April, 2015
The Delaware Trust Advantage
More professionals, business owners, directors, and wealthy individuals are creating Delaware Trusts. Delaware's favorable trust laws have made these instruments increasingly popular as an effective planning tool for individuals who wish to protect their assets, minimize taxes, and transfer wealth to future generations.
Protect Your Assets
In our ever-more litigious society, many professionals are afraid that someone will sue them for professional negligence, personal injury, or property damage. Some are concerned about losing a significant portion of their assets in a divorce settlement or to other future creditors.
Delaware laws allow a person to create an irrevocable trust from which he or she may receive income and principal distributions and over which he or she may retain certain control. Except in the case of fraud, the assets of the trust are protected from seizure from most future creditors.
Multigenerational Wealth Transfer -- Dynasty Trusts
For those who wish to pass wealth to future generations, a Delaware Dynasty Trust presents an extraordinary opportunity to pass personal property and real property held through a corporation, limited partnership, or limited liability company to multiple generations by avoiding transfer taxes at each successive generational transfer.
The Delaware Dynasty Trust can also be an important strategy for business owners and executives to freeze the value of assets for estate tax purposes and reduce tax consequences often associated with rapid appreciation over a short period of time.
Minimize or Eliminate State Income Tax
A Delaware Trust may be used to minimize or even eliminate state income taxes on dividend or interest income accumulated in, or capital gains earned by the trust provided the beneficiaries are not Delaware residents. In addition, Delaware does not impose sales, use, or intangible personal property taxes on assets held in the trust. Individuals should review the laws of their own state to determine whether a Delaware Trust will be subject to tax in their state of residence.
Maintain Confidentiality
In Delaware inter vivos, or living, trusts do not have to be filed with a court, and court accountings are not required. Further, Chancery Court involvement in trust administration is minimal, and, in the case of routine trust accountings, even discouraged. This environment leads to savings in court costs and increased confidentiality. In addition, because the Chancery Court is not backlogged with routine matters, court proceedings that are required are prompt and efficient.
Individuals who are interested in exploring the many long-term benefits offered by Delaware Trusts should consult with a legal professional with expertise in this area of estate and wealth planning.
This communication is not intended to be legal and/or tax advice and should not be treated as such. Each individual's situation is different. You should contact your legal and/or tax professional to discuss your personal situation.
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© 2015 Wealth Management Systems Inc. All rights reserved.
April 2015 This column is produced by the Financial Planning Association, the membership organization for the financial planning community. It has been modified and is provided by Thomas A. Fisher, a local member of the FPA.
The material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your own adviser prior to implementation in order to determine whether the strategies mentioned are appropriate for your specific situation.