The model and trust law

The model and trust law

If it wasn’t for my study into trust law and its history in conjunction with my studies into religion, philosophy, economics etc , I doubt I would have discovered this model; this is really when the model popped out and hit me like a truck. Trust law and the principles it rests on cannot be appreciated without a thorough understanding of its history, which is long, and cannot be fully appreciated by narrowing oneself to recent trust practice, which today has become commoditized and all about money.

The key principles this model rests on are primary trust law principles, principles which have been around for thousands of years and have stood the test of time. In order to understand the way of the custodian model it is essential to understand these principles of trust law.

In case you are not familiar, I shall first go through the basics of a trust as the law has viewed it throughout history.

A trust is a confidence which is attached to some thing and someone, to hold that thing and perform certain duties regarding that thing for the benefit of another. For instance, if I was to go away for quite some time and I needed someone else to look after something of mine, say a dog, my house, etc, then I, as grantor, would be asking this person if it is ok if I place my trust, my confidence, in them, and if they accept they become trustee. What the duties are in relation to the dog or house are irrelevant; what is important above all is that the person I place my trust in is not permitted to treat the dog or house as their own. What is meant by this is that they are not permitted to derive some personal benefit from it, i.e. they couldn’t sell the dog or house, or lease either, and then take that money for themselves. Of course, if I actually asked the person to lease the house while I was gone and hold on to the money until I get back then this would constitute a valid trust. Further, I could even ask them to lease the house and apply the proceeds to a third person, which could be a relative of mine, or some charity, etc, and this would still constitute a valid trust. The key principle of trust law is that a trustee is not permitted to derive a personal benefit from the thing which has been entrusted to them, but instead must perform any duties for the benefit of certain specified beneficiaries.

This key principle also has some offshoots, or other principles derived from it, which go by other names, such as the rule against self-dealing to name one, and which limit the way in which a trustee can deal with his or her beneficiaries. For instance, one key principle is that a trustee is generally not permitted to deal with the beneficiaries outside of the duties imposed on them, as this too is a breach of trust. An example would be if the trustee who was given the duty to sell the house entrusted to them on the open market and give all proceeds to the beneficiary, decides instead to act in their own interests and buy the trust property themselves. In theory, this may not seem like much of an issue but what is key here is that when buying the house the trustee is now in what is called a conflict of interests because on one hand, he wants to buy the house for as low as possible (as does everyone in that situation) whereas from the position of trustee he is duty bound to get the best price for it for his beneficiary. If he wants to purchase the house himself he can’t act in his own interests and at the same time act in the interests of the beneficiary. It is because of this obvious conflict that the law has always maintained strict rules against this form of dealing.

Another key principle offshoot is the principle of equality between all beneficiaries. If a trustee happens to have duties to manage property for multiple beneficiaries, and unless ordered otherwise by clear instructions, then the law requires they treat all beneficiaries equally and not favour one or some over others. A key basis behind this is that a trustee accepts the duty on grounds of complete loyalty to the wishes of the grantor and the purpose for which it is granted, and therefore there is no room for favouritism or otherwise based on personal opinions or judgments on the character of each beneficiary. The law cares not whether you like or dislike any of the beneficiaries, and any act which tends toward personal opinions is an act which is essentially an act based on self-interests.

A third, but just as important principle is the protection of the trustee themselves in their ability to perform their duties. This protection comes in two primary ways; the first being from the trust itself and the second from the law. Although a trustee is not permitted to put their own interests first in relation to their trust duties, by the same token they are not expected to perform their duties at their own financial expense or at the expense of other duties they may have, such as their own duties to provide for their own family. It would make a mockery of good reason and good conscience if a man was asked to be a trustee if only he agrees to completely abandon the duty of providing for his own children. Therefore, and unless the trust instrument expressly says otherwise, if a trustee was to perform a trust duty which for the sake of convenience at that time he paid for out of his own pocket, the law would justify him in reimbursing himself out of the trust property. The point here is that a trustee can only be a good trustee if he himself is not bankrupt, homeless, or destitute. Another element of trustee protection is the ability of a trustee to seek the guidance of the courts if he finds himself in a position where he is not sure if his actions will be in conformity with either the trust instructions or the law itself. The responsibilities of a trustee are such that more is expected of them by the law than the general day to day businessman and so if the trustee is unsure if any proposed action may be in conflict with his duties and/or the law, not only does he have the right to seek the courts aid, he is in fact bound by trust law to seek it. Once seeking that aid and guidance, the trustee is then protected by the courts when taking the action he first proposed, or whatever direction the court deems him necessary to take.

So far we have touched on the basics of what a trust is and some of its key principles, based on there being a grantor, a trustee, and a beneficiary (who may be the grantor also). Another form of trust, but one equally bound by the same principles, is one where the grantor becomes the trustee, and openly declares their intent to hold something they own in trust for another or others. The moment they make this declaration they no longer own the thing in question as someone with outright ownership, but instead have made themselves a trustee, and as such have completely changed the way the law views how they must now treat this thing. The key difference between this trust and the first trust is that with the former, the duty was placed on another, but with the latter, it is a self-imposed duty, both of which carry with them the full force of the law. It is the latter type of trust which this model is based on.

The key elements of a trust, although sometimes varied depending on the country etc, are basically the following:

1. Intent to form a trust
2. A trustee
3. A subject
4. An object

1. The intent to form a trust is usually some form of expression or declaration, made by the grantor, whether in writing or orally, that they intend some property of theirs to be held under a trust duty. Intent to form a trust is important from the laws perspective because often people try to claim a trust exists where in fact one does not exist because under a trust the reach of the law is usually longer. On the flip side, the law has also always maintained that no party in a trust needs to know or understand that a trust is being formed. This may seem counter-intuitive at first, but in essence what the law is trying to protect is the concept of confidence and when that confidence is placed in another, and accepted by that other (even if neither calls this confidence a trust), in relation to some property or thing. Then, as far as the law is concerned the elements of a trust exist. The reason I point this out is because the principles behind trusts, and therefore confidences over another’s property, are in a sense a higher set of principles and a higher law form than the general common laws dealing with contracts etc; firstly, the responsibilities of a trustee are in stark contrast to the responsibilities of any business man entering into a bargain or contract for their own benefit, and secondly, the duties of the courts themselves and the duties they are bound by are also heightened when a trust matter comes before them compared to say a contract for example.

2. This is obviously key. No trust or confidence can exist unless some individual accepts the duty to hold something for purposes other than their own interests.

3. The subject is the thing or the property, otherwise known as ‘res’, which the trustee holds in trust. It can be anything which is essentially capable of ownership. The concept of ownership and thus property, and the meanings given to them are widely misunderstood, and it is key in understanding this model that we know and understand these concepts properly. Your car or your house etc are not property strictly speaking; your property are all the rights you have as against others which flow out of a result of you possessing that car or house and the legal structure of that possession. Property in its true legal form, and the way in which the courts view it, is the duty others owe you in relation to a thing (such as a house, car etc), and is not the thing itself. For example, if you ‘own your own home’ to use a term that is in common parlance, what you ‘own’ are the duties which others owe you in respect of not preventing you from using and enjoying that home on that particular block of land, on that particular street etc. What you own then, is a right against others to uphold their duty, and that is the property. Likewise, if you enter a contract, the duties the other party owes you are property. If you are a beneficiary of a trust, the duties the trustee owes you are property. What I am hoping you will see here is that all property is based on relations, and is not the things themselves. When a trustee holds a house in trust, what he is holding in trust are the rights as against others that exist in relation to the house.

But not all relations however are property either, and this is key also (although this is becoming increasingly less and less as society marches forward and increases the number of things which can be treated as commodities, water being a recent but shining example, and a recent push to treat personal information and carbon as commodities). In general, provided a right growing out of some relationship is transferable, it is generally treated as property, whereas rights which are non-transferable have limits placed on them which do not fit within the definition of property. For instance, some government payments like a pension are not transferable and as such cannot be treated as property.

I’m purposely highlighting these points to demonstrate that property in its true sense are claims against others as a result of relations which are transferable, and which we place a numerical value on when we transfer them; and that a fundamental purpose of this model is that we no longer hold any claims against others which are transferable. Which means we have to hold resources (those resources needed to meet basic needs) in a way which does not permit them to be treated as property, which means we have to change the relationship we have with others regarding these resources.

Another key aspect of property, and which is essential in understanding this model, is that our labours are the very source of all other property; no property can come into existence without it. No one can lay claim, and thus subject others to a corresponding duty, in relation to any ‘thing’ without some form of expenditure of labour, even if it be the stroke of a pen or the nod of the head. No land, no machinery, no ‘thing’ in general can be made the subject of property, let alone be made productive, without the input of some amount of labour. Therefore, if labour is at the heart and core of all property, it is safe to assume it is also at the core of everything else including government, our legal system and just about every relationship that exists on earth. It is for this reason that at the heart and core of our model is also our labours – nothing else from the perspective of the law can exist without it – no relation can exist without it. No person can bind themselves to any contract or agreement without some form of labor being spent, even if that labour being spent is the choice to do nothing (you know those letters you get sent from the bank or some other company with an offer and often it says, you do not have to do anything and we will take this as acceptance – even this choice not to do anything is something you laboured over after you took the time to read the letter).

4. All trusts must have an object or purpose. This varies considerably but in general is aimed at benefiting someone or some purpose other than the trustee. At the core of a trust is the trustees acceptance and willingness to serve some other, or others, or some purpose, which from his personal point of view he would normally not serve. Therefore, if the purpose of the trust is not aimed at any particular named person or persons, but is instead directed at serving a particular class of people within society, such as the poor from such and such a town, the sick in such and such a hospital, or a particular church, or whatever, then it is also treated as a trust because it has an object or purpose beyond the personal interests of the trustee.

With this background, let’s explain the model from a trust perspective, first by showing that all the elements exist.

The model, which I call the way of the custodian, will be a self-declared intent (intent) to hold (as trustee or custodian) one’s labours and all fruits thereof (subject) in trust for the whole community (object), not just one’s family, or even some segment of the community, but the community as a complete whole. As such, then any use of that labour, and any and all relations formed a result, will be subject to this trust. The key point to this model, and one that sets it apart from most other trusts, is that the object of the model is the whole community, and not just some segment. From a technical point of view, this then means the whole of the state or country one lives in. This aspect of the model is important and fundamentally necessary for several reasons.

First, one of its purposes is to serve the whole community and not just some segment of it, second, it serves the community not by affirmative donations as such, but because it actively reduces its burden footprint (that left by competing for resources) on the whole community because it does not pursue property.

As noble as it is to donate some of ones resources to some section of the community, this is not what this model is about. It is not focused on picking and choosing who should benefit more and who should benefit less based on some personal judgment on who is more in need and who is less in need. This model is essentially aimed at benefiting the whole community by reducing one’s burden footprint on the community as a whole; i.e. the model benefits the rich man by the same quantity as it benefits the poor man – everyone benefits equally (which conforms to one of the principles described above), not by what they receive directly from the model, but by how much the model lessens the burden footprint I would otherwise leave if I pursued my own self-interests.
Another key component of this model’s object being the whole community, based on one of the principles above, is the rule against self-dealing. It is the component of this model which takes the desire to live without money and property away from being a mere whim or thought, which could change at any time, and instead turns it into a legal requirement based on trust law. Let me explain.

As described above, a trustee is forbidden from any form of self-dealing with the beneficiaries. Again, this means, the trustee cannot approach the beneficiaries, or any of them, with an offer to buy trust assets from the trust, or to sell personal assets to the trust or to engage in any form of bargaining with the beneficiaries involving trust assets. With this said then, if I am to hold my labours in trust for the whole community, then for starters, all rights to the fruits of my labours now belongs to the whole community. Any attempt I make then to sell my labours in the open market means I am not only self-dealing but am attempting to sell to a member or members of the community, an asset they already own, i.e. my labours. This is clearly a breach of trust. It would be akin to persuading a beneficiary to part with some of his personal assets in exchange for the trust assets which already belong to him, and then pocketing the proceeds myself.
One might argue at this point, why not, instead of pocketing that money and breaching the trust, do what most non-profit organizations do and put the money toward a charitable use? It was my hope that I would have already addressed this issue earlier when I expressed that it is the intent of this model not to pick and choose who should benefit and who should not, and so my question in return would be, who should get it, and on what grounds? The only possible use for that money, believe it or not, would be to send it back to the federal government to have it destroyed. This might sound alarming to many, but when one understands exactly what money is then to return it back to the government to be destroyed is the only thing this model could do if it was to remain true to its purpose, and because of this, it then makes the whole process of engaging in any form of trade or exchange for the purpose of raising money completely redundant, let alone a breach of trust.

Already, many will be asking, how will the person who declares this trust get access to basic needs like land, housing, clothing, food, energy, education, tools, healthcare and so forth, if they are not permitted to engage in exchange and therefore money, how will they pay for these things?

First of all, the whole concept of payment is misguided in our education system today. Today, we only see payment in the form of money or property which unfortunately shelters most minds from opening up a little. Payment can come in many forms, but for the purposes of this model, the payment is not in money nor property but in the renunciation of it and thus the reducing of the burden footprint that one would otherwise leave if one pursued property. This is the payment. But it’s not a form of payment which the private sector recognizes, but only a payment which a government would ever recognize, because it is the government which carries the biggest burden of having to manage an economy a result of the pursuit of wealth. Have you ever wondered why the only thing which is taxed is private profit?

Coupled with this, is one of the principles mentioned above, i.e. trustee protection. This model is founded on the principle that no human can achieve their fullest potential living in a state of constant fear, even if most economists would disagree with this, because fear causes one to place themselves first, and not others first. The trustee is granted access to basic needs by the government, specifically, land and housing (the size of which depends on the activities the trustee wishes to engage in whether its hobby farming, arts, literature, being a minister, inventor, etc, and the size of their family), sundry items like vehicles, furniture, etc to meet standard needs in this regard, and a purchase card for consumables like food, energy, education, healthcare etc. As a trustee, they are accountable for their purchases and these purchases must never be used for any purpose contrary to the purposes of the model. The government pays for all these purchases through the creation of non-interest bearing money which when returning to the government in the form of taxes is destroyed. There is no expense to the tax-payer. The trustee holds all these resources until they die, and then they revert back to the government.

Just like a trustee can only serve if his needs are not compromised, so too is it only possible for anyone to serve their community if they are not forced to fight and compete against others for needs. The true service to the community by this model comes first from eliminating completely one’s property burden footprint, and only then is one free to gift to the world what he or she was always born to gift.

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