Creating The ONE TRUE Common Law Trust Aligned With The Divine

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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 United 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, 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 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), 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.            

       

  Please make sure you comprehend this thoroughly.