Choosing a Domestic Jurisdiction for a Long-Term Trust (Portfolio 867)

Description

Tax Management Portfolio, Choosing a Domestic Jurisdiction for a Long-Term Trust, No. 867, explores two important developments in trust law that emerged late in the 20th century. The first was the recognition of the tax and nontax benefits of creating long-term or “dynasty” trusts. The second was the recognition of the benefits that clients may achieve in many situations by creating trusts in states other than the state of residence.

After covering some preliminary matters, this Portfolio summarizes the federal income and transfer-tax attributes of long-term trusts. It next discusses a client’s freedom to choose a jurisdiction for a new trust, the ability of courts to disregard that selection, and factors for clients to consider in making such a choice. The Portfolio then addresses ethical and practical concerns, relocating existing trusts, and the use of dynasty trusts by nonresident aliens. The Worksheets contain illustrations, state law charts, and a sample trust form.

Table of Contents

I. Initial Considerations
II. Federal Tax Implications of Perpetual Dynasty Trusts
III. Client’s Ability to Choose a Jurisdiction For a Trust
IV. Beneficiaries’ Ability to Defeat Clients’ Selection of Trust States
V. Factors to Consider in Selecting a Trust State
VI. Ethical and Practical Concerns When Creating a Dynasty Trust in a Trust State
VII. Moving a Dynasty Trust to a More Favorable State
VIII. The Nonresident Alien Dynasty Trust