A trust allows you to pass along your wealth to your heirs. It has advantages over a will because probate proceedings take time, require fees and are open to the public.
The State of Delaware is a popular choice for people establishing trusts. The legislative and court systems make the state trust friendly for you and your family.
Tax and flexibility friendly
Trusts are not taxable in Delaware when the beneficiaries are not state residents. Trusts also do not require state income tax return filings. Beneficiaries may owe some taxes, though. A trust, for example, is still subject to the grantor’s home state tax laws.
The state’s trust laws are flexible, allowing for the easy transfer of funds between trusts. You can also delegate authority to advisers so trustees do not have the responsibility of absolute discretion.
Delaware also offers a range of trust options that many people consider favorable:
- Perpetual trusts. You can pass assets pass between generations. Gift, estate and generation-skipping taxes do not apply.
- Purpose trusts. You can establish perpetual, non-charitable funds.
- Quiet trusts. You can create a fund without revealing its nature, extent or even its existence to a beneficiary. Some people believe that a large trust can negatively impact a beneficiary’s productivity. You can establish an age or time when the beneficiary learns about the trust.
- Directed trusts. You maintain some control over the direction of the funds by assigning responsibility to asset managers.
- Asset protection trusts. You shield your assets from creditors even while you have a beneficial interest in the trust. Such trusts are beneficial to people in high-risk professions, including physicians and attorneys.
Establishing a trust is a major financial decision, and it is also complex. The laws in Delaware differ from other states. You need to understand the laws to make them work for you and your family.