Del. Matches Alaska Law Attractive to Personal Trusts
Fraser, Katharine, American Banker
The state of Delaware, not to be outdone by Alaska's bid to become an attractive locale for personal trusts, has passed a law that keeps pace with a measure recently adopted by the 49th state.
In April, Alaska surprised many by enacting legislation to encourage the nation's wealthy to put their money in trust in the state. Alaska's trust law is meant to emulate some advantages of offshore trusts, such as tax savings and protection of trust assets from creditors.
Reaction was swift in Delaware, a traditional personal trust haven, which responded this month by enacting a law that also protects trust assets from creditors.
In a state whose history is intertwined with that of its wealthy families, bankers and lawyers in Delaware were not going to sit back and watch what they perceive as a Johnny-come-lately try to better their trust law.
"It stung a lot of us," said Daniel F. Lindley, one of the law's drafters and a partner in the Wilmington office of the Philadelphia law firm Duane, Morris & Heckscher. "It was a matter of personal pride: You want to keep Delaware as one of the most favorable trust states."
Trust and estate law varies from state to state. The laws in Alaska, Delaware, Idaho, South Dakota, and Wisconsin already stand out because they, unlike the majority of states, allow so-called "dynasty" trusts, which do not have to terminate.
A battle is emerging among states that want to encourage the establishment of trusts in their backyards.
"They're scrambling because they saw it worked for credit cards and brought lots of employment and taxes. They want to do the same for trusts," said John P.C. Duncan, a partner in Jones, Day, Reavis & Pogue, a Chicago law firm.
The new laws make Delaware and Alaska the only states that impose deadlines of four years on creditors seeking to prove money transferred to a trust belongs to them. Individuals setting up trusts in the two states can remain their own beneficiaries. …