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Trusts are legal entities, made with contract law, existing of 3 parties that can be used to transfer and manage property or assets. The three parties in any trusts are the Grantors (Settlors), the Trustee, and the Beneficiaries. It is an ingenious entity empowering Trustees of the Trust to have and hold all control over that property or assets. The true purpose of a trust is always to manage the property or trust assets (also known as the corpus) for the specific benefit of the beneficiaries. The terms and conditions of the Trust strictly define the form of the trust used and the needs of the people it is created to serve.
The Nexxess Trust is an extremely powerful instrument for those who use it, as it provides the ultimate tax-advantages, asset protection and invisibility of assets. To have complete asset protection, the Nexxess Trust must be Irrevocable and Non-Grantor. We separate the settlor, or creator, from the corpus of the trust for specific reasons. When assets are irrevocably transferred to the trust, they may never revert to the one who is making the endowment or transfer. Once the very first asset is placed in the trust by the “settlor,” or “grantor,” the trust is said to be “funded” and considered valid at that time. Under these terms and conditions upon creation, legal separation has occurred, and the corpus may not be breached by claimants of the settlor, the trustee or anyone.
The non-grantor designation exempts the trust from any alter ego status that brings into action the management or beneficial enjoyment by the settlor. Because the settlor “resigns” after funding the trust, there can be no ambiguity of such an alter ego claim. If the creator of a trust has management of the corpus, or is a beneficiary of the same trust, it becomes a so-called “living trust,” which has limited benefits and no tax advantages or asset protection.
The Nexxess Trust is written to comply with 7 different trust-law categories and governing laws or codes. They are;
To serve the beneficiaries of the trust and protect the corpus, the trust must be complex in structure, with terms and conditions that plainly and fully state the powers and limitations of the Trustee(s). Complex trusts are governed by terms and conditions that may not be altered or changed by the trustee(s); however, we can show you how this is a good thing. It’s a good thing that it’s irrevocable and non-grantor. This keeps the trust from ever being subject to an “alter-ego claim” by a creditor or an “abusive trust scheme” claim by the IRS. The one who created the trust resigned and has nothing to do with the trust anymore. It would be impossible to claim either one of those things. This resignation by the grantor takes away the element of a “conflict of interest.”
Another good thing about the trust being irrevocable is that if it was “revocable,” and able to be changed then that would take away the ability of the trust to have the three “ultimate” benefits: Ultimate Tax Advantages, Ultimate Privacy and Invisibility, and Ultimate Asset Protection.
The Spendthrift Provision of the trust is the critical element of the document, in that, no spendthrift trust corpus may be penetrated to reach the assets of the corpus. Case law has upheld this for hundreds of years. No judge or court may issue a turnover order against any asset in a properly constructed spendthrift trust. The only two known exceptions to this rule is 1) fraudulent conveyance to avoid a judgment, and this only applies to a trust created after litigation has been filed, not before. And, 2) a judge has been able to reach the corpus assets to force someone to pay unpaid child support. Other than those two exceptions, we know of no other case law where a turn-over order was successful.
The discretionary terms and conditions of the trust are established to insure the absolute and sole discretionary power of the trustee in determining the distribution of the corpus assets to the beneficiaries of the trust. If any single asset or percent of the corpus is designated either in the trust instrument itself or by the trustee to be held or distributed to one or more beneficiary(ies), the discretionary designation of the trust would be invalid. This does not affect the asset protection but will adversely affect the taxable structure of the trust for any taxable year that there was a distribution.
The Internal Revenue Code is explicit and clear regarding the discretionary nature of our trust, plainly stating that if a fiduciary has the sole and absolute authority to designate something as extraordinary dividends or taxable stock dividends, and that designation is paid to the corpus of the trust and not subject to distribution, then this is not income to the trust according to Rule 643. Another huge advantage to this trust is that any asset held in the corpus of the trust, when sold, is not subject to capital gains taxes, as long as the proceeds from the sale go back to the Trust corpus (bank account or title deed) and is not distributed to any beneficiary. (See IRC Rule 643A and 643B, or IRS Private Letter Ruling 133314-14)
There are many people who try to invalidate our program or say that our trusts are illegal or something like that. If that were true, then it would be the biggest headline in the news that more than 150,000 known trust clients who currently operate this structure (the Spendthrift Trust Organization) in the U.S. have invalid trusts. Not only that, but they would also have to conclude that somehow in more than 50 years of filing taxes, between the 17 different companies that have sold or offered this product, that somehow all the IRS Tax Officials have completely been inept to review taxes for the last 50 years (since the 1970s) and have overlooked several million “illegal” tax filings. Do you see how silly this would sound?
It would mean that not only would more than 150,000 people have invalid trusts but more than 5 million tax returns over the last 50 years are in error and every single IRS Agent that reviewed the returns were completely inept to do their job. This is completely impossible and not even reasonable.
It is way more reasonable to conclude that in 50 years of this product being widely sold in the U.S., that it is completely legal and follows the letter of the law, otherwise there would be widespread caselaw and open forums talking about its shortcomings. A popular saying is the proof is always in the pudding. That “pudding” is case law. Another popular saying is “If it’s not in case law it doesn’t exist.”
Well, not only has this not happened, but the exact opposite has happened. People are opening their eyes to the power of the tax code when savvy people will stop listening to the nay-sayers and start thinking for themselves. Even on the IRS website, the tax fraud schemes will always be found as foreign trusts and revocable trusts. One hundred percent of tax fraud schemes always fall into one of those two categories. We have not found one abusive tax scheme on the IRS site or in case law that was an Irrevocable, Non- grantor, and a Spendthrift Trust Organization. It just doesn’t exist.
At the end of the day, only reason and logic will win this argument. Our trusts can be used in all 50 States and in at least 185 Countries for business. Our trusts follow all banking regulations and work in conjunction with IRS Code, supporting the reduction of tax fraud/schemes . The Nexxess Trust is designed for those clients who have the most to protect either now or in the future and is a proven method for enhancing your wealth and securing your legacy for generations to come.
