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1. What Are the Advantages of a Delaware Trust?
Delaware trusts offer extraordinary estate, financial planning, and tax-saving opportunities for individuals and entities throughout the United States. A great deal of flexibility can be drafted into a Delaware trust. The creator of the trust (i.e., the settlor) can retain significant rights, powers, and controls. In addition, tie settlor can appoint an investment advisor (who can often be tie settlor) to control the investment of trust assets. This is particularly attractive to business owners who wish to transfer a closely held business interest to the trust. The settlor can also appoint an individual to serve as both a distribution advisor, with the power to direct the trustee to make distributions, and a trust protector, with the power to amend the trust under certain circumstances. The following are the three most common versions of Delaware trusts.
Asset protection trusts. One of the most popular planning tools is the Delaware Asset Protection Trust (DAPT). This is an irrevocable trust created by an individual or entity for the settlor's own benefit. Unlike trusts created under the laws of most states, a properly planned DAPT protects the assets in the trust from the settlor's future creditors, unless the creditor can prove that the transfer was fraudulent. DAPTs are also an effective tool to protect assets from ex-spouses. As a result, these trusts are increasingly used as an alternative to prenuptial agreements.
Delaware dynasty trusts. For individuals who want to make gifts in trust for the benefit of descendants, Delaware law permits trusts to last forever. Most other states limit the duration of the trust through a legal concept known as the rule against perpetuities. For example, a trust in New York must terminate after the death of the last eligible beneficiary who is alive at the time of the document's execution plus 21 years. Delaware dynasty busts are also popular because they can be "silenf '-that is, the settlor can limit or eliminate the trustee's duty to inform beneficiaries of the trust for a period of time. On the other hand, most other states require that the beneficiaries receive a copy of the trust and statements.
Tax-advantaged trusts. Many advisors are unaware that Delaware Incomplete Gift Non-Grantor (DING) busts can...