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“Common Law” Trust Provides No Shield Against Lawsuit

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Nancy Bracken, an 82-year-old widow living in Tennessee, thought she had found an excellent investment for her life savings. Richard Earl, managing director of something called Financial Services Company, convinced her that she could make good money by helping to finance a treasure-hunting operation in Florida.

Between July and October of 1993, Ms. Bracken delivered a total of $110,000 to Mr. Earl for investment in FSC’s treasure-hunting venture. She received promissory notes, and they carried a 10% interest rate. She even received payments during the first year, including seven payments of $400 and one payment of $13,200. When no further payments were forthcoming after October, 1994, she contacted a lawyer and, ultimately, brought a lawsuit.

In his defense, Mr. Earl claimed that he was not personally liable. He was only an employee of Financial Services Company, he insisted, and not its owner. He pointed to the documents indicating that Financial Services Company was actually an Arizona trust, established by John Michael Crim and Robert H. Kilgore in 1992. The trust named two other individuals, Dana T. Houtz and Steven E. Duke, as trustees, and Mr. Earl claimed he was hired by them to be the managing director.

The lawyer for Ms. Bracken disagreed. He introduced evidence that the trust was really Mr. Earl’s alter ego, apparently constructed for the express purpose of insulating Mr. Earl from claims like Ms. Bracken’s. In fact, Mr. Earl had absolute control over the trust, was its only employee, answered to no one else, and could not even name the “trustees”.

The Tennessee trial judge found Mr. Earl personally responsible for repayment of the money to Nancy Bracken. On appeal, the Tennessee Court of Appeals agreed. The appellate judges found “no substance to this so-called trust, beyond a means for defendant to attempt to protect himself from liability when investing other people’s money in risky ventures.” Bracken v. Earl, 8/7/2000.

Mr. Earl illustrates several things frequently seen in cases of exploitation of the elderly. First, of course, is the attempt to assure the elderly victim that the investment is reasonable, but that returns will be uncommonly high. Another common element is the use of multi-state entities; in this case, the “trust” was created in Arizona, the “investment” collected in Tennessee, and the “treasure hunting” alleged to be in Florida.

Another element involved in the Bracken case is the use of a so-called “common law trust.” Unscrupulous individuals claim that the trusts are somehow protected by common law principles, and therefore immunize participants from civil liability and even federal income taxes. Ms. Bracken’s case is proof that they are wrong.

“Common law” trusts are sometimes also known as “Constitutional” or “Pure” trusts. They are heavily promoted (including on the internet) as tax avoidance devices, and sometimes also as a way of insulating assets from liability. They are not only ineffective, but also high-priority targets by the Internal Revenue Service, which views them (correctly) as abusive arrangements. The IRS has a perfect record of defeating claims that such trusts are somehow insulated from tax liability.

2 Responses

  1. Bracken v. Earl, 8/7/2000.
    what the case number?
    who was the judge?
    what court?
    there is no link to this case…….. please post the entire case

    1. Look for Bracken v. Earl from the Tennessee Court of Appeals. It should show up without any problem.

      We don’t post the entire opinions, or links to the opinions, for several reasons. For one, the links often move as courts reorganize their websites. We don’t think of ourselves as a research tool, either for lawyers or non-lawyers. But we do try to give enough information that you should be able to find the described cases on your own.

      Robert B. Fleming
      Fleming & Curti, PLC
      Tucson, Arizona

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.