What Is a Common Law Trust?
Common law trust (also called a constitutional trust, pure trust, or natural law trust) is a legal structure created under common law principles — the body of law derived from court decisions and historical legal traditions, rather than from legislative statutes.
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Unlike a statutory trust (which is created and regulated by state statute), a common law trust derives its authority from contract law and common law principles that predate modern government regulation. It operates under the idea that private parties have the right to enter binding agreements without government interference.
This distinction matters enormously for asset protection, privacy, and sovereignty.
### Common Law Trust vs. Statutory Trust
Most financial advisors push statutory trusts — they're simple, well-understood, and billable. A common law trust requires more education. That's exactly why so few people know about them, and why those who do have a significant structural advantage.
Here's how they compare:
Statutory (Revocable Living) Trust:
Common Law Trust:
## Why Set Up a Common Law Trust?
If you're serious about estate protection, asset privacy, and operating outside the typical statutory framework, a common law trust offers advantages that standard trusts don't provide.
### 1. Asset Protection
Assets held in a properly structured common law trust can be shielded from:
- Civil judgments against you personally
When assets are no longer legally "yours" — they belong to the trust — they are no longer reachable by your personal creditors.
### 2. Privacy
Statutory trusts are often recorded with the county or state. Common law trusts typically are not. Your assets, beneficiaries, and trust terms remain entirely private.
No public record. No probate hearing. No court oversight of your estate's distribution.
### 3. Avoiding Probate
Probate is slow, expensive, and completely public. A common law trust bypasses probate entirely — assets transfer to beneficiaries according to the trust document, with no court involvement required.
For a significant estate, this alone is worth thousands of dollars and months of delay avoided.
### 4. Multigenerational Wealth Transfer
A well-drafted common law trust can continue indefinitely, passing assets across generations without triggering estate taxes or requiring court intervention at each transfer. Your wealth compounds privately, not publicly.
### 5. Sovereignty Alignment
For those who have studied state national status and sovereignty principles, the common law trust is the natural estate extension. Once you've reclaimed your political status — you need a structure to protect the property that flows from it.
## The Core Elements of a Common Law Trust
Every valid common law trust has three parties:
### The Grantor (Settlor or Creator)
The person who creates the trust and initially transfers assets into it. Once assets are transferred, the grantor no longer legally owns them — the trust does.
Important: The grantor generally should not be both the sole trustee and sole beneficiary simultaneously. Courts can collapse trusts structured this way as self-dealing shams.
### The Trustee
The individual or entity that manages the trust assets according to the trust agreement. The trustee holds legal title to the assets but is bound by fiduciary duty to act in the interest of the beneficiaries.
Key trustee responsibilities:
### The Beneficiaries
The parties who receive the benefit of the trust — either income distributions, principal distributions, or both. Beneficiaries hold equitable title while the trustee holds legal title.
This separation of legal and equitable title is the cornerstone of all trust law — and the mechanism that enables asset protection.
## How to Set Up a Common Law Trust: Step-by-Step
### Step 1: Define Your Purpose and Goals
Before drafting anything, get clarity on what the trust needs to accomplish:
- Asset protection — shielding property from future creditors or judgments?
Your goals determine the structure. A trust built for pure asset protection looks different from one optimized for multigenerational transfer.
### Step 2: Draft the Trust Agreement
The trust agreement (also called the trust indenture or declaration of trust) is the governing document. It establishes:
- The trust name and date of creation
The trust agreement is where most people fail. A poorly drafted document won't hold up under legal scrutiny. It must reflect genuine common law principles — not simply copy statutory trust language.
Our Estate Trust Package at the ChainBreaker Store includes a professionally prepared trust agreement template designed for common law application, along with corresponding forms and step-by-step instructions.
### Step 3: Appoint Your Trustee
Choose your trustee carefully. They will hold legal title to all trust assets, make management decisions, and represent the trust in legal and financial matters.
Options:
Do not make yourself the sole trustee and sole beneficiary. Courts can pierce this structure as a sham transaction if challenged.
### Step 4: Fund the Trust
An unfunded trust protects nothing. You must actually transfer assets into it with documented legal assignments.
Real Property:
Financial Accounts:
Business Interests:
Personal Property (vehicles, equipment, collectibles):
The transfer must be real, documented, and completed. A trust that "owns" assets on paper but was never properly funded will not protect those assets.
### Step 5: Obtain an EIN
A common law trust operating as a separate entity needs an Employer Identification Number (EIN) from the IRS. This:
- Allows the trust to open bank and brokerage accounts
Apply online through the IRS website using Form SS-4. Use the trust's legal name exactly as written in the trust agreement.
### Step 6: Open Trust Bank Accounts
Once you have an EIN, open bank and investment accounts in the trust's name. All trust activity — income, expenses, distributions — flows through these accounts.
Never commingle personal funds with trust funds. Commingling is the fastest way to have a court pierce the trust structure and hold you personally liable for trust obligations.
### Step 7: Maintain Proper Trust Records
Ongoing recordkeeping is not optional — it's what makes the trust legitimate under legal scrutiny:
- Annual trust accounting (income, expenses, asset values, distributions)
Think of it like maintaining a separate business entity. The trust is a separate legal entity — it must be treated as one.
## Common Mistakes That Collapse Common Law Trusts
### Mistake 1: Using a Statutory Template
Most trust templates available online or from attorneys are statutory trusts — they cite state statutes, follow state trust codes, and fall under state regulation. A common law trust is structurally different and requires different foundational language.
### Mistake 2: Making It Revocable Without Limits
A fully revocable trust offers minimal asset protection because creditors can argue you still constructively own the assets. Structure the trust with appropriate irrevocability, or at minimum very limited revocation rights that don't compromise the asset protection purpose.
### Mistake 3: No Documented Consideration
Under common law contract principles, a trust is a contract. Contracts require consideration to be binding. Document the consideration for creating the trust within the trust agreement itself.
### Mistake 4: Self-Settled, Self-Benefited, Self-Controlled
Naming yourself as the primary beneficiary of a trust you funded while maintaining sole control as trustee is a structure courts regularly pierce. Proper separation of roles is essential.
### Mistake 5: Not Defending Jurisdiction When Challenged
If your trust is ever challenged in court, you need to understand how to assert common law jurisdiction — challenging any assumption that statutory trust law applies. Status alone doesn't defend itself. You need strategy and documentation to back it up.
## Common Law Trust and State National Status
If you've been studying state national status and sovereignty principles, the common law trust is the estate component of that framework.
State national status addresses your political and jurisdictional standing as an individual. The common law trust addresses your property standing — keeping your assets in a structure that operates under common law, separate from the statutory frameworks most people unknowingly accept.
They're complementary strategies. Your status determines how law applies to you personally. Your trust determines how law applies to what you own.
The most serious sovereignty students pursue both — and understand how they reinforce each other.
## Is a Common Law Trust Right for You?
It's the right tool if:
It's not for you if:
## What You Need to Set Up a Common Law Trust
Getting it right requires the right documents:
1. A properly drafted trust agreement (common law basis, not statutory)
That's exactly what's in our Estate Trust Package — the complete document set for establishing, funding, and operating a common law trust. It includes professional-grade templates and step-by-step instructions for every component.
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## Related Reading
- How to Set Up an Irrevocable Trust to Protect Your Assets — The statutory counterpart: irrevocable trusts, asset protection mechanics, and step-by-step setup
## Ready to Protect Your Estate?
Package 2: The Estate Trust Package — $66
Everything you need to set up and fund a common law trust: trust agreement template, asset assignment forms, EIN guidance, trustee instruction manual, and supporting affidavits.
Or go all-in with the Complete ChainBreaker Collection — $166 — the Estate Trust Package plus the State National Guide and Court Strategies. All three for $166 (you save $32).
Your estate should be working for your heirs — not sitting exposed to the courts. Start here.
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- What Is a Cestui Que Vie Trust? — The history behind estate trusts and how they apply today
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This article is for educational and informational purposes only. It is not legal advice. Consult a qualified professional for guidance on your specific situation.