States Race to the Bottom with Trust Laws

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In the U.S. each individual state has wide latitude to determine its own laws for handling trusts. Many are concerned that a small handful of states are using that latitude to race to the bottom.

Delaware has long been known for having trust-friendly laws. For decades it was considered the best state for protecting trust assets from potential creditors and tax collectors. However, Delaware is no longer alone.

As the New York Times explains in “States Vie to Shield the Wealth of the 1 Percent,” some other states are now competing to outdo Delaware and pass even more trust-friendly laws.

States such as Nevada, Alaska, Wyoming, South Dakota, Ohio, Tennessee and New Hampshire have been passing more and more trust-friendly laws. States have made it easier to transfer trust assets and pass wealth on for generations while avoiding the estate tax completely. It is even possible in some states to protect trust assets from child support calculations.

This trend has caused some to worry that these states are creating a race to the bottom to attract trust business when there is no moral or ethical reason to pass the trust-friendly laws.

On the other hand, lawyers and accountants in these states see this as a positive development that gets money into their states. It is evidence that wealthy people should consider shopping around before deciding in which state to create their trusts.

Reference: New York Times (Aug. 8, 2016) “States Vie to Shield the Wealth of the 1 Percent

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