Asset Protection Trusts
Long known as the American Banking haven, establishing a trust under Delaware Law (you do NOT need to reside in Delaware to choose Delaware law) creates benefits in tax planning and also in asset protection.
Significant Tax Advantages
- Delaware levies no state personal property tax, gift tax or inheritance tax.
- A trust with non-Delaware resident beneficiaries is exempt from Delaware state income taxation.
- Assets can be maintained for suture generations free of excessive transfer taxes.
Federal Estate Tax Advantage
Having abolished its Rule Against Perpetuities with respect to personal property, Delaware law permits you to preserve assets for multiple generations. Assets in a properly structured Dynasty Trust are sheltered from Generation Skipping Tax (GST) and Federal Estate Taxes.
Assume that you establish a Trust funded with $5 Million, and that the net earnings in the trust are 4% annually, this would be the difference in total Trust assets over time:
| 25 Years | 50 Years | 75 Years | 100 Years | |
| Delaware Trust | $13,329,182 | $35,533,417 | $94,726,273 | $252,524,741 |
| Other States | $7,184,591 | $10,096,472 | $13,977,770 | $19,151,224 |
Protecting Assets Without Going Offshore
As American society has become increasingly prone to engage in civil lawsuits, trusts that can protect an individual's assets from creditors have become increasingly popular. Until 1997, when Delaware passed the Qualified Disposition in Trusts Act, the only way to protect personal assets was to create offshore entities.
Now, through a Delaware Asset Protection Trust, you can shelter your assets from future creditors claims without the costs or complications of offshore trusts. More importantly, you may continue to benefit from assets placed in the trust.
In general, Asset protection Trusts preserve assets against lawsuits when the claims are based on events arising after the establishment of the trust. These trusts may be particularly attractive to high-risk professionals, such as physicians, who may face potential future litigation.
