CIBC Delaware Trust Company

Under traditional trust law, individuals may not create trusts that last beyond the Rule Against Perpetuities period (lives in being plus 21 years). Delaware abolished the rule and enacted legislation that permits trusts to last indefinitely (there is a limitation of 110 years on real estate in trusts).

Clients who want to avoid the estate tax levied at the transfer of wealth for each generation and who wish to provide asset protection and professional management of assets for children, grandchildren and beyond.

Most states impose a state income tax in addition to the federal income tax on trust income. Trusts established in Delaware are not subject to Delaware state income tax if the beneficiaries are not Delaware residents.

Clients who live in a state that imposes an income tax on trust income, particularly if they anticipate a large taxable transaction involving trust assets, such as a sale of a business or a concentrated asset position with a low basis.

In many jurisdictions, individuals may not avoid the claims of creditors on assets they place in trust if they retain a beneficial interest. Delaware has enacted a Self-Settled Asset Protection Trust statute that permits a grantor to retain trust benefits and protect the assets in the trust from the claims of creditors.

Clients in high-risk professions, such as physicians or attorneys, or clients whose business presents potential individual liability, such as real estate developers.

Generally, trust law requires trustees to inform beneficiaries about trusts for their benefit so that they may protect their interest. Creators of trusts in Delaware can restrict the right of beneficiaries to know about their interests in trust for a period of time.

Clients who feel it is in the best interests of their children or grandchildren not to know the extent of the family wealth that has been set aside for their benefit until a certain time.

Generally, trustees are responsible for all administrative and investment duties of a trust and may not take direction from the grantor or other parties. Under Delaware law, trustee responsibilities may be bifurcated and directed under the terms of the instrument. A trustee may be authorized to take investment direction from the client or other investment advisors as provided in the trust agreement.

Clients who wish to retain control over investments held in trusts or clients who have non-liquid assets in trust, such as real estate or business interests that they wish to manage themselves or appoint an advisor to manage.

Generally, the provisions of irrevocable trusts may not be amended. Delaware has implemented a process whereby the assets of a trust that no longer meets the grantor’s purposes may be transferred to a new trust that meets changing circumstances.

Clients with existing trusts that no longer meet the needs of the beneficiaries, for example, clients with family situations that have changed since the creation of an older trust.