Private Irrevocable Ecclesiastical Legacy Trust

Private Irrevocable Ecclesiastical Legacy Trusts: A Comprehensive Guide

Introduction

This comprehensive guide explores the concept of Private Irrevocable Ecclesiastical Legacy Trusts, examining their definitions, legal status, regulatory framework, and practical applications. Through extensive research from multiple authoritative sources, this document aims to provide a clear understanding of these complex financial and legal structures.

Definitions and Key Concepts

Private Trust

A private trust is a legal contract that holds and manages assets for the benefit of specific individuals, typically relatives, family members, and friends of the grantor. The three major components of a trust are:

1. **Grantor:** The creator and owner of the trust, also known as the settlor or trustor.
2. **Trustee:** The individual or individuals responsible for managing and overseeing the trust and its assets.
3. **Beneficiaries:** The persons or entities who benefit from the trust.

Private trusts are distinguished from public trusts (charitable trusts) in that they benefit specific individuals rather than the general public and are not subject to the same level of scrutiny or transparency.

Irrevocable Trust

An irrevocable trust is a type of trust that, once established, cannot be modified, amended, or terminated without the permission of the grantor's beneficiary or by court order. Key features include:

1. **Permanent Transfer:** The grantor relinquishes ownership of assets to the trust
2. **Tax Benefits:** Reduces the value of the grantor's estate, which lowers estate taxes
3. **Asset Protection:** Protects assets from creditors and legal judgments
4. **Limited Control:** Cannot be altered without beneficiary permission or court order

Irrevocable trusts come in two main forms:
- **Living Trusts (Inter Vivos):** Created and funded during the grantor's lifetime
- **Testamentary Trusts:** Created after the death of their creator and funded from the deceased's estate

Ecclesiastical Element

To be considered "Ecclesiastical," a nonprofit organization must be a legitimate and compliant church, integrated auxiliary of a church, association of churches, or a convention of churches (also called a "508"). Section 508(c)(1)(A) of the Internal Revenue Code exempts churches, their integrated auxiliaries, and conventions or associations of churches from the standard requirement to apply for tax-exempt recognition.

Legacy/Dynasty Trust

A Legacy Trust (also known as a dynasty trust) is an irrevocable trust designed to help preserve wealth and provide benefits for multiple generations of a family while potentially minimizing the impact of state, estate, and transfer taxes. Key features include:

1. **Multigenerational Planning:** Designed for the financial well-being of children, grandchildren, great-grandchildren, and beyond
2. **Tax Advantages:** Potentially minimizes the impact of state, estate, and transfer taxes
3. **Customizable:** Can be tailored to the grantor's specific wishes and circumstances
4. **Flexibility Options:** Can include provisions for changing the place of administration or replacing trustees

Legal Status and Regulatory Framework

Official Status Under IRS Regulations

Under the Internal Revenue Code (IRC), there is no specific provision for a "Private, Irrevocable, Common Law, Ecclesiastical, legacy Trust." The term "508" refers to Section 508(c)(1)(A) of the IRC, which outlines special rules for organizations seeking tax-exempt status under Section 501(c)(3), particularly focusing on the notification requirements for such organizations.

Section 508(c)(1)(A) simply exempts churches, their integrated auxiliaries, and conventions or associations of churches from filing the notice with the IRS (Form 1023) in order to be recognized as tax exempt. They are exempt from this filing requirement because they are already classified as 501(c)(3) organizations, not as an alternative to being 501(c)(3) organizations.

Common Law Trust Status

According to the IRS, "contrary to the claims of promoters, 'common law trusts' no longer exist since all states now have statutes relating to the creation and operation of trusts." For them to say they no longer exist is mere manipulation. Per Article 1 Section 10 of the U.S. Constitution, “No State shall... pass any... Law impairing the Obligation of Contracts...”. If you want your governing law to be common law you can make it common law because that's your right to do so!

This directly contradicts claims made by some promoters of "Private, Common Law, Irrevocable, Ecclesiastical Trusts" who suggest these operate under common law principles outside of statutory regulations.


Churches and 501(c)(3) Status

The IRS considers a church, integrated auxiliary of a church, association of churches, or convention of churches (also known as a "508") a public charity by the nature of their religious and charitable activities. They are automatically recognized as tax-exempt 501(c)(3) charitable organizations if they meet the IRS requirements.

This allows 508s to receive federal income tax exemption, tax-deductible donations, and exemption from annual Form 990 filing requirements that cause their accounting and records to be subject to public scrutiny.

Irrevocable Trust Requirements

For an irrevocable trust:
- The grantor forfeits ownership and authority over the trust and its assets
- Cannot be changed without a court order or the approval of all the trust's beneficiaries
- A third-party member, called a trustee, is responsible for managing and overseeing the trust
- Generally, the trustee is entirely in control of the trust assets and the donor has no further rights to the assets
- The donor may not be a beneficiary or serve as a trustee

Practical Applications and Examples

Despite the legal concerns noted above regarding the specific "Private Irrevocable Ecclesiastical Legacy Trust" terminology, the individual components that make up this concept have legitimate applications:

Private Trust Applications

1. **Family Wealth Management:** Preserving and transferring wealth to specific family members
2. **Privacy Protection:** Keeping asset ownership and transfer details private
3. **Specific Beneficiary Support:** Providing for the needs of specific individuals

Irrevocable Trust Applications

1. **Asset Protection:** Shielding assets from creditors and legal judgments
2. **Estate Tax Minimization:** Reducing the taxable estate by removing assets from the grantor's ownership
3. **Medicaid Planning:** Helping individuals qualify for government benefits
4. **Special Needs Planning:** Providing for beneficiaries with special needs without disqualifying them from government assistance
5. **Professional Practice Protection:** Protecting assets of individuals in high-risk professions

Legacy/Dynasty Trust Applications

1. **Multigenerational Planning:** Providing financial benefits across multiple generations
2. **Tax Efficiency Across Generations:** Minimizing transfer taxes as wealth passes through generations
3. **Family Legacy Preservation:** Maintaining family values and wealth management principles over time
4. **Protection from Spendthrift Heirs:** Preventing beneficiaries from squandering inherited wealth

Creation Process and Implementation

The process of creating and implementing these trusts typically involves:

1. Drafting a Declaration of Trust
Creating a comprehensive trust agreement that outlines:
- The trust's purpose and terms
- Naming the trustee and beneficiaries
- Outlining asset distribution and management guidelines
- Establishing the trust's duration

2. Funding the Trust
Transferring assets from the grantor to the trust, which may include:
- Real estate
- Cash and investments
- Life insurance policies
- Business interests
- Personal property

3. Planning Beneficiary Disbursements
Determining how and when beneficiaries will receive distributions:
- Regular income payments
- Principal distributions at specific ages or milestones
- Discretionary distributions based on trustee judgment
- Educational or healthcare expense provisions

Specific Types of Irrevocable Trusts

1. **Spousal Lifetime Access Trust (SLAT):** Used by married couples for asset protection while maintaining indirect access through a spouse

2. **Irrevocable Life Insurance Trust (ILIT):** Removes life insurance proceeds from the taxable estate while providing liquidity for heirs

3. **Grantor Retained Annuity Trust (GRAT):** Allows the grantor to transfer appreciating assets to beneficiaries with minimal gift tax consequences

4. **Qualified Personal Residence Trust (QPRT):** Enables the transfer of a personal residence to beneficiaries at a reduced gift tax value

5. **Charitable Remainder Trust:** Provides income to the grantor during their lifetime with the remainder going to charity

Important Considerations and Limitations

1. **Legal Status Concerns:** There is no specific provision for a "508 Trust" or "Private, Irrevocable, Common Law, Ecclesiastical Trust" under the Internal Revenue Code.

2. **Potential IRS Scrutiny:** The IRS has identified certain trust arrangements marketed as "508 Trusts" that may be considered abusive tax avoidance schemes.

3. **Ecclesiastical Considerations:** To be considered "Ecclesiastical," an organization must be a legitimate and compliant church, integrated auxiliary of a church, association of churches, or convention of churches.

4. **Common Law Trust Issues:** According to the IRS, "common law trusts" no longer exist since all states now have statutes relating to the creation and operation of trusts.

5. **Professional Guidance Requirement:** Due to the complexity and potential legal/tax implications, professional legal and financial advice is essential when considering these structures.

Conclusion

This Private Irrevocable Ecclesiastical Legacy Trust is YOUR CHURCH and YOUR NEW GOVERNING LAW. That's why its Church v State!

While the specific concept of a "Private Irrevocable Ecclesiastical Legacy Trust" does not have explicit recognition under the Internal Revenue Code, nor should it because it is private. You have the right to private contracts per Article 1 Section 10 of the U.S. Constitution. Also, the First Amendment to the U.S. Constitution, part of the Bill of Rights, guarantees several fundamental freedoms: freedom of religion, freedom of speech, freedom of the press, the right to peacefully assemble, and the right to petition the government. It prohibits Congress from making laws that establish a religion, prohibit the free exercise of religion, or abridge the freedom of speech, the press, the right to assemble, or the right to petition for redress of grievances. If anyone were to question or file suit against your Private Trust, they will have to break through these to constitutional agreements which has NEVER been done. Marbury v Madison, 1803, Supreme Court Case, says the supreme law of the land is the U.S. Constitution and please go look for yourself how many times that case has been overruled. ZERO TIMES!

Given the potential for IRS scrutiny of the private trust, individuals interested in these concepts should not construe what we say as legal advice. If you want to learn more on why we think you have the right to this private contract, read Hale v Henkel, 1906, Supreme Court case. This will give you a lot of insight on the distinction between natural persons and your legal entity (trust). As well as what a church is in the IRC because they say it is not specifically defined on the website!