Delaware continues to be a solid choice
for the creation and administration of modern trusts.
Key Advantages of Delaware-Based Trusts
As one of the most sought-after jurisdictions for housing trusts, Delaware offers unique, beneficial opportunities for a variety of investors with legally rotund asset protection and minimal tax burdens. With innovative and ever-evolving fiduciary statutes and one of the most modern legal systems in the country, Delaware is a sound choice for businesses, investors, and individuals looking to manage and protect assets with a trust.
1 Tax Savings
- Establishing a trust in Delaware can provide a significant economic advantage for non-resident beneficiaries by allowing trust assets to grow free of state income tax. An irrevocable trust with no beneficiaries residing in Delaware is not subject to state income tax on its accumulated income and realized capital gains in Delaware.
- Delaware does not impose taxes on the trust income that a trustee distributes to non-resident beneficiaries. Whether income from a trust established and managed in Delaware for non-residents is subject to state income tax on such income may depend on the tax laws of the state where the trust beneficiaries reside.
- The State of Delaware does not levy taxes on the value of intangible personal property held in trust, including but not limited to public and private securities, bonds, mutual fund shares, copyrights, patents, royalties, life insurance and annuity contracts, and partnership interests.
- Delaware law may be highly advantageous to individuals creating a Delaware Incomplete Gift Nongrantor Trust or "DING," as it eliminates state income taxes on capital gains incurred from the sale of trust assets.
- Dynasty trusts with personal property can be held indefinitely, and real property has an expiration of 110 years before any distribution, which can provide opportunities for effective tax planning for generations of beneficiaries.
3Flexibility & Opportunity
- Laws allow grantors to direct trust investment strategy, meaning that the grantor can structure their entire approach to investment.
- Under Delaware law, trustees are permitted to determine a sensible and careful blend of investments, considering various factors such as the existing economic climate, tax implications, risks, expenses, beneficiaries' ages, cash flow, and the other requirements of both current and future beneficiaries.
- Investments can be made in almost any type of asset as long as the needs and objectives of beneficiaries are met.
- Under state law, trustees also have the power to adjust receipts and disbursements between income and principal. State law allows the grantor to choose between naming an individual or an institution as trustee for investments. This may be particularly advantageous for business owners wishing to keep a business in the family, in control (or out of the control) of specific individuals.
- Grantors can authorize co-trustees to direct the trustee in distributions, leaving all decision-making in the hands of someone other than the corporate trustee.
2Protection, Confidentiality & Control
- Under Delaware law, individuals can establish self-settled trusts that can safeguard their assets, particularly intangible assets, against potential claims from unforeseen creditors.
- Delaware strictly enforces spendthrift trusts, ensuring the trust's assets are protected from creditors while protecting beneficiaries. Despite the name, a spendthrift trust, it can serve a broader purpose than solely safeguarding your heirs against their own financial mismanagement. It can shield your family's assets from dishonest business partners or unscrupulous creditors.
- Delaware allows for the creation of "Silent Trusts," giving grantors the flexibility to keep the existence of a trust private and confidential until such date or event the grantor specifies in the trust document. Trustees can modify trusts with decanting laws or non-judicial settlement agreements, provided certain conditions are met.
- Statutes supporting the care of pets and property in non-charitable trusts allow assets to be used for ongoing expenses, maintenance, and other purposes cited by the grantor.
4Modern & Evolving Fiduciary Laws
- The Delaware Court of Chancery is widely recognized as the nation's preeminent forum for determining trust disputes.
- One of the oldest equity court systems in the nation with over 250 years of case law to draw upon, the Delaware Court of Chancery has exclusive jurisdiction over all matters of Delaware trust administration and trust interpretation.
- Trials are performed swiftly and require only judges to give rulings .
- Delaware boasts of a highly innovative state legislature with a profound understanding of trust law. The legislature benefits from the support of a robust and influential state Bar Association and Banker's Association, which collaborate to ensure that Delaware's trust legislation remains at the forefront of the field. Delaware's laws prioritize executing the grantor's intentions.
1 Tax Savings
- Establishing a trust in Delaware can provide a significant economic advantage for non-resident beneficiaries by allowing trust assets to grow free of state income tax. An irrevocable trust with no beneficiaries residing in Delaware is not subject to state income tax on its accumulated income and realized capital gains in Delaware.
- Delaware does not impose taxes on the trust income that a trustee distributes to non-resident beneficiaries. Whether income from a trust established and managed in Delaware for non-residents is subject to state income tax on such income may depend on the tax laws of the state where the trust beneficiaries reside.
- The State of Delaware does not levy taxes on the value of intangible personal property held in trust, including but not limited to public and private securities, bonds, mutual fund shares, copyrights, patents, royalties, life insurance and annuity contracts, and partnership interests.
- Delaware law may be highly advantageous to individuals creating a Delaware Incomplete Gift Nongrantor Trust or "DING," as it eliminates state income taxes on capital gains incurred from the sale of trust assets.
- Dynasty trusts with personal property can be held indefinitely, and real property has an expiration of 110 years before any distribution, which can provide opportunities for effective tax planning for generations of beneficiaries.
2Protection, Confidentiality & Control
- Under Delaware law, individuals can establish self-settled trusts that can safeguard their assets, particularly intangible assets, against potential claims from unforeseen creditors.
- Delaware strictly enforces spendthrift trusts, ensuring the trust's assets are protected from creditors while protecting beneficiaries. Despite the name, a spendthrift trust, it can serve a broader purpose than solely safeguarding your heirs against their own financial mismanagement. It can shield your family's assets from dishonest business partners or unscrupulous creditors.
- Delaware allows for the creation of "Silent Trusts," giving grantors the flexibility to keep the existence of a trust private and confidential until such date or event the grantor specifies in the trust document. Trustees can modify trusts with decanting laws or non-judicial settlement agreements, provided certain conditions are met.
- Statutes supporting the care of pets and property in non-charitable trusts allow assets to be used for ongoing expenses, maintenance, and other purposes cited by the grantor.
3Flexibility & Opportunity
- Laws allow grantors to direct trust investment strategy, meaning that the grantor can structure their entire approach to investment.
- Under Delaware law, trustees are permitted to determine a sensible and careful blend of investments, considering various factors such as the existing economic climate, tax implications, risks, expenses, beneficiaries' ages, cash flow, and the other requirements of both current and future beneficiaries.
- Investments can be made in almost any type of asset as long as the needs and objectives of beneficiaries are met.
- Under state law, trustees also have the power to adjust receipts and disbursements between income and principal. State law allows the grantor to choose between naming an individual or an institution as trustee for investments. This may be particularly advantageous for business owners wishing to keep a business in the family, in control (or out of the control) of specific individuals.
- Grantors can authorize co-trustees to direct the trustee in distributions, leaving all decision-making in the hands of someone other than the corporate trustee.
4Modern & Evolving Fiduciary Laws
- The Delaware Court of Chancery is widely recognized as the nation's preeminent forum for determining trust disputes.
- One of the oldest equity court systems in the nation with over 250 years of case law to draw upon, the Delaware Court of Chancery has exclusive jurisdiction over all matters of Delaware trust administration and trust interpretation.
- Trials are performed swiftly and require only judges to give rulings .
- Delaware boasts of a highly innovative state legislature with a profound understanding of trust law. The legislature benefits from the support of a robust and influential state Bar Association and Banker's Association, which collaborate to ensure that Delaware's trust legislation remains at the forefront of the field. Delaware's laws prioritize executing the grantor's intentions.
Delaware offers some of the most attractive, business and investor-friendly trust structures in the nation, especially in the real estate space. With abilities to decant trusts, modify and control investments within the trusts and allowances to grow the assets, trustees and advisors have the ability to serve the trusts and its beneficiaries while being protected from liability. These advantages, paired with Delaware’s focused fiduciary legal system, make this state a strong ally for trustees, settlors and beneficiaries alike.
