Trusts are highly effective wealth management vehicles that can facilitate the transfer of wealth between generations and help individuals, families and business owners meet a range of estate and tax planning goals. One of the most fundamental and essential decisions for individuals and families looking to establish a trust is choosing the state where the trust will be administered. Depending on the jurisdiction that is selected, there can be significant implications for both the grantor and the beneficiaries as to how the trust is administered and the potential tax savings that can be achieved over time. Delaware is a jurisdiction that has long been a popular choice among grantors.
Delaware is known as the First State. Of course, this nickname refers to its position in line to ratify the US Constitution. However, Delaware has also been at the forefront of trust law since the beginning of the 20th century. Many states, including Alaska, Nevada, and South Dakota, have followed in Delaware’s footsteps to create flexible and useful environments for trust grantors. Still, the original value proposition created by Delaware remains because of its reputation as a jurisdiction with a rich history of well-developed, flexible trust and tax laws.
Delaware began building its trust infrastructure in the early 20th century, and its state legislature continues to update and adjust trust laws to adapt to a variety of new challenges. The state legislature, governor, banking institutions and legal community work together to propose and pass new trust legislation to ensure that Delaware maintains its status as a leading trust jurisdiction. Unlike many jurisdictions that are newer to the trust scene, Delaware has a robust community of seasoned professionals, including accountants, attorneys and banking professionals, who specialize in trusts.
Moreover, Delaware has supported its laws with a knowledgeable and effective court structure. All trust administration and trust interpretation cases are exclusively within the jurisdiction of the Delaware Court of Chancery, and upon appeal, the Delaware Supreme Court. Delaware’s Court of Chancery is a court of equity as opposed to a court of law. In other words, the Delaware Court of Chancery is a non-jury trial court and case holdings are based on judicial decisions.
In addition, because the Court of Chancery focuses exclusively on fiduciary and commercial matters, it does not experience the same backlog that many other state court systems do. As a result, dispute resolutions often are handled more efficiently and quickly by professionals that have experience in the area. Furthermore, Delaware has ruled favorably on a number of trust issues including asset protection trusts and directed trusts. These rulings can help individuals plan with more comfort and confidence.
While selecting a trust jurisdiction is not a one-size-fits-all decision, as a pioneer in trust law with developed case law and a cooperative legislative environment, Delaware offers a variety of unique advantages over other trust friendly states. For more information about whether Delaware is the right choice given your circumstances and objectives, contact your CIBC Private Wealth Advisor or visit the CIBC Delaware Trust Company resource page.