Not all States are the Same…
Evaluating and further creating your estate is something that you should give thoughtful consideration. You should review, among other matters, tax advantages, general flexibility, privacy considerations and other legal protections that suit your needs and desires. A jurisdiction other than your domicile may be the right state for you to create a trust that aligns with your estate planning needs and goals.
Know Your Needs and Desires in order to Establish Your Goals
In order to properly create an effective estate, you need to understand your needs and clearly establish your goals. As a first step, you should take inventory of your financial position (both current and future) and the priorities you deem significant, in order to set goals for your overall estate planning. Completing this first step will give you a clear and realistic idea of your objectives and allow you to better organize your assets.
Regardless of your personal wishes, keep in mind that your goals should be aligned with trying to maximize the total value of your estate by reducing taxes and other expenses.
Why Should You Consider a Different Jurisdiction From Your Home State?
You should take into consideration that taxes, probate, liquidity, and incapacity may affect your estate. When choosing the state to create your trust, you may want to look for a jurisdiction that does not tax trust income. In addition, you may want to consider whether you want your trust to continue in perpetuity (given that some states have rules against perpetuities), disclose certain information to beneficiaries (privacy laws) or further invest your assets.
Moreover, you may also want to consider, among other things: (1) protecting your assets from future creditors or limiting a beneficiary’s access to the trust; (2) having the ability to modify a trust given future changes in circumstances; (3) properly selecting a trustee; and (4) the control you and your advisors may have over investments and distributions.
You may or may not need court approval when changing or creating a new trust in a jurisdiction where you are not domiciled.
Some trust-friendly jurisdictions include, but are not limited to: Delaware, Nevada, and South Dakota. However, you would need to engage a local attorney in the state you choose since a local attorney will be best equipped to advise you on the relevant state’s trust law. Always compare the pros and cons of the jurisdictions you are considering to create a trust.
Do you need assistance determining which jurisdiction is right for you? Please contact our office, we would be glad to assist you on your estate planning needs.
Please note that this blog should be read for informational purposes only.
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