By Jennifer Cuva | Delaware Trust Director, Citizens Trust Company of Delaware
You may be looking for effective ways to protect, manage and transfer your wealth. Delaware trusts are the go-to solution in estate planning based on their unique blend of asset protection, tax advantages and flexibility.
Delaware is a prominent jurisdiction for trusts and has a long history of trust-friendly laws. It provides extraordinary benefits including cutting-edge flexibility, income and estate tax advantages, enhanced confidentiality and asset preservation. These benefits allow ultra-high-net-worth (UHNW) individuals, and their families protect and grow their wealth now and for generations to come.
Delaware is well-known for its asset protection laws, which help individuals shield their assets from potential creditors, lawsuits and other financial risks. This protection is especially valuable for business owners, professionals in high-liability fields and individuals with significant personal or business exposure. Delaware Asset Protection Trusts (DAPTs) allow grantors to create self-settled trusts which allow individuals to transfer assets into a trust for their own benefit while still protecting those assets from creditors.
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. Delaware does not impose a state income tax on a trust's accumulated income and realized capital gains when no beneficiaries reside in Delaware.
Delaware allows dynasty trusts that can last forever, allowing families to establish trusts that benefit future generations and carry on their legacy. While most states have a limit on how long a trust can last, Delaware allows you to benefit multiple generations and enjoy tax-efficient growth with no end date. With a Delaware dynasty trust, proper planning can reduce or eliminate federal estate, gift, and generation-skipping transfer (GST) taxes indefinitely. Delaware allows trusts to maximize the federal GST exemption, creating opportunities to avoid multiple layers of estate tax across generations.
Privacy is a major concern for many high-net-worth (HNW) individuals, and Delaware trusts allow for enhanced confidentiality because a trustee is not required to file court accountings. Delaware law does not require trusts to be registered, or that trust grantors or beneficiaries be identified. This ensures that sensitive financial information stays secure and out of the public eye, reducing exposure to potential financial predators or family disputes.
You may want to hold off telling your beneficiaries about the trust until you think they're ready. Generally, a trustee has the duty to inform the beneficiary of his or her interest in a trust. In Delaware, you have flexibility about when to tell someone they are the beneficiary of the trust. So long as the settlor expressly provides language in the trust, the trustee has no duty to inform a beneficiary of his or her own interest in the trust "for a period of time."
Delaware permits a grantor to create a directed trust, in which the administrative functions of the trustee can be bifurcated from the investment management responsibilities or the authority to direct distributions from the trust. With the ability to appoint specialized advisors or family members for different roles, you can ensure the administration aligns with your wealth management goals as well as your family dynamic.
Delaware law allows for a number of methods to modify an irrevocable trust or one created decades ago. The flexibility to update trust terms as your family's needs evolve is critical given the multi-generational benefits a trust can provide. For example, a family may want to update their trust to reflect current needs and legal requirements, so the trust continues to benefit the family as originally intended.
The Delaware Court of Chancery is widely recognized as the nation's preeminent forum for the determination of disputes involving trusts. It has a long history of well-reasoned court rulings and a demonstrated commitment to safeguarding the advantages of its trust laws. All trust administration and trust interpretation cases are exclusively within the jurisdiction of Delaware Court of Chancery.
Delaware trusts are also strategic tools in succession planning, especially valuable to families owning closely held businesses or complex multi-generational assets. Delaware's flexible trust laws allow seamless transitions of family business control, reduce potential conflicts among heirs and protect business assets from creditors.
Delaware trusts provide many advantages for those looking to preserve and manage their wealth. The unique combination of asset protection, tax efficiency, privacy and flexibility make these trusts invaluable to estate plans.
Consult with a Citizens Wealth Manager to explore how a Delaware Trust can be integrated into your estate planning strategy.
© Citizens Financial Group, Inc. All rights reserved. Citizens is a brand name of Citizens Bank, N.A. Member FDIC
Views expressed may not necessarily reflect those of Citizens. The information contained herein is for informational purposes only, as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.
Citizens Wealth Management does not provide legal or tax advice. The information contained herein is for informational purposes only as a service to the public and is not legal advice or a substitute for legal counsel. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.
Banking products are offered through Citizens Bank, N.A. ("CBNA"). For deposit products, Member FDIC.
Citizens Wealth Management (in certain instances DBA Citizens Private Wealth) is a division of Citizens Bank, N.A. ("Citizens"). Securities, insurance, brokerage services, and investment advisory services offered by Citizens Securities, Inc. ("CSI"), a registered broker-dealer and SEC registered investment adviser - Member FINRA/SIPC. Investment advisory services may also be offered by Clarfeld Financial Advisors, LLC ("CFA"), an SEC registered investment adviser, or by unaffiliated members of FINRA and SIPC providing brokerage and custody services to CFA clients (see Form ADV for details). Insurance products may also be offered by Estate Preservation Services, LLC ("EPS") or an unaffiliated party. CSI, CFA and EPS are affiliates of Citizens. Banking products and trust services offered by Citizens.
SECURITIES, INVESTMENTS AND INSURANCE PRODUCTS ARE SUBJECT TO RISK, INCLUDING PRINCIPAL AMOUNT INVESTED, AND ARE:
· NOT FDIC INSURED · NOT BANK GUARANTEED · NOT A DEPOSIT · NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY · MAY LOSE VALUE