Creative Uses of Trusts & Asset Protection Strategies

Creative Strategies with Irrevocable Trust Planning! Asset Protection – Why Delaware? Thomas M. Forrest, CPA *This presentation is for general informational purposes only. Schwab Bank and Schwab do not provide legal or tax advice. Advisors and their clients should consult their legal counsel and tax advisors about their particular circumstances. Provided by Charles Schwab Bank Personal Trust Division. Charles Schwab & Co., Inc. and Charles Schwab Bank are separate but affiliated companies and wholly-owned subsidiaries of The Charles Schwab Corporation. Schwab Institutional is a division of Charles Schwab & Co., Inc. Charles Schwab Bank Personal Trust is a division of Charles Schwab Bank. Charles Schwab Bank Personal Trust serves as administrative trustee of trusts the investment of which are managed by independent investment advisors. Schwab Institutional provides custody securities brokerage, trust accounting and related back office services to Charles Schwab Bank Personal Trust in connection with the Bank's Administrative Trustee service. © 2010 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC. Schwab Advisor Services (formerly known as Schwab Institutional®) is a business segment of The Charles Schwab Corporation serving independent investment advisors, which includes the custody, trading and support services of Charles Schwab & Co., Inc. ( 0610-2868 ) President Personal Trust Services Division Charles Schwab Bank

The Delaware Perspective ,[object Object]

The Delaware Advantages ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Delaware Administrative Trusts (Directed Trusts) ,[object Object],[object Object],[object Object],KEY CHARACTERISTICS

Delaware Administrative Trusts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],A DIVISION OF FIDUCIARY DUTIES

Delaware Administrative Trusts A DIVISION OF FIDUCIARY DUTIES Trusts Protectors Distribution Advisors Special Asset Holding Committees Charitable Trust Committees

Delaware Administrative Trusts ,[object Object],[object Object],A MULTI-PROVIDER SOLUTION

Delaware Administrative Trusts ,[object Object],[object Object],[object Object],WHO SHOULD CONSIDER ADMINISTRATIVE TRUSTS?

State Directed Trust Case Law ,[object Object],[object Object],COURT DECISIONS

State Directed Trust Case Law ,[object Object],[object Object],[object Object],[object Object],Delaware Code Title 12 Chapter 33 § 3313 Advisers.

State Fiduciary Income Tax Savings ,[object Object],[object Object]

[object Object],[object Object],State Fiduciary Income Tax Savings EXAMPLE Assumptions: Federal capital gains tax rate: 15.0%; Other state income tax rate: 6.0%; DE state fiduciary income tax rate: 0%; Example is for illustrative purposes only. Income tax savings not available to residents of all states. Delaware Other State Trust Trust Post-Sale Value of Trust $4.25MM $3.95MM Delaware Benefit $300,000

State Tax Considerations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Delaware Trusts Factors ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

State Fiduciary Income Tax ,[object Object],[object Object],COURT DECISIONS

Perpetual Duration ,[object Object],[object Object],DYNASTY TRUSTS

Perpetual Duration ,[object Object],[object Object],[object Object],POSSIBLE FUNDING TECHNIQUES

Perpetual Duration ,[object Object],[object Object],[object Object],WHO MIGHT CONSIDER A DELAWARE DYNASTY TRUST?

Asset Protection Trusts ,[object Object],[object Object],DELAWARE

Asset Protection Trusts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],GRANTOR’S ALLOWED INTEREST

Asset Protection Trusts ,[object Object],[object Object],[object Object],[object Object],GRANTOR’S ALLOWED INTEREST

Asset Protection Trusts ,[object Object],[object Object],[object Object],TAIL PERIOD

Asset Protection Trusts ,[object Object],[object Object],EFFECT OF TAIL PERIOD

Asset Protection Trusts ,[object Object],[object Object],EXEMPT CLAIMS

Asset Protection Trusts ,[object Object],[object Object],[object Object],IS A DELAWARE ASSET PROTECTION TRUST EFFECTIVE?

Asset Protection Trusts ,[object Object],OFFSHORE TRUSTS Shorter statutes of limitations for fraudulent transfers Practical problems with foreign litigation No recognition of foreign judgments

Asset Protection Trusts ,[object Object],OFFSHORE TRUSTS Substantial tax reporting requirements Possible U.S. court hostility; the “Anderson sanction” Political and economic instability

Asset Protection Trusts ,[object Object],[object Object],[object Object],[object Object],[object Object],FRADULENT TRANSFERS

Asset Protection Trusts ,[object Object],[object Object],[object Object],[object Object],WHO MIGHT CONSIDER AN ASSET PROTECTION TRUST?

Asset Protection Trusts WHO HAVE CREATED ASSET PROTECTION TRUSTS? Attorneys Real Estate Developers Other Business Owners Fast Food Chain and Restaurant Owners Individuals Appointed to Public Board of Directors Doctors / Dentists Newlyweds

Asset Protection Trusts: Non-Grantor – Incomplete Gift Trust ,[object Object],[object Object],[object Object],DING TRUSTS – DELAWARE INCOMPLETE NON-GRANTOR TRUSTS

Asset Protection Trusts: Non-Grantor – Incomplete Gift Trust ,[object Object],[object Object],DING TRUSTS – DELAWARE INCOMPLETE NON-GRANTOR TRUSTS

Asset Protection Trusts: Non-Grantor – Incomplete Gift Trust ,[object Object],[object Object],[object Object],[object Object],OTHER COMMENTS

Total Return Unitrusts ,[object Object],[object Object],DELAWARE LAW

Total Return Unitrusts ,[object Object],[object Object],[object Object],FLEXIBLE OPTIONS

Total Return Unitrusts ,[object Object],[object Object],CONVERSION PROCESS

Power to Adjust ,[object Object],[object Object]

Confidentiality ,[object Object],[object Object],[object Object]

Decanting Statute ,[object Object],[object Object],[object Object],[object Object]

Decanting Statute ,[object Object],[object Object]

Other Delaware Benefits ,[object Object],[object Object],[object Object]

Transition to Delaware ,[object Object],[object Object],[object Object]

Roadblocks To Moving Trusts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Common Challenges to Moving Trusts

Fees for Administrative Trustee Services* * Rates effective 11/16/2007. Charles Schwab Bank Personal Trust Services Division reserves the right to charge additional fees in order to perform services necessary to the administration of the trust. Rates and fees are subject to change. Marketable Securities Closely-Held Entities .40% on first $3 million $4,000 for the first entity .35% on next $1 million $1,000 for each additional entity .30% on next $1 million Irrevocable Life Insurance Trusts .20% on next $5 million $1,500 Annually .15% thereafter $500 for each additional policy Minimum annual fee $2,500

Creative Uses of Trusts & Asset Protection Strategies

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