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CASE LAW

CASE LAWS THAT DEFINED THE SPENDTHRIFT TRUST

THE COURT CASES THAT DEFINE OUR EXISTENCE, CAUSE AND LEGITIMACY

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The “right to contract” is guaranteed under the United States Constitution Article §10. (1778) "No State shall...pass any Bill...or Law impairing the Obligation of Contracts" Prohibits states from passing laws that impair the obligation of contracts.

Courts can determine the enforceability of contracts, generally on public policy grounds.

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Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) The Supreme Court ruled that a contract, no matter how obtained, cannot be invaded by state legislation. 

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Hussey v. Arnold 182 U.S. 461, 21 S. Ct.645 (1901) “Trust property cannot be held under attachment nor sold upon execution for the trustees personal debts”

Hussey V. Arnold 70 NE 87 (1904), Mayo V. Morin, 24 NE 1083 (1890). The fact that the trustees hold the property does not mean that the trustees own the personal property. Trust property cannot be held under an attachment nor sold upon the execution of trustee's personal debts. Trustees and beneficiaries cannot be held liable for debts incurred by the trust. If in fact, a trust has been created, the certificate holders are not liable on the obligation incurred by the trustees or managing agents appointed by the trustees.

 

Eliot v. Freeman 220 US 178 (1911) ruled that a Spendthrift Trust Organization is not subject to legislative control. The Supreme Court holds that the trust relationship comes under the realm of equity based on common law and is not subject to legislative restrictions, as are corporations and other organizations created by legislative authority.

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Eliot v. Freeman Nos. 448, 496, Argued January 19, 1911, Decided March 13, 1911 - 220 U.S. 178 APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS It was the intention of Congress to embrace within the corporation tax provisions of the Tariff Act of August 5, 1909, c. 6, 36 Stat. 11, 112, only such corporations and joint stock associations as are organized under some statute, or derive from that source some quality or benefit not existing at the common law. A trust formed in a state, where statutory joint stock companies are unknown, for the purpose of purchasing, improving, holding and selling land, and which does not have perpetual succession but ends with lives in being and twenty years thereafter, is not within the provisions of the Corporation Tax Law.

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Pursuant to Narragansett Mut. F. Ins. Co. v. Burnhamun 51 RI 371, 154 a 909, (1931) “It is not an evasion of legal responsibility to take what advantage may accrue from the choice of any particular form of organization permitted by law.”

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Edison California Stores, Inc. v McColgan. 30 Cal 26472.183 P2d 16. (1947) ruled that persons may adopt any lawful means for the lessening of the burden of income taxes; The Department of the Treasury, IRS Handbook for Special Agents § 412, Tax Avoidance Distinguished from Evasion states; "Avoidance of Taxes is not a criminal offence. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible.”

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Phillips vs Blanchard, 74 Mass. 21 (1862),  Weeks v. Sibley DC 269F. 155 (1969),  Edwards V. Commissioner. 415 F. 2d, 532 10th Cir. (1969), in these three cases the courts ruled that a Spendthrift Trust Organization is not illegal even if formed for the express purpose of reducing or deferring taxes

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Pursuant to 695.30(a) of the CPC for the State of California and similar Civil Procedure Codes of other states; "property of the judgment debtor that is not assignable or transferable is not subject to the enforcement of a money judgment”.

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IOWA COURT SAYS DISTRIBUTIONS HELD BY SPENDTHIFT TRUST ARE PROTECTED FROM CREDITORS

On August 31, 2022, the Iowa Court of Appeals held that a creditor cannot collect distributions from a spendthrift trust until the funds are in the beneficiary’s control. A creditor attempted to garnish funds of two spendthrift trusts which were being held by a trustee for the debtor’s benefit. The district court denied the debtor’s motion to quash the garnishment. Because the debtor had not yet received the distributions, the Court of Appeals reversed the district court’s order. 

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NOTICE: Benson financial US Business Trust (“BENSON”) strongly encourages the purchasers of a Benson Trusts Product to be mindful of all rules and regulations that apply and should be followed in structuring, implementing, and operating any of the various Benson Trust Products. Accordingly, Benson strongly urges each trustee and/or their authorized agent or representative to at all times be knowledgeable of, and compliant in all material respects with the provisions of Trust by: (1) not engaging in any type of fraudulent activity in connection with the administration of the Trust, (2) not taking any action in contravention to the Trust, local law, state law, and/or federal law, (3) timely filing an accurate income tax return with the Internal Revenue Service (and where required the filing of an accurate income tax return with all local and state governments), and (4) not understating income or overstating a deduction on an income tax return. By purchasing a Benson Trust Product, directly or indirectly, the purchaser agrees that he, she, it, is solely responsible for consulting with their own tax advisor as to the tax consequences associated with the income and principal distributions made from this trust and that you the purchaser assume sole responsibility, to the complete exclusion of Benson for the tax consequences resulting from the use of the Benson trust product including specifically with respect to income and principal distribution and IRC Section 643 treatment and application. The tax rules governing Non-Grantor, Irrevocable, Complex, Discretionary, Spendthrift Trusts are complex, change frequently, and depend on each individual taxpayer’s situation. By purchasing A Benson Trust Product, you the purchaser acknowledge that any tax liability or other tax consequences to you resulting from the establishment of this trust is solely your responsibility. Purchaser further acknowledges that he, she, or it, bears sole responsibility for the structure, implementation, and operation of any of the various Benson products purchased by you, directly or indirectly, and that you, to the express exclusion of Benson, shall bear sole responsibility for any adverse consequences for improperly structuring, implementing, and operating, a Benson Trust Product or otherwise improperly using a Benson trust product.

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