You can almost hear the pitchman barking: “Hurry, hurry, hurry! It’s the legal and tax deal of the century! Pay no taxes! Protect your assets from lawsuits! Escape creditors! Gain complete financial privacy!” And all for the bargain price of $225…or $600…or $4,500.
A quick search on the Net turns up hundreds of pages of information from sites offering to sell you the know-how to set up your own “pure trust” without the need for an attorney (who would, of course, tell you it’s a scam).
Also known as the “common law trust,” the “constitutional trust” and by a dozen other names, the pure trust is so outrageous that it would be humorous if the results weren’t so disastrous:
- You could spend hundreds or thousands of dollars setting up a pure trust (or several) that has no legal or financial value.
- If the Internal Revenue Service catches on while you’re alive, you’ll have to pay all of the back taxes, interest and penalties on income you didn’t declare because you thought it belonged to the trust.
- If you die before the IRS or creditors challenge your trust, your heirs will receive the unpleasant and unexpected news that, yes, all the taxes, interest and penalties you avoided during life will be taken out of your estate before they get a penny.
- All the assets in your pure trust were really owned by you anyway, so they have to go through probate, creditors get a shot at them and they are subject to estate taxes.