Benefits of Setting up a Trust in Delaware

Benefits of Setting up a Trust in Delaware

One of the most important details when establishing a trust is choosing the jurisdiction under which the trust will be administered and governed. With proper planning, the choice of jurisdiction may offer significant tax or asset protection benefits. The State of Delaware has a long-standing history of robust, favorable and well-developed trust and tax laws to consider incorporating into your estate plan.

Key Benefits to Consider

• There are potential income tax savings.
  • As a general matter, if there are no Delaware-resident beneficiaries of a Delaware trust, Delaware will not impose a tax on trust income.

• Delaware has a particularly well-developed and favorable set of trust laws and court system.
  • Delaware law allows for personal property to remain in trust forever and for real estate to remain in trust for 110 years.
  • Delaware law provides for a trust agreement to contain strong confidentiality provisions; in other words, a settlor can provide in a trust agreement that the trustee cannot inform a beneficiary of that beneficiary’s interest in the trust for a certain period of time.
  • Delaware law provides for multiple and well-developed methods for modifying the terms of an irrevocable trust, for example, through decanting or through non-judicial settlement agreements.
  • Delaware law contains particularly strong protection of trust assets as against creditors’ claims.
  • The Delaware Court of Chancery is thought of as one of the most favorable forums for trust law issues. One of the exclusive focuses of the Delaware Court of Chancery is on fiduciary matters, and the Court has a long history of well-reasoned decisions rendered timely.

• Delaware law allows for particular types of trust arrangements that may be beneficial.
  • Self-settled asset protection trusts:
    • The laws of many states provide, generally speaking, that when an individual sets up a trust for his or her own benefit, that individual’s creditors can reach the assets of that trust.
    • Delaware law, by contrast, allows an individual to transfer assets to a trust for his or her own benefit, while protecting those assets from many of the individual’s creditors, if structured property.
  • Directed trusts:
    • Delaware law allows for a “Director” to be named in the trust agreement (who can be the settlor, a beneficiary, a close friend or a family member) with the authority to direct the Trustee with respect to certain of its duties and responsibilities, most notably, with regard to investments, and therefore relieve the Trustee from responsibility and liability with respect to any directed actions.
    • This structure can allow for greater flexibility for trust assets to be invested in a customized manner that may not otherwise be possible with a corporate trustee. The reason for this is that with traditional trust structures where a corporate trustee has full investment authority, the corporate trustee will generally be more restricted in its investment choices, for example, with respect to holding high concentrations of a particular investment or holding “unique” assets such as real estate, artwork and closely-held businesses.

Speak with your Rockefeller Private Advisor to learn more about The Rockefeller Trust Company (Delaware) and the benefits of Delaware Trust law.