best pays
the Treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again courts have said that there is nothing sinister in
so arranging affairs as to keep taxes as low as possible, everyone does
it, rich and poor alike and all do right, for nobody owes any public duty
to pay more than the law demands." Helvering v. Gregory, 60
Federal (2nd) 809. Judge Learned Hand.
(Note: Certain trusts are taxed as associations. However, there is sound
legal evidence that the Pure Contract Trust is not an association.) "We
perceive no ground for grouping the two - beneficiaries and trustees -
together, in order to turn them into an association, by uniting their contrasted
functions and powers, although they are in no proper sense associated."
Hecht v. Malley, 265 U.S. 144.
- If property received in exchange has no fair market value, it does
not represent taxable gain to the recipient. Burnet v. Logan, 283
- Subscription to stock in Common Law Trust was held not a gift but an
investment. Palmer et. al. v. Taylor et. al., 269 S.W. 996 (1925).
- Gift tax applies only to transfers by gift with less than full and
adequate consideration. Tyson v. Commissioner, 146 F 2d. 50 (1944).
The Pure Contract Trust may remunerate directors or other individuals,
who may pay taxes on such remuneration
- "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 v. Pennsy, 319
- "Where rights secured by the Constitution are involved, there
can be no rule making or legislation which would abrogate them." Miranda
v. Ariz., 384 U.S. 436 at 491 (1966).
- "The cooperative taxpayer fares much worse than the individual
who relies upon his constitutional rights. Only the rare taxpayer would
be likely to know that he could refuse to produce his records to Internal
Revenue Service Agents." U.S. v. Dickerson, 413 F 2d 1116.
- "In numerous cases where the IRS has sought enforcement of its
summons pursuant to statute (26 U.S.C. 7402), courts have held that a taxpayer
may refuse production of personal books, and records by assertion of his
privilege against self-incrimination." Hill v. Philpott, 445
F 2d 144. 146; and Stuart v. U.S. 416 F 2d 459; and U.S. v. Kleckner,
273 F Supp 251.
- Treasury Department regulations, construing laws relating to taxation,
are not conclusive. Doubts in taxation statutes are resolved in favor of
taxpayer. Hellmich v. Hellman, 18 F 2d 239 (1927).
The Pure Contract Trust is not subject to probate or estate taxes
- A Trust, for probate avoidance, is a lawful, irrevocable, separate
legal entity. Shaw v. Paine, 12 Allen (Mass.) 293; and Harwood
v. Tracy, 118 Mo. 631, 24 S.W. 214.
(Note: Although the Pure Contract Trust has a termination date, it can
be renewed and need not be subject to "death." The first trust
similar to the Pure Contract Trust on record in the U.S. was drawn up by
Patrick Henry in 1765. Called the North American Land Company, it is believed
to be still in operation at the time of writing.)
- Succeeding trustees take title to the property subject to the same
conditions as in the hands of the original trustees. Bisbee v. McKay,
102 N.E. 327.
- Federal estate tax is an excise on transfer of interests in property
that occurs as a result of death. Old Kent Bank & Trust Co. v. U.S.,
349 F Supp. 792 (1972).
The Pure Contract Trust has no reporting obligations to any government
- The Trustees of a Trust have all the powers necessary to carry out
the obligations which they assume. Their books and records are not subject
to review or subpoena. Smith v. Morse, 2 CA 524; Boyd v. U.S.,
116 U.S. 618; Silverthorne Lumber Co. v. U.S., 251 U.S. 385.
The Pure Contract Trust contains a clause forbidding the parties,
including managing director(s) to reveal confidential information about
the trust without the unanimous decision of the trustees.
- The trustees of a trust have all the power necessary to carry out the
obligations they assume. Their consulting services and records are not
subject to review or subpoena. Boyd v. U.S., 116 U.S. 618; and Silverthorne
Lumber Co. v. U.S., 251 U.S. 385.
- The Court will support the trustees in carrying out the terms of their
trust contract and agreement. Clew v. Jamison, 182 U.S. 461, 21
S. Ct. 645.
- Concerning privacy, a trust organization created under the U.S. Constitutional
right of contract cannot be abridged. The agreement, when executed, creates
a federal organization not under the laws passed by any of the several
[State and Congress] legislatures. U.S. v. Carruthers, 219 F2s 21
(1925); and Waterman v. MacKenzie, 138 US 252 (1981).
The Pure Contract Trust has the constitutional protections of
right to privacy, freedom from unwarranted search and seizure, to refrain
from self-incrimination, and all other individual rights bestowed by the
- "There is a clear distinction in this particular case between
an individual and a corporation, and that the latter has no right to refuse
to submit its books and papers for an examination at the suit of the State.
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 such duty [to submit his books and
papers for an examination] to the State, since he receives nothing therefrom,
beyond the protection of his life and property. His rights are such as
existed by the law of the land [Common Law] long antecedent to the organization
of the State, and can only be taken from him by due process of law, and
in accordance with the Constitution. Among his rights are a refusal to
incriminate himself, and the immunity of himself and his property from
arrest or seizure except under a warrant of the law. He owes nothing to
the public so long as he does not trespass upon their rights." Hale
v. Henkel, 201 U.S. 43 at 47 (1905); and Pinkerton v Verberg,
78 Mich. 573, 584.
The Pure Contract Trust provides limited liability protection
- Trust property cannot be held under attachment nor sold upon execution,
for the trustees' personal debts. Clew v. Jamison, 182 U.S. 461,
21 S. Ct. 645.
- Personal liability of a Trustee cannot be enforced against the trust
property. Mayo v. Moritz, 24 N.E. 1083 (1980).
- Trustees and beneficiaries cannot be held liable for debts incurred
by the trust. Hussey v. Arnold, 70 N.E. 87 (1904).
Other reports in this series:
#PCT01 - #PCT01A - #PCT02
- #PCT03 - #PCT04 - #PCT05
- #PCT06 - #PCT07 - #PCT07A
- #PCT08 - #PCT09
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