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This is the second blog in a three-part series that focuses on Delaware law for your trust.
Trusts can be used in a variety of ways to manage wealth and plan for the future. They offer broad flexibility for structuring and managing assets, can help reduce administrative costs and delays at death, and often provide substantial estate and gift tax savings. If you’re considering transferring your interest in a privately held business to a trust, you’ll need to decide where to establish that trust. Delaware is often considered an ideal choice for the governing law of a trust that owns an interest in a privately held business. There are three primary reasons that Delaware may be your trust’s ideal governing law.
Transferring an interest in a privately held business to a trust governed by favorable state income tax rules can provide a significant economic advantage to the trust beneficiaries upon the sale of that interest. Delaware offers many tax advantages upon the sale of a privately held business interest, including:
However, it’s important to note that beneficiaries who receive trust distributions may still be subject to taxation, and the trust may be taxed in the grantor’s home state depending on its rules. You should consult with your tax advisor to determine the impact to your tax situation.
Delaware permits a grantor to create a directed trust, which bifurcates the traditional responsibilities of a trustee between two or more fiduciaries. This approach has several benefits for owners of privately held business interests, including:
Delaware trust law offers flexibility to the grantor, beneficiaries and trustees, making it a relatively flexible jurisdiction for trusts for several reasons, including:
If you’re transferring your business interest to a trust, there are several reasons why Delaware is attractive as the state law for that trust. For more information about whether Delaware is the right choice given your circumstances and objectives, visit our CIBC Delaware Trust Company resource page.
Halsey Schreier is a wealth strategist for CIBC Private Wealth Management in New York, with more than nine years of industry experience. In this role, he provides high net worth clients with integrated wealth management services, including comprehensive estate and financial planning solutions, multi-generational legacy planning and fiduciary administration for trusts and probate estates.
May 25, 2017
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August 01, 2019
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