A Spendthrift Trust Organization isn’t brought into existence by a legislative act. Instead, its creation is founded upon the parties’ common law right to form contracts, a right recognized by the Constitution. Under American law, a “right to contract” as stipulated in Article §10 of the United States Constitution is protected.

This implies that neither the government nor a judge can alter even a single word of a Trust Contract. Once assets enter a Spendthrift Trust Organization, they adhere to its own set of guidelines, safeguarding and managing the property. The government only has the authority to regulate and tax entities it establishes.

For a Spendthrift Trust Organization, the income tax obligation is limited to the tax on the income generated by the trust’s corpus or endowments, unless specified otherwise by the trust’s terms. When properly structured, all contributions or endowments to the trust are non-taxable. Unlike corporations, which are subject to legislative oversight and taxation, Revocable Living Trusts also fall within statutory control. A Revocable Living Trust is mandated to file a 1041 Form annually. In contrast, income within a corporation is taxable, while endowments to a Revocable Living Trust are also taxable. However, contributions or endowments to a Spendthrift Trust aren’t taxable.

Court cases such as Weeks v. Sibley DC 269£, 155, Edwards V. Commissioner. 41512£!, 532 10th Cir. (1969), and Philips v. Blanchard 37 Mass 510, establish that a Spendthrift Trust Organization’s legality stands even if it has established specifically to lessen or delay taxes.

Similarly, Edison California Stores, Inc. v. McColgan. 30 Cal 26472.183 P2d 16 ruled that individuals can adopt lawful means to lessen the burden of income taxes. According to the Department of the Treasury, IRS Handbook for Special Agents § 412, Tax Avoidance Distinguished from Evasion: “Avoidance of Taxes is not a criminal offense. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible.”